If you plan to raise money from US venture investors or issue stock options to a team, a Delaware C-Corp is usually the better starting structure. This guide explains why, what it costs to run, and how PowerLaunch sets one up for you.
Why investors prefer the C-Corp
Most US venture funds are set up as limited partnerships. Their own investors expect clean, predictable tax treatment, and an LLC's pass-through income does not fit that model well. A C-Corp issues stock, which is the format venture deals are built around: preferred shares, a cap table, a board, and an option pool for employees.
An LLC can technically issue "units" and profit interests, but the legal work to make that look like standard venture stock is more complex and less familiar to investors. Most institutional investors will ask you to convert to a C-Corp before they wire money, so many founders start there instead.
Delaware norms, briefly
Delaware is the default state for venture backed companies. It has a specialized business court, a large body of corporate case law, and legal and investor familiarity that speeds up deals. None of that is required by law. You can incorporate in another state, but check the state's site and talk to your investors first, since a non-Delaware entity can slow down diligence.
A typical Delaware C-Corp setup includes:
- Authorized shares, usually a large round number like 10,000,000, with only a portion issued at first.
- A par value per share, often a very small fraction of a cent.
- A board of directors, even if that is just you at the start.
- Bylaws that set out how the board and shareholders make decisions.
Stock, 409A, and 83(b) at a high level
Once you issue stock to founders or employees, three things usually come up.
Common stock and vesting. Founders typically hold common stock that vests over time, so if someone leaves early, the company can buy back the unvested part. This protects the cap table and is something investors expect to see.
409A valuation. Before you grant stock options to employees, US tax rules require a formal valuation of the common stock, generally done by a third-party valuation firm. This sets the option strike price and helps avoid tax penalties for the option holders. It is a compliance step, not a fundraising valuation, and it is separate from your deal terms with investors.
83(b) election. If you receive stock that is subject to vesting, you can file an 83(b) election with the IRS within a short window after the grant. This locks in your tax basis at the low value on day one, instead of paying tax as the stock vests and (hopefully) grows in value. Missing the deadline is a common and costly mistake, so if this applies to you, get it confirmed with your tax professional right after your stock is issued.
None of these three items are things PowerLaunch skips past, but the details depend on your specific cap table and grants, so a licensed tax professional should confirm the numbers for your situation.
The double taxation trade-off
A C-Corp pays federal corporate income tax on its profits. If it later pays dividends to shareholders, those dividends are taxed again on the shareholder's personal return. This is the classic "double taxation" issue people bring up when comparing a C-Corp to an LLC.
In practice, most early-stage venture-backed companies are not profitable for years, and they rarely pay dividends, since any cash gets reinvested into growth. So the double taxation issue is real, but it usually shows up much later, if the company becomes profitable and starts distributing cash instead of reinvesting it.
Here is a simple side-by-side view:
| Factor | LLC | C-Corp |
|---|---|---|
| Investor fit for venture rounds | Usually needs to convert first | Standard structure |
| Tax on profits | Pass-through to owners | Corporate tax, then tax again on dividends |
| Stock options for employees | More complex to set up | Standard, with 409A valuation |
| Good fit for | Bootstrapped or lifestyle businesses, holding companies | Startups raising outside capital |
Converting later
Some founders start as an LLC and convert to a Delaware C-Corp once a round is close. This is possible, but it adds legal work, timing pressure, and cost right when you are also trying to close a deal. It can also complicate any 83(b) timing if you already have vesting stock-like interests in the LLC.
If you already know you will raise from US investors, it is usually simpler and cheaper to start as a C-Corp from day one, rather than convert under deadline pressure later.
Costs on PowerLaunch
PowerLaunch forms your Delaware C-Corp and keeps it compliant on the MyCG.AI platform. All plans include formation filings, your EIN, corporate bylaws, a registered agent, and a virtual mailing and business address, plus the state filing fee at cost.
| Plan | Price | Good for |
|---|---|---|
| Launch | $295/yr | Just forming the company and getting an EIN |
| Run | $1,995/yr | Ongoing filings, a tax professional consultation, IRS tax filings, transaction tracking, and financial reports |
| Scale | $2,995/yr or $329/mo | Everything in Run plus expedited EIN, free dissolution, live call scheduling, and a dedicated bookkeeper |
Formation in Delaware typically takes 1 to 2 weeks. If you are a non-resident founder without an SSN, your EIN usually takes 2 to 4 weeks, or a few days with the expedited EIN add-on, which is $295 on Launch and Run and included in Scale. Once your EIN is issued, PowerLaunch can introduce you to Mercury, Wise Business, or Relay for a business bank account, though approval is always the bank's own decision.
If your C-Corp is foreign-owned and structured in a way that triggers Form 5472 and pro forma 1120 filing, that deadline is 15 April. Under the current 2026 interim FinCEN rule, US-formed companies are exempt from BOI reporting, but check for updates before you file.
If PowerLaunch makes a formation error, it is corrected at no cost to you, and that portion of the fee is refunded. State filing fees are never refundable.
What to do next
If you are planning to raise from US investors, book a free 20-minute consultation at powerlaunch.solutions/book to talk through your specific structure, stock plan, and timing. When you are ready to form your Delaware C-Corp, head to powerlaunch.solutions/signup and pick the plan that matches how much ongoing support you need.
