You don't need a lawyer to incorporate a startup if your formation is standard: a single-class Delaware C corporation (C corp) with US-based founders, a clean intellectual property (IP) history, and a straightforward equity split among two or three people. Online incorporation services can handle these cases well. They can file your certificate of incorporation, secure your Employer Identification Number (EIN), and generate founder stock agreements through templates built for this scenario. But consider hiring a lawyer when you add complications such as multiple stock classes, international founders, unusual IP arrangements, and a cap table that has accumulated some history.

Below, we'll explore what online incorporation services do, when it makes sense to hire a startup incorporation lawyer, and mistakes that tend to surprise founders without legal guidance.

Key takeaways

• A standard startup formation, such as a single-class Delaware C corp with US-based founders, can typically be completed through an online incorporation service without legal counsel.

• Legal advice becomes valuable when a startup's structure involves multiple stock classes, international founders, complicated cap tables, or unusual IP arrangements.

• Costly incorporation mistakes, such as missing the 83(b) election deadline and choosing the wrong entity type, are avoidable with the right guidance at formation.

Can you incorporate a startup without a lawyer?

Many businesses with straightforward structures can incorporate without a lawyer. For example, if you're forming a single-class Delaware C corp with one or two founders, an online incorporation service can handle the process.

A "standard" incorporation assumes:

• A single class of common stock: The business has no preferred shares, separate voting and nonvoting classes, or leftover terms from a prior investment round.

• US-based founders: Founders outside the US bring tax and immigration questions the templates aren't built to answer.

• A clean IP history: All the code, designs, or other IP came into existence after formation, or the founders are comfortable assigning anything earlier through a standard invention assignment agreement.

• A simple equity split: Two or three founders divide equity in round numbers with no side agreements about vesting acceleration or unusual buyback terms.

What do online incorporation services do?

Online incorporation services automate a sequence that a startup incorporation lawyer would otherwise walk you through. Here's how they work:

• Certificate of incorporation: The platform files this with the state; that formally creates your corporation and establishes its legal existence.

• EIN application: The platform applies for your EIN with the IRS. You'll need this number to open a bank account or run payroll.

• Founder stock issuance: Using templates that reflect standard startup terms, the platform generates stock purchase agreements based on the equity split you specify.

• Corporate governance documents: The platform produces your initial board consent and bylaws, the internal documents that establish how your company is run from the start.

• 83(b) election filing: The platform bundles 83(b) election filing into the formation process; this matters because you have only 30 days from your stock purchase date to file your election with the IRS.

Stripe Atlas does all the above, which simplifies a process that used to require legal counsel. Founders can start a company in a few clicks and begin to bank, fundraise, and accept payments from customers immediately after incorporating.

When does hiring a startup incorporation lawyer make sense?

A startup incorporation lawyer is necessary when incorporation involves negotiation, judgement calls, or structures that fall outside standard templates. A few scenarios arise often:

• Multiple classes of stock: If you plan to issue preferred shares to early investors alongside common shares to founders, you'll have to find someone who understands liquidation preferences, anti-dilution provisions, and how those terms interact with future rounds.

• Complicated cap tables: You'll need a human-made cap table if you have more than a few founders, advisers who hold equity grants, or a prior round of simple agreements for future equity (SAFEs) or convertible notes that need to convert into the new structure.

• International founders or employees: Cross-border equity issuance raises tax withholding and reporting questions that vary by country; a domestic incorporation template won't address them.

• Unusual IP arrangements: If a founder brings in IP built before the company existed or IP developed using a prior employer's resources, you'll need an assignment agreement written for that situation.

• Founder disputes or unequal contributions: Vesting schedules with custom acceleration rules, unequal equity splits that reflect unequal past contributions, or buyback provisions tied to specific departure scenarios all benefit from having someone negotiate on your behalf.

Many founders don't pick one path exclusively. They incorporate online through a service to get started quickly and affordably. Then they bring in counsel when the company reaches a point at which that's required (e.g., a seed round with a term sheet to negotiate, a founder who's leaving and needs a clean equity buyback). Following this sequence tends to save money without leaving you exposed on the decisions that are difficult to undo.

What are the risks of incorporating without legal guidance?

Missing the 83(b) election deadline is a common and expensive mistake that arises often when founders incorporate on their own. From the date you purchase your founder shares, you'll have 30 calendar days to file this election with the IRS. If you miss the deadline, there's no extension and you'll lose the ability to lock in your tax basis at the near-zero value your shares typically carry at formation. Instead, you'll owe ordinary income tax on the value of your shares as they vest, which can turn into a serious cost if your company's value climbs quickly.

Misallocating founder equity is another recurring problem. Splitting equity evenly among founders feels fair on day one, but it doesn't account for differences in time commitment, prior IP contribution, or capital invested. Founders who skip the difficult conversation about unequal contributions often end up renegotiating equity later – under worse circumstances and after resentment has set in.

An online incorporation service such as Stripe Atlas mitigates these risks by automatically filing your 83(b) tax election and ensuring your incorporation documents cover ownership structure and equity distribution.

How Stripe Atlas can help

Stripe Atlas handles everything you need to legally launch your company – incorporation, EIN, equity setup, and tax filings – so you can fundraise, open a bank account, and start accepting payments in as little as two working days, from anywhere in the world.

Join 100,000+ startups incorporated using Atlas, including startups backed by top investors like Y Combinator, a16z, and General Catalyst.

Get started in minutes with Atlas

The application takes under 10 minutes. You'll choose your company structure, confirm your name is available, add up to four cofounders, set your equity split, and e-sign. Then, Atlas takes it from there, including notifying cofounders to sign their documents electronically.

Banking and payments before your EIN arrives

Atlas files your EIN application automatically after incorporation. You don't have to wait. Atlas enables pre-EIN payments and banking so you can start accepting payments and making transactions right away. US founders with a Social Security number are typically eligible for expedited IRS processing.

Automatic 83(b) tax election filing

Atlas files your 83(b) election for you – US and non-US founders alike – with US Postal Service certified mail and tracking to reduce personal income taxes. You'll get a signed 83(b) election and proof of filing directly in the Stripe Dashboard, with certified mail confirmation.

World-class company legal documents

Atlas provides all the legal documents you need to start running your company – drafted by Cooley, one of the world's leading venture capital law firms – and stores them directly in the Stripe Dashboard. These documents are designed to help you fundraise immediately and ensure your company is legally protected, covering aspects like ownership structure, equity distribution, and tax compliance.

US$2,500 in Stripe credits, plus US$50K+ in partner discounts

Atlas startups get US$2,500 in Stripe product credits for their first year, plus US$50,000+ in discounts on essential tools – Mercury, AWS, Carta, Xero, Perplexity, and more. Delaware registered agent service is also included free for your first year.

Learn more about how Atlas can help you set up your new business quickly and easily or get started today.

FAQs about hiring a startup incorporation lawyer