Venture Capital Fund Economics Explained
Let’s dive into the basics of VC fund economics, from how they work to who gets paid and why, covering the key aspects without overwhelming details.
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Forming a company in the U.S. is simple. Provide a few basic details, and we will form a C-corporation or limited liability company in Delaware, obtain a tax number, and open a bank account – all completely online.
Not sure what corporate form best suits your needs? This article will help you choose.
Read the guide and choose the entity type
Answer a few questions about your business
Pay
Have your entity ready within 3-5 business days
No hidden fees – the package includes expedited filing fees and the registered agent fee for the first year* $200/year after that
Sign your corporate documents
Get your EIN in 10-30 business days
Apply for a bank account at trusted institutions and have your application processed within 7-15 business days
Mailing address in New York for 1 year* $250/year after that
1-hour consultation with a lawyer
Annual report and franchise tax reminders
Services Agreement and NDA templates
The two most common reasons to form a company in the U.S. are to fundraise with U.S. investors and to accept payments from U.S. clients (such as via Stripe). It is much harder to do these things with a non-U.S. company.
(1) While it's true that the price of Clerky's basic package is just $407, it covers only C-corp formation. Clerky's full package costs $800 and does not include LLC formation, consultation with a lawyer, opening a bank account, or company mailing address. You have to obtain these services on your own or hire a lawyer, which brings the total price to well over the $1500 we charge.
(2) Our documents are written in plain and easily understandable language. Clerky's documents are complex and incomprehensible to founders, which causes them to seek lawyers' help to explain what the documents mean and revise them.
Yes, Delaware corporate law allows conversion of LLCs into C-Corps and vice versa. The conversion is relatively simple, quick, and cheap.
Yes, one person can hold all the positions in the company. This person can even make an agreement between the company and himself as an individual.
No, company documents don't need to be notarized. A handwritten or electronic signature is sufficient to execute the documents.
Approximately $3,000. The main expenses are accounting services fees to prepare and file federal tax and information returns (up to $1,000), Delaware franchise tax payments ($300-$600), registered agent fee ($200), and mailing address ($250-$1000). If you form a C-corporation, you will also need to pay federal income tax at the rate of 21%.
LLC Package
(1) Certificate of formation – a document filed with the State of Delaware that evidences the formation of your LLC.
(2) LLC operating agreement – the charter document of the LLC that outlines the company's ownership structure and members’ duties. An operating agreement is suitable for both single-member and multiple-member LLCs.
(3) Statement of authorized person – a document that names the initial members of the LLC.
(4) EIN notice – an official letter from the IRS assigning your company an Employer Identification Number.
C-corporation Package
(1) Certificate of incorporation – a document filed with the State of Delaware that evidences the formation of your C-corporation.
(2) Bylaws — the internal governing document for your C-corporation, which outlines the powers and duties of the stockholders, directors, and officers.
(3) Initial board resolutions — the document commonly used for initial stock distribution, officer election, and setting up the company's operations.
(4) Founder stock purchase agreement — an agreement under which the founder assigns his intellectual property to the company in exchange for the company’s shares. Comes in two versions – with or without vesting.
(5) Proprietary information and invention assignment agreement — an agreement by which founders, employees, advisors, and others assign to the company the intellectual property and other proprietary rights they create while performing work for the company.
(6) Capitalization table — a spreadsheet that lists all stockholders of the company, the number of shares they hold, and their ownership percentages.
(7) Statement of incorporator – a document that appoints the initial directors of the C-corporation.
(8) EIN notice – an official letter from the IRS assigning your company an Employer Identification Number.
We maintain certain KYC procedures and may ask you to provide additional documents and information to ensure compliance with sanctions laws