---
# === IDENTITY ===
id: business/startup-legal/cap-table-setup-guide/2026
canonical_question: "How do I set up a cap table — initial equity split frameworks, option pool sizing (10-20% pre-Series A), common structures?"
aliases:
  - "Cap table setup for new startup"
  - "How to split equity among co-founders and set up option pool"
  - "Startup capitalization table structure with SAFEs and options"
  - "Founder equity split frameworks equal vs contribution-based"
entity_type: execution_recipe
domain: business > startup-legal > cap table setup guide
region: global
jurisdiction: US
temporal_scope: 2024-2026

# === VERIFICATION ===
last_verified: 2026-03-11
confidence: 0.88
version: 1.0
first_published: 2026-03-11

# === TEMPORAL VALIDITY ===
temporal_validity:
  status: evolving
  last_breaking_change: "IRS released standardized Form 15620 for 83(b) elections in November 2024; electronic filing permitted as of mid-2025"
  next_review: 2026-09-07
  change_sensitivity: high

# === CONSTRAINTS ===
constraints:
  - "83(b) election must be filed within 30 days of restricted stock grant — no extensions, no exceptions"
  - "409A valuation required before issuing any stock options; safe harbor lasts 12 months or until a material event"
  - "Delaware C-Corp is the standard structure for VC-funded startups — other entity types create friction with investors"
  - "Option pool sizing affects founder dilution — pre-money pool creation dilutes founders more than post-money"
  - "All equity grants require board approval and proper documentation — undocumented grants create legal liability"

# === SKIP CONDITIONS ===
skip_this_unit_if:
  - condition: "User already has a cap table and needs to model a Series A round"
    use_instead: "finance/saas-benchmarks/saas-fundraising-benchmarks-by-stage/2026"
  - condition: "User needs to evaluate co-founder fit before splitting equity"
    use_instead: "business/startup-readiness/co-founder-evaluation-framework/2026"
  - condition: "User is a non-US company needing jurisdiction-specific equity structure"
    use_instead: null

# === AGENT HINTS ===
inputs_needed:
  - key: number_of_founders
    question: "How many co-founders are there?"
    type: choice
    options: ["solo founder", "2 co-founders", "3 co-founders", "4+ co-founders"]
  - key: equity_split_approach
    question: "What equity split approach does the user prefer?"
    type: choice
    options: ["equal split", "contribution-based split", "dynamic (Slicing Pie)", "no preference — auto-select"]
  - key: tool_preference
    question: "Which cap table tool should be used?"
    type: choice
    options: ["spreadsheet (free)", "Carta (free Launch tier)", "Pulley ($1,200/yr)", "Captable.io", "no preference — auto-select"]
  - key: fundraising_timeline
    question: "When does the user plan to raise external funding?"
    type: choice
    options: ["not planning to raise", "6-12 months", "12-18 months", "already in conversations"]
  - key: technical_skill
    question: "What is the user's technical skill level?"
    type: choice
    options: ["non-technical (no-code only)", "semi-technical (can edit spreadsheets)", "developer (can write code)"]

