Gun to My Head: Startup Setup Questions, Answered Bluntly
Not rules. Not legal advice. Just the honest, opinionated answers to the questions every early-stage founder asks — from entity type and bank to equity splits and patents.
Founders ask these questions constantly. The internet gives them 3,000-word articles with endless qualifications. Here's what I actually tell founders when they ask.
These aren't hard and fast rules. Your situation may differ. But if you put a gun to my head — here's the answer.
Formation
Corporation or LLC? Corporation. If you're building a venture-backed startup, an LLC creates tax and structural complications that will hurt you later. Delaware C-Corp from day one.
Where should I incorporate? Delaware. Every time. Investors expect it, courts have centuries of corporate law precedent, and the franchise tax is manageable. Here's why.
Registered agent? Harvard Business Services. Reliable, affordable, no upsells.
How many shares should I authorize? 10 million. Enough to cover founders, an option pool, and early investors without needing to amend your Certificate immediately.
Par value per share? $0.0001. Standard. Minimizes the cost of issuing founder shares and keeps your Delaware franchise tax manageable.
Fiscal year end? December 31. Calendar year. Keep it simple and consistent with how everyone else reports.
Option pool size? No more than 10% to start. You can always expand it later. Investors will ask you to right before a round anyway — don't give away more than you need to upfront.
83(b) election? Yes. Always. File within 30 days electronically. No exceptions. Missing this window is one of the most expensive mistakes a founder can make, and there's no cure. The IRS now accepts electronic filings — use that.
Banking & Finance
Bank? Mercury. Clean interface, founder-friendly, no minimum balances, excellent API. Works well with the rest of the startup stack.
Spend management? Ramp. Corporate cards, expense management, and bill pay in one place. Saves your bookkeeper hours every month.
Accounting software? QuickBooks Online. Unfortunately. It's not great, but it's what every bookkeeper and accountant knows, it integrates with everything, and it's the path of least resistance. Switching later is painful.
People & Equity
Payroll? Gusto. Easy to set up, handles multi-state, integrates with QuickBooks. Rippling is better if you're also managing HR and IT, but Gusto is the right default.
Vesting schedules? Yes. 4 years, 1-year cliff, double-trigger acceleration. Every founder. No exceptions. This protects the company if someone leaves early and protects founders from being forced to forfeit vested equity in an acquisition.
Should co-founders split equity equally? Almost never. Equal splits feel fair in the moment and create resentment later. Someone is the CEO. Someone came up with the idea. Someone has been working on it longer. Have the honest conversation early and reflect reality in the cap table.
How much equity for an advisor? 0.25–0.5%, 2-year vest. More than that and you're giving away equity for what is usually a modest time commitment. Less than that and it's not worth the paperwork.
Confidentiality and IP assignment agreements? Always. For everyone. Every founder, employee, and contractor should sign one before they do a single day of work. This is how you ensure the company owns what it paid to build.
Cap Table & Fundraising
Cap table software? Carta. The standard. Investors expect it, it handles 409A, and it produces the output your lawyer needs. Pulley is a reasonable alternative if you want something cheaper early on.
SAFE or convertible note? SAFE. Simpler, no maturity date, no interest accruing. The YC post-money SAFE is the market standard and investors know it. Only consider a convertible note if an investor insists.
Governance
Board size at founding? Small. Founders only. You don't need outside board members on day one. Keep it lean until you have investors who require a seat.
Do I need insurance? Not to start. D&O becomes important before your first outside investor closes. General liability depends on your business. Don't over-insure early — add coverage as the risk profile develops.
Legal
Do I need an NDA before pitching investors? Please, no. Asking an investor to sign an NDA before hearing your pitch signals inexperience. Serious investors won't sign them at the pitch stage. Your idea is not what they're investing in anyway.
Do I need a privacy policy? Yes, but keep it simple. If your product touches user data — and it almost certainly does — you need one on day one. It doesn't need to be long. It needs to be accurate. Here's what actually matters.
Should I file a patent? Probably not yet — and provisional to start. Patents are expensive, slow, and rarely the moat founders think they are at the early stage. If you have something genuinely novel and patentable, file a provisional patent application to establish a priority date cheaply. You have 12 months to decide whether to convert it.
Should I trademark my name? Yes — once you've validated the business. Don't trademark a name you might change. Once you're confident in the brand, file it. It's inexpensive, it protects you, and it becomes an asset in an acquisition.
Law firm? Flux. Embedded legal counsel — senior attorney and paralegal — on a flat monthly subscription. We work alongside you as you sign the agreements that matter, so you're not cleaning up problems two years later.
These answers work for most early-stage startups. Your situation may be different. But when founders ask us what we'd do — this is what we tell them.
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