If you’re building an AI company in 2025, venture capital (VC) can fuel your growth. But to attract serious investors, you need to set up your Delaware startup the right way. From legal structure to cap table strategy, here’s what you need to know to get funded.
Tax Code and Legal Reference
- IRC §351 – Tax-free transfer of property to corporations in exchange for stock
- IRC §1202 – Qualified Small Business Stock (QSBS) exclusion
- IRC §83(b) – Election to pay tax on restricted stock at grant
- IRC §11 – C-Corp tax rate at 21%
- Delaware General Corporation Law – Preferred by investors for strong legal rights
Common IRS and State Forms
- Form SS-4 – EIN for banking and tax filing
- Form 83(b) – For early equity grants to founders or employees
- Form 1120 – Federal return for C-Corps
- Cap Table Templates – Not filed with IRS, but essential for VC rounds
- Delaware Franchise Tax – Paid annually
Example: Fundraising Done Right
Example:
DeepScale AI, a Delaware C-Corp, raised $2M in seed funding from U.S. and Indian VCs. They issued preferred shares with protective terms, used a standard SAFE agreement, and gave early employees common stock with 83(b) elections filed. Their Delaware legal setup gave investors confidence, and their QSBS-qualified stock meant tax-free gains for early investors after 5 years.
Step-by-Step: VC-Ready Setup
- Form a Delaware C-Corp
Most VCs will not fund LLCs or S-Corps. - Issue Founders’ Stock Early
Use Form 83(b) within 30 days of grant. - Keep a Clean Cap Table
Avoid mixing SAFE, convertible notes, and common shares without clarity. - Use Preferred Stock for Investors
Offers them rights like liquidation preference and anti-dilution. - File for QSBS Qualification
If structured properly, investors can avoid tax on gains under IRC §1202. - Stay Tax Compliant
File Form 1120 yearly and pay Delaware Franchise Tax. - Consult with a CPA Early
Clean books and IRS compliance increase investor trust.
Conclusion
Raising capital is about more than pitching. A clean structure, tax-smart planning, and Delaware compliance can help close the deal faster and protect your long-term growth. Be investor-ready from day one.
Call to Action
Need help setting up your Delaware C-Corp for funding?
Schedule a 1-on-1 with Anshul Goyal, CPA, EA, FCA to structure your business for tax savings and investor trust.
Book your call now
Disclaimer
This post is for informational purposes and not legal or tax advice. Speak with a professional before taking action.
Anshul Goyal is a U.S. CPA, IRS Enrolled Agent, and Indian FCA who helps AI founders raise capital with IRS-compliant and investor-friendly setups.
FAQs – Funding Your AI Startup
1. Do VCs prefer Delaware C-Corps?
Yes. It’s the industry standard for U.S. and international investors.
2. Can founders issue stock before funding?
Yes. File Form 83(b) to lock in early tax savings.
3. What is QSBS and why does it matter?
It offers tax-free capital gains after 5 years, if stock qualifies.
4. Can I raise funding as an LLC?
Rarely. Most investors will ask you to convert to a C-Corp.
5. What’s the ideal time to structure the cap table?
Before you raise any outside money.
About Our CPA
Anshul Goyal, CPA, EA, FCA works with early-stage founders and investors to set up U.S. companies, file taxes, and structure funding rounds. He’s licensed in the U.S. and India and represents clients before the IRS.