# === EXECUTION METADATA ===
execution:
  required_inputs:
    - name: "Founder agreement on equity principles"
      source: "user/co-founder discussions"
      format: "verbal or written agreement on split approach"
    - name: "Incorporation documents"
      source: "startup attorney or legal service"
      format: "Certificate of Incorporation (Delaware C-Corp)"
  outputs:
    - name: "Capitalization table"
      format: "spreadsheet or cap table software"
      description: "Complete cap table showing authorized shares, issued shares by founder, option pool reserve, and unissued shares"
    - name: "Founder stock purchase agreements"
      format: "legal document"
      description: "Executed agreements with vesting schedules and 83(b) election filings"
    - name: "Equity plan documentation"
      format: "legal document"
      description: "Stock option plan (typically equity incentive plan) with board approval"
  tools_required:
    - name: "Carta"
      purpose: "Cap table management, 409A valuations, equity plan administration"
      tier: free
      cost: "$0 (Launch tier for <25 stakeholders, <$1M raised)"
      alternatives: ["Pulley", "Captable.io", "Google Sheets template"]
    - name: "Pulley"
      purpose: "Cap table management with transparent pricing and fast 409A"
      tier: paid
      cost: "$1,200/year (Startup plan, up to 25 stakeholders)"
      alternatives: ["Carta", "Captable.io", "AngelList Stack"]
    - name: "Startup attorney"
      purpose: "Draft stock purchase agreements, option plan, file 83(b) elections"
      tier: paid
      cost: "$2,000-$5,000 for formation package"
      alternatives: ["Clerky ($799 formation)", "Stripe Atlas ($500)", "LegalZoom"]
  credentials_needed:
    - service: "Delaware Division of Corporations"
      type: "Incorporation filing"
      where_to_get: "https://corp.delaware.gov/"
      free_tier_limits: "N/A — filing fee ~$89-$189"
    - service: "IRS (83(b) election)"
      type: "Tax election form"
      where_to_get: "https://www.irs.gov/forms-pubs/about-form-15620"
      free_tier_limits: "N/A — free to file"
  estimated_duration: "4-8 hours for complete setup (excluding attorney review)"
  estimated_cost: "$500-$5,000 depending on DIY vs. attorney-assisted"

# === DISTRIBUTION ===
canonical_source: "https://knowledgelib.io/business/startup-legal/cap-table-setup-guide/2026"
suggested_citation: "Source: knowledgelib.io — AI Knowledge Library (verified 2026-03-11)"

# === RELATED UNITS ===
related_kos:
  depends_on:
    - id: "business/startup-readiness/co-founder-evaluation-framework/2026"
      label: "Co-founder evaluation must be complete before splitting equity"
  feeds_into:
    - id: "business/startup-legal/founder-agreement-essentials/2026"
      label: "Founder agreement — vesting (4yr/1yr cliff), IP assignment, roles, exit provisions, 83(b) filing"
    - id: "business/startup/financial-model-template-library/2026"
      label: "Stage-appropriate startup financial model — pre-revenue, seed, Series A and growth structures with P&L, cash flow, burn and unit economics"
  related_to:
    - id: "finance/saas-benchmarks/saas-fundraising-benchmarks-by-stage/2026"
      label: "SaaS fundraising benchmarks by stage — round size, pre-money valuation, and the ARR, growth and operational metrics required to raise at each stage"
  alternative_to: []

# === SOURCES ===
sources:
  - id: src1
    title: "Cap Table Basics: Understanding Startup Equity & Ownership"
    author: Promise Legal
    url: https://promise.legal/startup-legal-guide/formation/cap-table-basics
    type: technical_blog
    published: 2025-01-15
    reliability: high
  - id: src2
    title: "What is a Cap Table? Key Concepts & Examples"
    author: Carta
    url: https://carta.com/learn/startups/equity-management/cap-table/
    type: official_docs
    published: 2025-06-01
    reliability: authoritative
  - id: src3
    title: "Understanding SAFEs and Priced Equity Rounds"
    author: Y Combinator
    url: https://www.ycombinator.com/library/6m-understanding-safes-and-priced-equity-rounds
    type: official_docs
    published: 2024-01-01
    reliability: authoritative
  - id: src4
    title: "Understanding the Basics of Cap Table Math in Start-Ups"
    author: American Bar Association
    url: https://www.americanbar.org/groups/business_law/resources/business-law-today/2024-february/understanding-basics-cap-table-math-start-ups/
    type: industry_report
    published: 2024-02-01
    reliability: authoritative
  - id: src5
    title: "Founder Equity Splits: How to Divide Ownership (Equal vs Unequal)"
    author: Promise Legal
    url: https://promise.legal/startup-legal-guide/formation/equity-splits
    type: technical_blog
    published: 2025-03-01
    reliability: high
  - id: src6
    title: "83(b) Election Explained: Tax Benefits & How to File"
    author: Carta
    url: https://carta.com/learn/equity/stock-options/taxes/83b-election/
    type: official_docs
    published: 2025-01-01
    reliability: authoritative
  - id: src7
    title: "Cap Table Mastery: How to Manage Startup Equity from Seed to Series C"
    author: The VC Corner
    url: https://www.thevccorner.com/p/cap-table-mastery-how-to-manage-startup
    type: technical_blog
    published: 2025-04-01
    reliability: high
  - id: src8
    title: "409A Valuation for Startups: Complete Compliance Guide 2025-2026"
    author: Sofer Advisors
    url: https://soferadvisors.com/insights/blog/409a-valuation-for-startups-complete-compliance-guide-2025-2026/
    type: technical_blog
    published: 2025-09-01
    reliability: high
---

