OMNI LAW
Corporation Formation Lawyers for C-Corps and S-Corps
We form Delaware C-corps and state corporations for founders raising capital, building cap tables, and structuring equity for the long game.
A corporation is a separate legal entity owned by shareholders, governed by a board of directors, and run day-to-day by officers. It is the structure venture investors expect, the form that supports stock options and tiered equity, and the entity most often associated with a future IPO or strategic sale. If your plans include institutional capital, a deep cap table, or operations across multiple states, a corporation is usually the right starting point.
Omni Law forms corporations across multiple states for founders, growth-stage operators, and businesses planning to raise priced equity. Below is what a corporation is, when it makes sense, how we form one, and the tax and compliance obligations you should understand before you file.
What is a corporation?
A corporation is a separate legal entity created under state law. It is owned by shareholders, governed by a board of directors elected by those shareholders, and operated by officers appointed by the board. The corporation itself — not its owners — owns assets, signs contracts, and bears liability. Shareholders are generally protected from the corporation’s debts beyond what they paid for their shares.
There are two federal tax classifications a corporation can take: C-corporation (the default, taxed as a separate entity) and S-corporation (a tax election that turns the corporation into a pass-through). A corporation is the same legal entity in either case — the difference is how the IRS taxes it.
When to choose a corporation
Choose a C-corporation if you plan to:
- Raise priced equity rounds from venture funds or institutional investors
- Issue stock options to employees, advisors, and contractors
- Eventually sell to a strategic acquirer or pursue an IPO
- Operate across multiple states with a clean equity record
Most institutional investors will not invest in LLCs or partnerships — their fund documents restrict pass-through investments, and preferred stock (with its liquidation preferences, anti-dilution protections, and protective provisions) is engineered for the C-corporation framework. Delaware C-corps remain the default for venture-backed startups, but a state corporation can work just as well for businesses raising locally or staying privately held.
Choose an S-corporation if you:
- Run a closely held operating business with U.S.-resident owners
- Want pass-through taxation with potential self-employment tax savings on distributions
- Have fewer than 100 shareholders, all individuals (no entity owners, no non-resident aliens)
- Issue only one class of stock
The S-election is made by filing Form 2553 with the IRS within 75 days of formation (or the start of the tax year). It fits closely held service businesses better than growth-stage startups, because the single-class-of-stock rule is incompatible with venture-style preferred equity.
When a corporation is not the right answer
A small service business with two or three owners and no plans to raise equity may find an LLC simpler and cheaper. A general partnership offers no liability shield. A joint venture is a deal structure, not a long-term operating entity. If you are choosing between a corporation and an LLC, see our LLC formation page for the comparison.
C-corp vs. S-corp vs. LLC at a glance
| Feature | C-Corporation | S-Corporation | LLC |
|---|---|---|---|
| Legal entity | Corporation | Corporation (with S-election) | LLC |
| Federal tax | Entity-level + dividend | Pass-through | Pass-through (default) |
| Owner limit | Unlimited | 100 max | Unlimited |
| Foreign owners | Permitted | Not permitted | Permitted |
| Classes of stock | Multiple | One class | Flexible (units) |
| VC-friendly | Yes | No | No |
| Equity comp | Stock options, RSUs | Limited | Profits interests |
| Best for | Venture-backed startups | Closely held operating businesses | Most operating businesses |
How Omni Law forms your corporation
Forming a corporation correctly is more involved than filing one document. Our team handles the full sequence so you start with a defensible record from day one.
1. Entity selection and state of incorporation
Most growth-stage businesses incorporate in Delaware because Delaware’s Court of Chancery offers well-settled corporate law and institutional familiarity. Businesses operating in a single state with no immediate plans to raise capital often incorporate locally. We advise on Delaware versus your home state, C-corp versus eventual S-election, share structure, and authorized share count before any filing is made.
2. State filing and formation documents
We draft and file the Certificate of Incorporation with the Secretary of State, designate a registered agent, and reserve the entity name. We then prepare the bylaws, the organizational consents (initial board, officers, share issuance), and the stock ledger that tracks every share from day one.
3. Founder stock issuance and 83(b) elections
We issue founder shares, paper the vesting schedule (typically four years with a one-year cliff), and prepare the Section 83(b) election for each founder receiving restricted stock. The 83(b) must be filed with the IRS within 30 days of issuance — miss it and the founder pays ordinary income tax on the value of stock as it vests, which can be a six- or seven-figure mistake on a successful company.
4. Stockholders agreement and equity plan
We draft the stockholders agreement covering transfer restrictions, rights of first refusal, drag-along and tag-along rights, and information rights. If equity compensation is in scope, we prepare an equity incentive plan authorized for the right share pool, plus the form stock option and restricted stock unit agreements.
5. EIN, tax accounts, and banking documents
We obtain the corporation’s Employer Identification Number, register state tax accounts, and prepare the banking authority resolutions you need to open accounts. We also evaluate S-election eligibility and file Form 2553 if S treatment is desired.
6. Foreign qualification
If the corporation operates in states beyond its state of incorporation, we file foreign qualification in each state where it does business and appoint registered agents.
7. Securities exemption analysis
Founder stock issuances and any seed-round investments need a securities exemption. We document the exemption (typically Regulation D Rule 506(b) or Section 4(a)(2)) and prepare the subscription paperwork investors will sign.
