Fix the formation problems before the data room opens — not after the VC's lawyer finds them.
Pre-financing and pre-exit cleanup of Delaware C-Corp formation documents — diagnostic from $2,500, full remediation from $4,500.
Best for US-based founders who incorporated on Stripe Atlas, Clerky, Firstbase, doola, LegalZoom, or a generalist lawyer — and now have a Series A term sheet, an acquisition LOI, or a cofounder departure on the horizon.
The phone call I get a lot
The term sheet arrived on a Tuesday. The data room opened Wednesday. By Friday, the VC's lawyer had a list of fourteen items to be "addressed before closing." A few were trivial. Three were not: a missing IP assignment from a cofounder who had quit a year earlier, an 83(b) election that wasn't where it should have been, and common stock issued to angel investors who should have gotten convertible notes.
The estimate to clean it all up — at the buyer's lawyer's rate, charged against closing — came in north of $30,000. The valuation took a haircut. The protective provisions got heavier. The deal closed. But not on the terms anyone walked into the room with.
This is the cleanup work. It is almost always cheaper, faster, and better-leveraged when done before the diligence list arrives — not after. The cheapest time to fix formation problems is before outside counsel starts billing by the hour to find them.
What I look for
Most companies formed through self-service platforms — or by lawyers who treated formation as a commodity — have some subset of the issues below. Some are easy to fix. Some are only fixable in narrow windows. Some are not fixable at all once a deadline has passed.
| Issue | Frequency | What it means |
|---|---|---|
| Missing or late 83(b) election | Very common | The 30-day statutory deadline is unforgiving. Cure options are extremely limited. May convert vesting events into ordinary income. |
| No founder vesting | Very common | Founder stock issued fully vested. When a cofounder leaves early, the company has no repurchase mechanism. Often correctable only if no one has left yet. |
| IP assignment gaps | Very common | Founder, employee, or contractor IP never properly assigned to the company. A common diligence-killer. Usually fixable while the people involved still cooperate. |
| Services-for-stock without §351 cover | Common | Founder stock issued for services without the proper §351 structure. Creates a tax problem at issuance and a QSBS problem at exit. |
| Accidental S-election | Common | The wrong box checked on the SS-4 or Form 2553. Creates pass-through tax treatment, may complicate the QSBS clock, and may need a revocation filed. |
| Common stock issued to outside "investors" | Common | Angels who should have received convertible notes or SAFEs got common stock instead. Recapitalization may be required to clean up. |
| Cap table doesn't tie to documents | Common | Carta says one thing; the executed agreements say another. Diligence won't close until they reconcile. |
| QSBS-disqualifying features at formation | Common | Redemption rights, services-for-stock without bifurcation, business-activity drift into ineligible industries. Some curable, some not. |
| Missing organizational consents | Occasional | Board or stockholder consents that were never properly executed. Often backfillable by ratification. |
| Capital structure that can't take a priced round | Occasional | Authorized shares too low. No preferred designations. No option pool. Requires amendment before any term sheet closes. |
Two ways to engage
1. Cleanup Diagnostic — $2,500
I review your full formation file (Certificate, bylaws, stock purchase agreements, board and stockholder consents, 83(b) elections, IP assignments, EIN and tax-election filings, cap table) and deliver a written report identifying what works, what's broken, what's fixable, and what's not. Roughly 5-7 business days. You can take the report to any lawyer you choose, or come back for remediation.
2. Diagnostic + Remediation — from $4,500
The diagnostic, plus the cleanup work itself. Scope and price depend on what's found. Most engagements land in the $7,500-$15,000 range; complex situations (cofounder departures, retroactive QSBS substantiation, recapitalizations) run higher. You get a fixed-fee quote after the diagnostic, before any remediation begins. No surprises.
If a term sheet is already in hand
If you have a signed term sheet and the data room opens in the next two weeks, the work is the same — just on a rush timeline. Pricing in that case is by quote and reflects the compressed schedule. The earlier you call, the more I can do.
A few honest caveats
- Some things can't be cleaned up. A missed 83(b) election is the prime example. The Internal Revenue Code's 30-day rule is statutory. Limited relief exists for inadvertent failures, but it is not a substitute for filing on time. If a deadline has passed, cleanup may be damage control rather than repair.
- People who have left the company matter. Fixing an IP assignment from a former cofounder requires that cofounder's signature. If the relationship is bad, the cost goes up.
- I will tell you what I find. Cleanup engagements are sometimes uncomfortable. Some of what I find may need to be disclosed in diligence even if it cannot be fully cured. Honesty in diligence is almost always the right answer; the alternative is much worse.
Who I am
I'm Joe Wallin. I've practiced startup and tax law for 25+ years, formed hundreds of Delaware C-Corps, and represented founders and companies through fundraises, acquisitions, and exits. I chair the Angel Capital Association's Legal Advisory Committee. I co-authored Angel Investing: Start to Finish (Holloway). I helped draft Washington State's equity crowdfunding law. I hold an LL.M. in Taxation from NYU.
I do cleanup work because I have seen, repeatedly, how much it costs founders when nobody does it.
Related services
- Forming a new entity instead? See Founder Formation — Delaware C-Corp done right the first time, fixed fee $3,500.
- QSBS already at risk? See QSBS Counsel of Record — annual attestation letters and standing counsel for Section 1202.
Ready to talk?
Cleanup is one of those things that gets cheaper the earlier you do it and dramatically more expensive once a transaction is on the table. If something on this page sounds like your company, the right move is a 20-minute call now — not a $35,000 invoice from someone else's lawyer in six weeks.
Schedule a 20-minute cleanup call →
Engagement subject to conflicts check and a written engagement agreement. Nothing on this page is legal or tax advice, and no remediation decision should be made based solely on the information shown here. Some items described above may not be curable in your specific circumstances. Attorney advertising.