# Cap Table Setup Guide

## Purpose

This recipe produces a complete, investor-ready capitalization table for an early-stage startup, including founder equity allocation, vesting schedules, option pool reserve, and documentation for 83(b) elections. The output is a structured cap table (in software or spreadsheet) with all supporting legal documentation, ready for SAFE/convertible note issuance and future priced rounds. [src2]

## Prerequisites

- [ ] **Delaware C-Corp incorporation** — Certificate of Incorporation filed with Delaware Division of Corporations ($89-$189 filing fee)
- [ ] **Co-founder agreement on split approach** — verbal or written consensus on equal vs. contribution-based equity division
- [ ] **EIN from IRS** — Employer Identification Number for the company (free, apply online at irs.gov)
- [ ] **Startup attorney or legal service** — [Clerky](https://clerky.com), [Stripe Atlas](https://stripe.com/atlas), or local startup attorney for stock purchase agreements
- [ ] **Cap table tool** — [Carta](https://carta.com) (free Launch tier), [Pulley](https://pulley.com) ($1,200/yr), or spreadsheet template

## Constraints

- 83(b) election has a hard 30-day filing deadline from the stock grant date. Missing this deadline is irrevocable and can result in massive tax liability as shares vest and appreciate. [src6]
- 409A valuation is required before granting any stock options to employees, advisors, or contractors. Issuing options without a 409A creates IRS penalties up to 40% of option value. [src8]
- Option pool created pre-money (before investor pricing) dilutes founders only; post-money dilutes all shareholders including investors. Investors almost always push for pre-money pool creation. [src4]
- Standard Delaware C-Corp authorizes 10,000,000 shares of common stock at $0.0001 par value. This is convention, not law — but deviating creates friction with investors and attorneys. [src1]
- All founder stock must be subject to vesting (typically 4-year with 1-year cliff) even for the idea originator. Investors will not fund companies with fully vested founder stock. [src7]

## Tool Selection Decision

```
Which path?
├── Solo founder OR 2 co-founders, pre-funding, budget-conscious
│   └── PATH A: Spreadsheet + Attorney — Google Sheets template + Clerky/Stripe Atlas
├── 2-3 co-founders, planning to raise within 12 months
│   └── PATH B: Carta Free — Carta Launch tier + startup attorney
├── Already in investor conversations, need scenario modeling
│   └── PATH C: Pulley Paid — Pulley Startup plan + 409A + attorney
└── Complex structure (SAFEs + notes + multiple classes)
    └── PATH D: Full-Service — Carta/Pulley + dedicated startup attorney
```

| Path | Tools | Cost | Speed | Output Quality |
|------|-------|------|-------|---------------|
| A: Spreadsheet + Attorney | Google Sheets + Clerky | $500-$800 | 1-2 days | Functional, manual updates |
| B: Carta Free | Carta Launch + attorney | $2,000-$3,500 | 2-3 days | Professional, auto-managed |
| C: Pulley Paid | Pulley + 409A + attorney | $3,200-$5,000 | 2-3 days | Professional, fast 409A |
| D: Full-Service | Carta/Pulley + dedicated attorney | $5,000-$10,000 | 1-2 weeks | Investor-grade, complex |

## Execution Flow

### Step 1: Determine Share Structure

**Duration**: 30 minutes
**Tool**: Calculator / spreadsheet

Define the authorized and issued share structure for your Certificate of Incorporation.

```
Standard Delaware C-Corp Share Structure:
──────────────────────────────────────────
Authorized Common Shares:    10,000,000
Par Value per Share:         $0.0001
Share Price at Founding:     $0.0001 (par value)

Initial Allocation Plan:
  Founders (issued):         7,000,000 - 8,000,000 shares (70-80%)
  Option Pool (reserved):    1,000,000 - 2,000,000 shares (10-20%)
  Unissued (available):      remainder

Example — 2 co-founders, 15% option pool:
  Founder A:    4,250,000 shares (42.5%)
  Founder B:    4,250,000 shares (42.5%)
  Option Pool:  1,500,000 shares (15.0%)
  Unissued:       000,000 shares  (0.0%)
  ─────────────────────────────────────
  Total:       10,000,000 shares (100%)
```

