Certificate of incorporation (Delaware C corporation)

What it is and when it is used

The certificate of incorporation is the founding document of a Delaware corporation. It is filed with the Delaware Secretary of State under sections 101 and 102 of the Delaware General Corporation Law (8 Del. C., the "DGCL") to form a corporation for profit. Once the filing is accepted, the corporation exists.

It is used when founders decide to form a Delaware C corporation, the structure that venture-backed startups commonly use. The certificate is short and public. It records the basic facts about the company and a few governance defaults; the detailed internal rules go in the bylaws, which the certificate authorises the board to adopt and change.

In Dealroom the certificate is a single-party document, prepared in solo mode. It is also the first step of Dealroom's startup formation journey for founders who choose to incorporate in Delaware.

Who signs it: the incorporator

Unlike a contract, the certificate has no counterparty. It is signed by one person, the incorporator, who certifies the contents to the State of Delaware.

• The incorporator must be a natural person aged eighteen or older.
• It is usually a single founder or the company's outside counsel.
• The certificate gives the incorporator's name and mailing address (in Dealroom's text, care of the registered office).
• Under section 108 of the DGCL, if the initial directors are not named in the certificate, the incorporator has the power to adopt the initial bylaws and elect the initial directors. Dealroom's certificate does not name directors, so this step falls to the incorporator.
• The incorporator's role ends once the initial board is elected. The incorporator keeps no special authority afterwards.

Key clauses

The certificate is organised in numbered articles, from FIRST to EIGHTH, followed by the signature.

FIRST: Corporate name

The legal name of the corporation. It must be distinguishable from other entities registered in Delaware and must include an approved corporate designator, such as "Inc.", "Corporation" or "Company". Dealroom uses the name exactly as entered.

SECOND: Registered office and agent

The address of the corporation's registered office in Delaware and the name of its registered agent at that address. The agent accepts service of process (formal legal papers) for the company. Most startups appoint a commercial registered agent, which publishes a standard name and address block that can be pasted in.

THIRD: Corporate purpose

Dealroom uses the broad, all-purpose statement: the corporation may engage in any lawful act or activity for which corporations may be organised under the DGCL. This is the standard for modern Delaware startups and is preferred by institutional investors. It allows the business to change direction without amending the certificate.

FOURTH: Authorized shares and par value

The total number of shares of common stock the corporation may issue, and the par value of each share. The authorized number is a ceiling: the company can issue up to that number without changing the certificate. Raising it later requires a certificate of amendment filed with the Secretary of State, approved by the board and by the stockholders.

FIFTH: Director liability limitation

As section 102(b)(7) of the DGCL allows, directors are not personally liable to the corporation or its stockholders for monetary damages for a breach of fiduciary duty, to the fullest extent Delaware law permits. The law does not allow this protection for breaches of the duty of loyalty, intentional misconduct or improper distributions. Any later repeal or change applies only to the future. Nearly all Delaware corporations include this clause, which helps attract qualified directors.

SIXTH: Incorporator

The name and mailing address of the incorporator, as described above.

SEVENTH and EIGHTH: Amendment and bylaws

These articles are fixed. The corporation reserves the right to amend the certificate in the manner the DGCL prescribes, and the board of directors is authorised to make, amend and repeal the bylaws, subject to any limits the stockholders set in the bylaws.

What the founders decide

There are no two sides to this document, so there is nothing to negotiate. The founders make choices, and Dealroom's options are all neutral: none favours one person over another.

Authorized shares is the one real choice between options:

• 5,000,000 shares (conservative): suits a bootstrapped or lifestyle business, or a founding team that does not expect institutional rounds. If the company later raises a priced round, it will almost certainly need to amend the certificate, with the extra paperwork and filing fees that brings. Investors expect ten million as the default, and five million can be tight for a reasonable option pool plus several rounds.
• 10,000,000 shares (standard): the usual startup ceiling, and the one investors expect. It leaves room for the founders (typically five to seven million shares), an option pool (typically one to two million) and multiple priced rounds. The only drawback is a slightly larger-sounding capitalisation on day one, and investors care about issued shares, not authorized ones.
• 20,000,000 shares (flexible): extra headroom for several priced rounds in the first few years. The only drawback the skill notes is that it is not the standard, so some investors will ask why the company departed from ten million.

The founders also supply four facts:

• the corporate name, with its designator;
• the registered agent and its Delaware street address;
• the par value per share in US dollars ($0.00001 is the standard low figure);
• the incorporator's full name.

The other articles (all-purpose wording, director liability limitation, amendment reservation, board power over the bylaws) each have a single standard text.

Jurisdictions and languages Dealroom supports for it

This document is specific to Delaware and is offered in English only. It is a filing under Delaware corporate law; it cannot be used to form a company in another state or country.

Common mistakes

• Filing a name without checking availability. Confirm with the Secretary of State that the name is available and distinguishable before filing, and include a corporate designator.
• Omitting or misstating the registered agent. The certificate must give both the Delaware address of the registered office and the agent's name at that address. A commercial agent also charges an annual fee (roughly 50 to 300 US dollars), which should be budgeted.
• Authorizing too few shares. A low ceiling means amending the certificate before a priced round, with board and stockholder approval and a new filing.
• Overlooking par value when thinking about franchise tax. Delaware uses the lower of two calculations. At the standard low par value of $0.00001, the assumed par value method gives roughly the $85 minimum whatever the number of authorized shares, so the share count mainly affects headroom, not tax.
• Expecting the incorporator to keep control. The incorporator's authority ends once the initial board is elected; ongoing decisions belong to the board and the stockholders.
• Narrowing the purpose clause without need. A limited purpose may force an amendment if the business changes direction.

# 1. Read the clauses, options and the facts it needs
curl https://dealroom.todo.law/api/v1/agent/templates/DELAWARE_CERT_OF_INCORPORATION \
  -H "Authorization: Bearer drk_YOUR_KEY"