Tax and compliance obligations
C-corporation taxation and double taxation
A C-corporation pays federal corporate income tax at 21% on its net income. When the corporation distributes profits as dividends, shareholders pay tax on those dividends — the double taxation founders sometimes mention. For growth-stage companies that reinvest earnings rather than distribute them, the second layer of tax rarely bites until exit, when Section 1202 Qualified Small Business Stock (QSBS) can shelter up to $10 million of gain (or 10x the founder’s basis) per shareholder if the stock is held for more than five years and the company meets the QSBS requirements.
S-corporation pass-through taxation
S-corporations pay no federal income tax at the entity level. Profits and losses flow through to shareholders on Schedule K-1. Active owner-employees take a reasonable salary subject to payroll taxes, and additional profits can be distributed as distributions that are not subject to self-employment tax — the principal tax-planning reason founders elect S status.
State franchise taxes
Corporations pay annual franchise taxes in their state of incorporation. Delaware’s annual franchise tax is calculated using the assumed-par-value method or the authorized-shares method, and we recommend the calculation that produces the lower amount. States where you have foreign-qualified the corporation may also impose franchise tax or annual report fees.
Annual reports and corporate formalities
Corporations must hold annual shareholder meetings and annual board meetings (or take action by written consent), maintain minutes, and file annual reports in their state of incorporation and any foreign-qualified states. Failing to follow these formalities is a leading cause of “piercing the corporate veil” — courts disregarding the corporate liability shield because owners did not treat the corporation as a separate entity.
Federal employment and reporting obligations
Once you hire employees, the corporation owes payroll taxes (Social Security, Medicare, federal unemployment), files Forms 941 and W-2, and complies with state unemployment, workers’ compensation, and new-hire reporting rules.
Common mistakes we prevent
- Missing the 83(b) deadline on founder stock — the 30-day window is unforgiving
- Issuing too few authorized shares, forcing an early amendment when the option pool is created
- Skipping the stockholders agreement, which leaves transfer restrictions and ROFR rights unenforceable
- Treating the corporation as the founder’s personal account — commingling funds, missing minutes, and skipping board approvals invites veil-piercing
- Forming in the wrong state — incorporating in Nevada or Wyoming for “tax savings” while operating elsewhere triggers foreign qualification and adds cost without benefit
Pricing and what to expect
Omni Law offers flat-fee corporation formation packages starting at $1,000 for the basic incorporation (Certificate of Incorporation, bylaws, organizational consents, EIN, stock ledger). Add-ons — stockholders agreement, equity incentive plan, 83(b) elections, foreign qualifications, S-election — are quoted separately so you know the total before we start. See our fee structure page for the full pricing model.
Initial consultations are free and run about 30 minutes — enough time to walk through entity choice, state of incorporation, equity plans, and timing.
Frequently Asked Questions
What is the difference between a C-corp and an S-corp?
A C-corp and an S-corp are the same legal entity — both are corporations formed under state law. The difference is federal tax treatment. A C-corp is taxed as a separate entity at 21%, with a second layer of tax on dividends. An S-corp elects pass-through treatment, so profits flow to shareholders’ personal returns. S-corps are limited to 100 U.S.-resident individual shareholders and one class of stock.
Should I incorporate in Delaware or my home state?
Incorporate in Delaware if you plan to raise institutional capital, expect to grant equity to employees in multiple states, or anticipate a future sale. Incorporate in your home state if you operate in one state, are not raising venture capital, and want to avoid the cost of foreign qualifying. Delaware costs more upfront but is the institutional default.
How long does it take to form a corporation?
A typical Omni Law incorporation closes in 5 to 10 business days from engagement to fully formed, EIN-in-hand corporation with founder stock issued and 83(b) elections filed. Expedited Delaware filings can shorten that to 24 to 48 hours when timing matters.
How much does it cost to form a corporation?
Omni Law’s flat-fee corporation formation packages start at $1,000 and cover the Certificate of Incorporation, bylaws, organizational consents, EIN, and stock ledger. State filing fees are passed through at cost. Add-ons such as stockholders agreements, equity plans, and foreign qualifications are quoted separately.
What is an 83(b) election and why does it matter?
A Section 83(b) election lets a founder pay ordinary income tax on restricted stock at the time of grant — when the value is typically near zero — rather than as the stock vests. Filing the election within 30 days of grant locks in a low cost basis and can save hundreds of thousands or millions in tax on a successful exit. Missing the 30-day deadline is one of the most expensive mistakes a founder can make.
Can I convert an LLC into a corporation later?
Yes. LLCs are commonly converted to corporations when the business is preparing to raise venture capital. Most states allow a statutory conversion (a one-step filing); others require a merger of the LLC into a newly formed corporation. The conversion can usually be structured tax-free under Section 351 with proper planning.
What is QSBS and how do I qualify?
Qualified Small Business Stock (QSBS) under Section 1202 lets founders and early investors exclude up to $10 million of capital gain (or 10x their basis) from federal tax on the sale of stock held more than five years. The corporation must be a U.S. C-corp, have less than $50 million in gross assets when stock is issued, and operate in a qualified trade or business.
Do I need a stockholders agreement at formation?
Yes — even a two-founder corporation should have one. The stockholders agreement covers transfer restrictions, rights of first refusal, drag-along/tag-along, vesting acceleration, and what happens if a founder leaves. Without it, state default rules govern, and they are almost never what the founders intended.
Related practice areas
Get started
Schedule a free 30-minute consultation. We’ll listen to what you’re building, walk through the entity options that fit, and give you a clear sense of the engagement before any work starts.