**Verify**: Total issued + reserved + unissued equals authorized shares exactly. No fractional shares.
**If failed**: Re-check math. Common error is double-counting the option pool as both issued and reserved.

### Step 2: Choose Equity Split Framework

**Duration**: 1-2 hours (conversation with co-founders)
**Tool**: Decision framework

Select the equity split approach based on your team dynamics. [src5]

```
Equity Split Decision Tree:
──────────────────────────────────────────
Q1: Are all co-founders contributing equally in time, money, and skills?
├── Yes → EQUAL SPLIT (e.g., 50/50 or 33/33/34)
│         Pro: Simple, no resentment, YC-recommended for equal contributors
│         Con: Does not account for differing contributions or risk
│
└── No → Q2: Can you quantify contribution differences?
    ├── Yes → CONTRIBUTION-BASED SPLIT
    │         Score each founder on 6 factors (1-10 each):
    │           1. Idea origination and IP contribution
    │           2. Domain expertise and industry relationships
    │           3. Technical ability to build the product
    │           4. Time commitment (full-time = 10, part-time = 5)
    │           5. Capital investment
    │           6. Opportunity cost (salary sacrificed)
    │         Calculate: Founder % = (founder score / total scores) × equity pool
    │
    └── No → DYNAMIC SPLIT (Slicing Pie)
              Track contributions over time in "slices"
              Equity recalculates based on actual input
              Best for: uncertain roles, unequal start dates
              Risk: complexity, potential disputes over valuation of inputs

Common Splits for 2 Co-Founders (2025 data):
  Equal (50/50):     ~46% of startups
  Near-equal (45/55): ~25% of startups
  Unequal (60/40+):  ~29% of startups
```

**Verify**: All co-founders have explicitly agreed to the split in writing (even an email confirmation counts initially).
**If failed**: If co-founders cannot agree, pause and complete the co-founder evaluation framework before proceeding.

### Step 3: Issue Founder Stock with Vesting

**Duration**: 1-2 hours
**Tool**: Carta/Pulley or attorney-prepared documents

Issue restricted common stock to each founder with a vesting schedule.

```
Standard Founder Vesting Schedule:
──────────────────────────────────────────
Total Vesting Period:     4 years
Cliff:                    1 year (25% vests at 12-month mark)
Post-Cliff Vesting:       Monthly (1/48th per month)
Acceleration:             Single-trigger or double-trigger (negotiate)

Example — Founder A receives 4,250,000 shares:
  Month 0:    0 shares vested (all restricted)
  Month 12:   1,062,500 shares vest (25% cliff)
  Month 13:   1,151,042 shares vested (+88,542 monthly)
  Month 24:   2,125,000 shares vested (50%)
  Month 36:   3,187,500 shares vested (75%)
  Month 48:   4,250,000 shares vested (100%)

Required Documents:
  1. Board Resolution authorizing stock issuance
  2. Restricted Stock Purchase Agreement (RSPA)
  3. IP Assignment Agreement
  4. 83(b) Election (see Step 4)
```

**Verify**: Each founder has a signed RSPA with the correct share count, vesting schedule, and purchase price ($0.0001/share = $425 total for 4,250,000 shares).
**If failed**: If documents are unsigned, do not proceed. Undocumented equity creates existential risk for the company.

