What are the formation documents?

Takeaway: The primary formation documents are the certificate of incorporation (filed with the state), bylaws, organizational board consent, organizational stockholder consent, founder stock purchase agreements, proprietary information and inventions agreements for the founders, and indemnification agreements for the founders.

When incorporating a C-corporation in Delaware, there are several formation documents that must be prepared and filed with the state. These documents establish the legal foundation of the corporation and outline its structure, management, and operations. Here's a detailed guide to the formation documents used to incorporate a C-corporation in Delaware.

Certificate of Incorporation

The Certificate of Incorporation is the primary formation document for a C-corporation in Delaware. This document establishes the existence of the company as a legal entity and sets forth the corporation's basic information, including its name, purpose, duration, and authorized stock. The Certificate of Incorporation also includes the corporation's registered agent and registered office in Delaware. This document must be filed with the Delaware Secretary of State to create the corporation.

Bylaws

The Bylaws are another important formation document for a C-corporation in Delaware. The Bylaws govern the corporation's internal operations, including its management, shareholder meetings, and other procedures. The Bylaws may also address the corporation's capital structure, stock issuance, and other important matters. The Bylaws are typically adopted by the corporation's board of directors at its first meeting.

Initial Written Consent of the Board of Directors

The Initial Written Consent of the Board of Directors is a formation document that records the initial actions taken by the board of directors. This document typically includes the appointment of officers, adoption of the Bylaws, approval of initial stock grants to the founders, and other important matters.

Initial Written Consent of the Stockholders

The Initial Written Consent of the Stockholders is a formation document that records the first actions taken by the stockholders. This document typically includes the adoption of the Bylaws, approval of indemnification agreements, and other important matters.

Founder Restricted Stock Purchase Agreements

This is the agreement pursuant to which the company sells the founder their stock (i.e., this is how “founder stock” is distributed) in exchange for a small amount of cash and contribution of the initial business plans and intellectual property to the company. This agreement contains the vesting (and any acceleration) provisions for the founder stock. The Founder Restricted Stock Purchase Agreements also often contain 83(b) elections that should be filed with the IRS as applicable.

Proprietary Information and Invention Agreement (“PIIAs”)

Under the PIIAs, the founders agree to keep confidential the company’s information and agree that the company owns all of the intellectual property that the founder produces while providing services to the company.

Indemnification Agreements

The Indemnification Agreements provide indemnification to the company’s officers and directors in the event that they are sued. Only officers and directors should receive indemnification. Typically, the certificate of incorporation or bylaws will provide for indemnification of other employees and consultants of the company.

IRS Form SS-4

While not technically a formation document, IRS Form SS-4 is required to obtain an Employer Identification Number (EIN) for the corporation. The EIN is a unique identifier that is used by the IRS to track the corporation's tax obligations. The EIN is also required to open a bank account and file tax returns.

Conclusion

In conclusion, when incorporating a C-corporation in Delaware, several formation documents must be prepared and filed with the state. These documents establish the corporation's legal foundation and outline its structure, management, and operations. The primary formation document is the Certificate of Incorporation, which sets forth the corporation's basic information, including its name, purpose, and authorized stock. Other important formation documents include the Bylaws, Initial Written Consent of the Board of Directors, Initial Written Consent of the Stockholders, Founder Restricted Stock Purchase Agreements, Proprietary Information and Invention Agreement, Indemnification Agreement, and IRS Form SS-4. It is recommended that you consult with a legal and tax professional to ensure that all required formation documents are properly prepared and filed.