A note from Chris: For many founders, the only thing worse than paperwork is paperwork they don’t understand. Figuring out how to incorporate is the quintessential example: There are lots of structures to choose from, forms to file with regulators and distinctions that are hard for a non-lawyer to parse.

It isn’t as complex as it might seem. Most founders and their tech startups should follow the same playbook. And increasingly, there are online services and low-cost options to help. Here’s what you need to get started.
—Chris

As a founder, you will be faced with a multitude of important decisions. The first is to choose which legal structure is the best fit for your startup.

There are multiple ways to incorporate, each with its advantages and disadvantages. There’s one business type, though, a C-Corporation, that’s almost always the right choice for tech startups. It’s best to establish the C-Corp as early in your company’s life as possible. And while setting it up can seem complicated, there are lots of resources that can help.

Which option is right for you?

The simplest option for business owners who are getting started is to create a sole proprietorship. There’s no registration process or application to fill out, although you may want to pay a small fee to get a DBA (“doing business as”) certificate, which reserves the rights to a particular company name. (Note that once you register a name for your business, it’s a hassle to change it.)

If you’re working by yourself—say, coding prototypes—this is a fine option, says David Raynor, founder of Accelerate Legal, a San Francisco law-firm that caters its services to tech startups. “But the minute you have two people, there are problems, like who owns the intellectual property?”

Another common company structure is an LLC, or Limited Liability Company. An LLC is advantageous for several reasons: The cost is relatively low, you record the company’s financial results in your personal tax filing, and, as the name suggests, owners of an LLC are not personally liable for the company’s debts and legal obligations. The same is true for an S Corporation, or S-Corp.

And yet, most startups incorporate as a C-Corp, the same structure used by Apple, Google and pretty much every large company in the United States. A C-Corp is a fully separate legal entity, responsible for paying corporate taxes and for issuing annual reports. It must also appoint a board of directors. It will probably seem like more structure than you need when you’re just starting. But if you plan to raise money, as is likely, a C-Corp is the only right answer.

Why investors favor C-Corporations

There’s one big reason why …