### Step 4: File 83(b) Elections

**Duration**: 30 minutes per founder (filing) + 30 days (IRS processing)
**Tool**: IRS Form 15620

Every founder receiving restricted stock MUST file an 83(b) election within 30 days of the stock grant. [src6]

```
83(b) Election Process:
──────────────────────────────────────────
DEADLINE: 30 calendar days from stock grant date. NO EXCEPTIONS.

What it does:
  - Elects to pay tax on stock value at GRANT date (near $0)
  - Without 83(b): taxed on value at each VESTING date (potentially $$$)

Filing steps:
  1. Complete IRS Form 15620 (standardized Nov 2024)
  2. File electronically via IRS.gov OR mail to:
     Internal Revenue Service Center
     (address for your region — see IRS instructions)
  3. Send copy to your company
  4. Attach copy to personal tax return for that year
  5. Keep proof of filing (certified mail receipt or electronic confirmation)

Tax impact example:
  Shares: 4,250,000 at $0.0001/share
  Value at grant:  $425
  Tax owed at grant: $425 × marginal rate ≈ $100-$160

  WITHOUT 83(b) — if company valued at $2/share at Year 2 vesting:
  2,125,000 shares × $2.00 = $4,250,000 taxable income
  Tax owed: ~$1,500,000+ (ordinary income rates)
```

**Verify**: Proof of filing (electronic confirmation or certified mail receipt) obtained for each founder. Calendar reminder set for the 30-day deadline.
**If failed**: If the 30-day window is missed, consult a tax attorney immediately. There is no remedy — this is one of the most expensive mistakes a founder can make.

### Step 5: Create Option Pool and Equity Incentive Plan

**Duration**: 2-3 hours
**Tool**: Cap table software + attorney

Establish the employee stock option pool for future hires. [src4]

```
Option Pool Sizing Guide:
──────────────────────────────────────────
Pre-Seed / Pre-Revenue:    10-15% of authorized shares
Pre-Series A:              15-20% (investors will likely request top-up)
Post-Series A:             15-20% of post-money cap table (refreshed)

Sizing Calculation (Pre-Series A):
  Planned hires before Series A:
    CTO (if not founder):     1.0-2.0%
    VP Engineering:           0.5-1.5%
    First 5 engineers:        0.25-0.5% each
    Head of Sales/Marketing:  0.5-1.0%
    Advisors (3-4):           0.1-0.25% each
    ──────────────────────────────────
    Total needed:             4-8%
    Buffer (1.5-2x):         ×2
    ──────────────────────────────────
    Recommended pool:         10-15%

Required Legal Documents:
  1. Equity Incentive Plan (the "Plan") — board-approved
  2. Stock Option Agreement template
  3. Exercise Notice template
  4. 409A Valuation (required before ANY option grants)
```

**Verify**: Option pool is reserved (not issued) in the cap table. Board resolution approving the equity incentive plan is signed. No options granted until 409A valuation is obtained.
**If failed**: If pool size is disputed, model two scenarios (10% and 20%) showing founder dilution at Series A to inform the decision.

### Step 6: Model SAFE/Convertible Note Dilution

**Duration**: 1-2 hours
**Tool**: Cap table software or spreadsheet

Model how pre-seed instruments (SAFEs, convertible notes) will convert and dilute the cap table. [src3]

```
Post-Money SAFE Conversion Example:
──────────────────────────────────────────
Starting Cap Table:
  Founder A:     4,250,000 (42.5%)
  Founder B:     4,250,000 (42.5%)
  Option Pool:   1,500,000 (15.0%)
  Total:        10,000,000 (100%)

SAFE Investment: $500K on $5M post-money valuation cap
  SAFE ownership at conversion = $500K / $5M = 10%

Pro Forma Cap Table (at conversion, pre-Series A):
  Founder A:     4,250,000 (38.25%)
  Founder B:     4,250,000 (38.25%)
  Option Pool:   1,500,000 (13.50%)
  SAFE Investor:  1,111,111 (10.00%)
  Total:        11,111,111 (100%)

Key Post-Money SAFE Rules:
  - Investor ownership is FIXED at conversion percentage
  - Option pool increases AFTER SAFE do NOT dilute SAFE holder
  - Multiple SAFEs at same cap stack (first dollar in = same %)
  - Different caps = different conversion prices
```

**Verify**: Pro forma cap table totals 100%. SAFE conversion math matches the formula: new shares = investment / (valuation cap / pre-money shares). Model at least 2 scenarios (low and high valuation cap).
**If failed**: If SAFE math does not reconcile, check whether you are using pre-money or post-money SAFE — they calculate differently. YC post-money SAFEs fix investor percentage; pre-money SAFEs do not.

