- FormationEntity choice, elections and registrations from day one.Learn more about Formation →
- C corporations & QSBSStructuring founder stock to qualify for the Section 1202 exclusion.Learn more about C corporations & QSBS →
- Fractional CFOBudgets, runway and board reporting without a full-time hire.Learn more about Fractional CFO →
- Equity compensationOptions, RSUs and the tax side of paying people in stock.Learn more about Equity compensation →
Get the early decisions right
- The entity. If you plan to raise venture capital, investors generally expect a C corporation, usually formed in Delaware. A bootstrapped company that will pay out its profits may do better as an LLC or S corporation.
- The 83(b) election. Founders who receive stock that vests over time can elect to be taxed on its value now, when it is usually worth very little, rather than as it vests. The election must be filed with the IRS within 30 days of the grant, on Form 15620 or a written statement. There is no extension.
- Qualified small business stock. For C corporation stock issued after July 4, 2025, Section 1202 can exclude 50% of the gain after three years, 75% after four and 100% after five, up to the greater of $15 million or ten times your basis. The clock starts when the stock is issued, so formation timing matters.
- Stock options. Options should be granted at no less than fair market value, which usually means an independent 409A valuation, to avoid steep penalties for employees under Section 409A.
Research costs: the credit and the deduction
- Section 174A. For tax years beginning after 2024, the 2025 tax law lets companies deduct domestic research and experimental costs, including software development, in the year they are paid. Foreign research costs are still deducted over 15 years. An election that let smaller companies apply the change back to 2022 through 2024 closed in July 2026.
- The research credit, before profit. A qualified small business with under $5 million in gross receipts, and no gross receipts more than five years back, can apply up to $500,000 a year of the federal research credit against its employer payroll taxes, so the credit is useful before the company owes income tax.
- New Jersey. The Technology Business Tax Certificate Transfer Program lets eligible technology and life sciences companies sell unused net operating losses and research credits for cash.
Filings founders often miss
- Delaware franchise tax. Delaware corporations file an annual report and pay franchise tax by March 1. The default calculation can produce a large bill for companies with many authorized shares; the assumed par value capital method usually brings it down.
- Remote employees. Hiring someone in another state usually means registering there for payroll tax, and it can create an income tax filing in that state too.
- Foreign-owned companies. A U.S. corporation or single-member LLC with a 25% foreign owner generally files Form 5472, and the penalty for missing it starts at $25,000.
- Founders on payroll. In a C corporation, founders who work in the business and take money out are generally paid through payroll, not owner draws.
Investor-ready books
Investors and acquirers expect accrual-basis financial statements, a monthly close, revenue recognized when it is earned (deferred revenue for annual subscriptions, for example), a cap table that agrees with the equity accounts, and clear burn and runway reporting. Building that from the start costs far less than rebuilding it during due diligence.
Frequently asked questions
Should my startup be a Delaware C corporation?
If you plan to raise venture capital, usually yes, since most institutional investors expect one and it is required for QSBS. A company that will distribute its profits to the owners may do better as an LLC or S corporation.
What is an 83(b) election and when is it due?
It lets you be taxed on restricted stock when you receive it, usually at a very low value, rather than as it vests. It must be filed with the IRS within 30 days of the grant, and there is no extension.
Can a startup use R&D tax credits before it is profitable?
Yes. A qualified small business with under $5 million in gross receipts can apply up to $500,000 a year of the federal research credit against its employer payroll taxes.
Can we deduct software development costs right away?
For tax years beginning after 2024, domestic research and experimental costs, including software development, can generally be deducted in the year paid under Section 174A. Foreign research costs are still deducted over 15 years.
Why is our Delaware franchise tax bill so high?
The default authorized shares method can produce a very large number for startups with millions of authorized shares. Recalculating under the assumed par value capital method usually reduces it significantly.