OPERATIONAL FOUNDATION

Your entity structure determines everything: taxes, fundraising, founder liability. Get it right.

Most DACH founders set up the wrong entity type or choose the wrong state. We help you understand the trade-offs and set up a structure that works for your situation—whether you're bootstrapped or raising capital.

THE PROBLEM

Wrong Entity = Expensive Remediation

Mistake 1: LLC for simplicity, then need C-Corp for VCs. You incorporate as LLC in Delaware. 12 months later, you raise Series A. VCs say: "Convert to C-Corp." You spend €5K-10K converting, lose 2-4 weeks to due diligence. If you'd chosen C-Corp upfront (same timeline, €2K more), this was avoidable.

Mistake 2: Home state incorporation instead of Delaware. You incorporate in Vienna or Berlin. VCs expect Delaware (tax neutrality, proven law, privacy, standard). You have to convert. Cost: €3K-5K. Timeline: 4-6 weeks. Founder perception: "These guys are unsophisticated."

Mistake 3: Operating as a branch of your European company. You operate in the U.S. as a branch for 18 months, generating €2M revenue. You raise capital. VCs ask: "Where's your U.S. entity?" You scramble to establish one retroactively, file amended tax returns, adjust cap table. Cost: €30K-50K. Timeline: 3 months of VC delay.

65% of DACH founders make at least one of these three mistakes

Average remediation cost: €15K-50K

Average due diligence delay: 4-6 weeks

Preventable with proper planning upfront

WHAT WE COVER

Entity Type, State Selection, and Investor Readiness

Entity Type (LLC vs. C-Corp). C-Corp: Standard for VC-backed startups. More complex, higher accounting costs, but VC-ready. LLC: Best for bootstrapped founders never raising capital. Simpler, lower cost, but harder to fundraise. Recommendation: If you might raise capital, start with C-Corp. Cost difference: €2K (minimal).

State Selection (Delaware vs. home state). Delaware: Tax-neutral, proven law, privacy, standard. Cost: €2K-3K to form, €150-200/year. Home state: Lower cost (€500-1K), but not standard for VCs. Recommendation: Delaware, always. The €1K-2K upfront saves €10K-30K in future conversion costs.

Operating Agreement & Bylaws, Cap Table, Equity & Vesting, 409A Valuation, Registered Agent. These are the documents that make your company legally and operationally sound. We handle all of it.

Bylaws and shareholder agreement drafted and signed

Cap table initialized with founder shares and option pool

Equity vesting schedule in place (4 years, 1-year cliff)

409A valuation completed (required before equity grants)

Board structure established, annual governance calendar in place

Registered agent engaged, annual filing schedule set

BEFORE VS AFTER

From DIY to Investor-Ready

Before: LLC in home state, no operating agreement, no cap table, IP ownership unclear, no vesting schedule. You're not fundable. VCs won't touch you until you fix it.

After: Delaware C-Corp with professional bylaws, cap table clean, founder equity vested 4-year/1-year cliff, IP clearly belongs to company, 409A valuation completed, board structure documented. You're investor-ready. Due diligence is smooth (not a blocker).

Before: Entity formed online (DIY) → After: Professional incorporation, all docs reviewed by counsel

Before: No cap table or spreadsheet mess → After: Clean, SAFE/MFN-ready cap table

Before: Founders haven't discussed equity → After: Vesting schedule and ownership percentages documented

Before: Verbal agreements with co-founders → After: Shareholder agreement with dispute resolution

Before: IP ownership implied → After: All IP clearly assigned to company in writing

WHY IT MATTERS

The Financial and Legal Impact of Proper Structure

Fundable

Clean entity structure eliminates a major due diligence blocker. VCs close faster when entity is already investor-ready. Potential time savings: 4-6 weeks.

Tax-Efficient

C-Corp pass-through taxation avoids double taxation you'd face with home-state LLC. Delaware has no corporate income tax. Estimated annual savings: €3K-8K.

Founder Protected

Proper incorporation limits personal liability. Your personal assets are protected from company lawsuits. Cost of no protection: unlimited personal exposure.

Scalable

Once set up correctly, you can issue equity to employees, take investor capital, and make M&A transactions without needing to reconstruct your foundation.

HOW IT WORKS

From Decision to Investor-Ready in 8 Weeks

Assessment & Entity Selection (Weeks 1-2)

We assess your situation (bootstrapped vs. fundraising, timeline, budget). We recommend C-Corp or LLC. We clarify the trade-offs. Decision made in 1-2 weeks.

Incorporation & Governance Setup (Weeks 3-6)

We file articles of incorporation, obtain EIN, draft bylaws and shareholder agreement, initialize cap table, establish board structure. All docs signed by founders.

Equity Documentation (Weeks 5-7)

We draft stock option plan, prepare equity grants to founders with 4-year/1-year cliff, obtain 409A valuation, document all equity issuances.

Investor-Readiness Review (Week 8)

We complete investor-readiness checklist, ensure all documents are signed and filed, prepare cap table for future due diligence, establish annual governance calendar.

COMMON QUESTIONS

Entity Setup FAQ

C-Corp or LLC?

C-Corp if you might raise capital (rule of thumb: if unsure, C-Corp). LLC if bootstrapped forever and have no growth plans. Unsure? Pick C-Corp for optionality. Cost difference is minimal.

Delaware or home state?

Delaware, always. €1K-2K more upfront, but saves €10K-30K in future conversion costs if you raise capital. If you're bootstrapped forever, home state is fine. But plan for Delaware if you grow.

What if we already have the wrong structure?

We convert it. LLC to C-Corp costs €3K-5K and takes 4-6 weeks. Home state to Delaware costs €2K-4K and takes 2-3 weeks. Do this before fundraising, not during due diligence.

How do we split equity between co-founders?

Equal (50/50) if equal contribution and full-time. Unequal if different contribution, one part-time, or one brought significant IP/revenue. Whatever you decide, put it in writing with vesting. Vesting (4 years, 1-year cliff) protects the company if a founder leaves.

Do we need a 409A valuation right now?

Only if you're granting equity to employees. If it's just founders, not yet. Once you grant equity, yes (required). Cost: €1,500-3,000. Timeline: 2-4 weeks. Do this before your first employee grant.

What's in an operating agreement?

Governance rules (board meetings, voting rights), equity vesting (4-year/1-year cliff), IP assignment (company owns all IP), dispute resolution, and what happens if a founder leaves. It's essential if you have co-founders.

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