### Step 7: Load Cap Table into Software and Validate

**Duration**: 1-2 hours
**Tool**: Carta, Pulley, or validated spreadsheet

Enter all data into your chosen cap table management tool and validate.

```
Cap Table Data Entry Checklist:
──────────────────────────────────────────
□ Company legal name and EIN
□ Authorized shares (from Certificate of Incorporation)
□ Par value per share
□ Each founder's stock purchase:
    - Name, shares, purchase price, grant date
    - Vesting schedule (4yr/1yr cliff)
    - 83(b) election status and filing date
□ Option pool:
    - Total reserved shares
    - Equity incentive plan adoption date
    - No individual grants until 409A obtained
□ Any SAFEs or convertible notes:
    - Investor name, amount, valuation cap, discount
    - Pre-money vs. post-money type
    - Date signed
□ Board approval documentation linked

Validation Checks:
  ✓ Issued shares ≤ authorized shares
  ✓ All percentages sum to 100%
  ✓ Vesting schedules match signed agreements
  ✓ 83(b) elections filed for all restricted stock holders
  ✓ No options granted without 409A valuation
  ✓ SAFE conversion modeled correctly
```

**Verify**: Export cap table summary and have co-founders review for accuracy. Cross-reference against signed legal documents.
**If failed**: If discrepancies exist between legal documents and cap table software, the legal documents are the source of truth. Update software to match.

## Output Schema

```json
{
  "output_type": "capitalization_table",
  "format": "spreadsheet or cap table software export",
  "columns": [
    {"name": "shareholder_name", "type": "string", "description": "Legal name of shareholder or 'Option Pool'", "required": true},
    {"name": "share_class", "type": "string", "description": "Common, Preferred Series X, or Option Pool", "required": true},
    {"name": "shares_authorized", "type": "number", "description": "Total shares authorized for this class", "required": true},
    {"name": "shares_issued", "type": "number", "description": "Shares actually issued to this holder", "required": true},
    {"name": "shares_vested", "type": "number", "description": "Shares vested as of current date", "required": false},
    {"name": "ownership_percentage", "type": "number", "description": "Fully diluted ownership percentage", "required": true},
    {"name": "purchase_price_per_share", "type": "number", "description": "Price paid per share", "required": true},
    {"name": "vesting_start_date", "type": "date", "description": "Date vesting schedule begins", "required": false},
    {"name": "eighty_three_b_filed", "type": "boolean", "description": "Whether 83(b) election was filed", "required": false},
    {"name": "safe_valuation_cap", "type": "number", "description": "SAFE valuation cap if applicable", "required": false}
  ],
  "expected_row_count": "3-10",
  "sort_order": "ownership_percentage descending",
  "deduplication_key": "shareholder_name + share_class"
}
```

## Quality Benchmarks

| Quality Metric | Minimum Acceptable | Good | Excellent |
|---------------|-------------------|------|-----------|
| Documentation completeness | Signed RSPAs for all founders | + Board resolutions + IP assignment | + Equity plan + 409A + all templates |
| 83(b) filing status | Filed for majority of founders | Filed for all founders within 20 days | Filed for all + confirmation receipts archived |
| Cap table accuracy | Manual spreadsheet, spot-checked | Software-managed, founder-reviewed | Software-managed + attorney-reviewed + scenario models |
| Dilution modeling | Single scenario modeled | 2-3 scenarios (SAFE amounts) | Full waterfall with multiple rounds modeled |
| Option pool sizing | 10% reserved | 10-15% with hiring plan justification | 15-20% with role-by-role allocation plan |

**If below minimum**: Do not proceed to investor conversations. Incomplete cap table documentation is the most common cause of funding delays and failed due diligence.

