Post-Incorporation Actions for Startups:

A Checklist

After a Delaware corporation is legally incorporated by filing a certificate of incorporation and paying a filing fee to the Secretary of State, it is not ready to start doing business. 

Several legal steps need to be taken, typically by the incorporators and by the first directors of the corporation. 

This checklist will guide you through the initial actions you need to take after forming your Delaware C Corporation.

Why this matters?

Many startups use online services to quickly incorporate in Delaware.  

While these services are convenient, they often don't include some essential post-incorporation steps.  

By following this checklist, you'll ensure your corporation is properly set up and compliant.

These actions typically fall into two categories:

1. Those taken by the incorporators, and

2. Those taken by the board of directors at their first board meeting

Let us look at them in turn.

Actions by incorporators

A certificate of incorporation may or may not include the names of the first directors of a corporation. 

If the certificate does not name the initial directors, at the time of incorporation, the corporation does not have any human beings, except for the incorporators, connected to it. 

Since the incorporators, who are often your lawyers or registered agents, will not be running your business, they will appoint the founders as the first directors of the corporation and resign their positions.

However, one important thing that many attorneys and registered agents do before resigning as incorporators is to adopt the bylaws of the corporation.

Bylaws are like the internal rulebook for your corporation. 

They offer more flexibility than the certificate of incorporation because they don't need to be filed with the state.  This makes it easier to update the bylaws as your corporation grows and evolves.  For example, if you decide to change your annual meeting date from December to June, you can simply amend your bylaws.  In contrast, any changes to the certificate of incorporation would require filing paperwork with the Delaware Secretary of State.

Bylaws can also be more detailed than the certificate of incorporation.  They outline how meetings are conducted, how officers are elected, and how stockholder votes are taken.  You can adopt bylaws at the incorporator meeting or the first board meeting.  

The bylaws of a corporation can address a wider range of topics, such as the following:

1. Meeting schedule: Determine how often you'll hold annual meetings and who has the authority to call special meetings.

2. Director elections: Establish the process for nominating and electing directors, including how many directors will serve on the board.

3. Voting rules: Set the requirements for a quorum (minimum number of stockholders needed to vote) and the percentage of votes required for different actions.

4. Dividends: Outline how and when profits will be distributed to stockholders as dividends.

5. Committee structure: You can establish committees of the board, such as an audit committee or a compensation committee, and define their roles and responsibilities.

6. Compensation: You can set procedures for officer and employee compensation, including bonuses and stock options.

7. Conflicts of interest: You can establish policies to address conflicts of interest between the corporation and its directors or officers.

8. Stockholder rights: You can specify additional rights of stockholders, such as preemptive rights (the right to buy new shares before they are offered to the public) or redemption rights (the right to require the corporation to repurchase their shares).

First meeting of the board of directors

The first directors of the corporation can be specified in the certificate of incorporation or they can be appointed by the incorporators. 

Once you have a board of directors, they should hold an initial meeting to adopt resolutions to the following effect. In the alternative, they can adopt these resolution by 'written consent':

1. Adopt bylaws (if not already done): The board can finalize the bylaws if the incorporators didn't do so earlier.

2. Approve incorporators' actions: Approve the actions taken by the incorporators. This stops the corporation from later disputing or objecting to the actions of the incorporators (and, by implication, the real founders or entrepreneurs behind the business).

3. Elect the corporate officers: Your corporation needs officers like a president, secretary, and treasurer.  These positions are often renamed as the CEO, CFO and Corporate Secretary positions. The board will decide who fills these roles and what their duties are.  These roles can be filled by directors or by other qualified individuals.

4. Salaries: Set salaries (or formulas for determining the salaries) of corporate officers

5. Fiscal year: Choose a fiscal year for your corporation (the year your company's financial records are kept on). The corporation's fiscal year does not have to be the calendar year i.e. 1 January to 31 December. Still, unless there are good reasons to do otherwise, it is probably best to stick to the calendar year. 

6. Apply for business licenses and tax IDs: Authorize the officers of the corporation to apply for business licenses and authorizations with federal, state and local authorities as well as the tax authorities.

7. Bank accounts: Authorize the officers of the corporation to open one or more bank accounts in the corporation's name.

8. Issue stock: Authorize the issuance of stock to shareholders. In the case of startups, this will typically involve authorizing the officers to issue all the authorized common stock to the founders at par value in exchange for cash or a combination of services rendered and intellectual property assigned to the corporation. 

Next Steps

By taking these initial actions, you'll have your Delaware C Corporation properly set up for success.  

If you have any questions or need help with this process, consult with an attorney who specializes in corporate law.