## Error Handling

| Error | Likely Cause | Recovery Action |
|-------|-------------|----------------|
| 83(b) deadline missed | Founder did not file within 30 days of grant | Consult tax attorney immediately; consider re-granting stock under new agreement if possible (costly) |
| Cap table does not sum to 100% | SAFE conversion math error or double-counted shares | Recalculate from scratch using authorized shares as anchor; verify pre-money vs. post-money SAFE type |
| Investor rejects cap table structure | Non-standard share count, missing vesting, or no option pool | Restructure to standard 10M shares, add vesting to all founders, create 10-15% option pool |
| 409A valuation stale (>12 months old) | No material event triggered renewal | Obtain new 409A before granting any additional options; budget $2,500-$5,000 |
| Co-founder disputes equity split after issuance | No written agreement before stock issuance | Mediate immediately; consider share buyback or restructuring — much harder post-issuance than pre-issuance |
| State franchise tax unexpectedly high | Too many authorized shares in Delaware | Use Assumed Par Value method with $0.0001 par; consult accountant on optimal authorized share count |

## Cost Breakdown

| Component | Free Tier | Paid Tier | At Scale |
|-----------|-----------|-----------|----------|
| Delaware incorporation | N/A | $89-$189 (state fee) | + $300/yr franchise tax |
| Registered agent (Delaware) | N/A | $50-$300/year | $50-$300/year |
| Cap table software | Carta Launch ($0) or spreadsheet | Pulley ($1,200/yr) or Carta Build | $3,500-$10,000/yr |
| Legal formation package | Clerky ($799) or Stripe Atlas ($500) | Startup attorney ($2,000-$5,000) | Full-service firm ($10K-$25K) |
| 409A valuation | N/A | $2,500-$5,000 (standalone) | Included in Carta/Pulley paid tiers |
| 83(b) election filing | $0 (self-file) | $200-$500 (attorney-assisted) | $200-$500 per founder |
| **Total for 2-founder startup** | **$600-$1,000** | **$3,000-$7,000** | **$15,000-$35,000** |

## Anti-Patterns

### Wrong: Skipping vesting on founder shares
Founders who issue fully vested stock create a major liability. If one co-founder leaves after 3 months, they retain their full equity stake (e.g., 42.5%) while contributing nothing further. Investors universally reject this structure, and it can kill funding rounds. [src7]

### Correct: Standard 4-year vesting with 1-year cliff for ALL founders
Apply vesting to every founder, including the idea originator. If a co-founder has been contributing for 12+ months pre-incorporation, grant credit for time served (e.g., start vesting clock 12 months earlier).

### Wrong: Oversizing the option pool to 25-30% at formation
Pre-funding founders who create a 25-30% option pool unnecessarily dilute themselves. You only need enough pool to cover hires until your next funding round, when the pool will be topped up anyway.

### Correct: Size option pool to 1.5-2x planned hires through next round
Calculate specific equity grants for planned roles, multiply by 1.5-2x for buffer, and set pool accordingly. A 10-15% pre-seed pool is standard; investors will negotiate pool size at Series A. [src4]

### Wrong: Using pre-money SAFEs without understanding dilution math
Pre-money SAFEs do not fix investor ownership percentage. Multiple pre-money SAFEs at the same cap interact in complex ways, and founders often discover they have given away more equity than intended. [src3]

### Correct: Use post-money SAFEs (YC standard) for predictable dilution
Post-money SAFEs (the current Y Combinator standard) fix each investor's ownership at conversion. This makes dilution math simple and predictable: a $500K SAFE on a $5M post-money cap always equals 10%.

## When This Matters

Use this recipe when a founder or founding team needs to create a capitalization table from scratch — typically at or just after incorporation. It produces a complete, investor-ready cap table with proper legal documentation, vesting schedules, and 83(b) elections. The output is a prerequisite for issuing SAFEs, hiring employees with equity, or beginning investor conversations.

## Related Units

- [Co-Founder Evaluation Framework](/business/startup-readiness/co-founder-evaluation-framework/2026) — complete before deciding equity split
- [Founder Agreement Template](/business/startup-legal/founder-agreement-template/2026) — formalize equity decisions in a binding agreement
- [Startup Financial Model Builder](/business/startup-finance/startup-financial-model-builder/2026) — incorporate dilution projections into financial planning
- [SaaS Fundraising Round Benchmarks](/finance/saas-benchmarks/saas-fundraising-round-benchmarks/2026) — benchmarks for dilution at each funding stage