The incorporation path
De facto vs de jure — how a venture becomes a registered company without losing its history.
The incorporation guide covers the how. This page covers the why — the legal ideas underneath the upgrade path.
De facto vs de jure
Legal systems have always recognized two kinds of organizations:
- De jure ("by law") — organizations that exist because a government registered them: LLCs, corporations, registered partnerships. Their existence is established by a filing.
- De facto ("in fact") — organizations that exist because they demonstrably operate: they have members, agreements, shared assets, and a track record. General partnerships are the classic example — in most jurisdictions, two people doing business together are a partnership, whether or not they ever filed anything.
Here's the thing most founders don't realize: the moment you and a cofounder start working together, you already have a de facto structure. The only question is whether its terms are written down or left to default partnership law and fallible memory.
A venture on Entity.ID is a de facto organization done properly: written constitution instead of implied terms, verified members instead of assumed ones, tamper-proof records instead of recollections. You're not choosing between "incorporate" and "nothing" — you're choosing between a documented de facto structure and an undocumented one.
What incorporation actually adds
Registering de jure adds specific, valuable things:
- Liability shield — a registered company separates business debts from personal assets. De facto structures generally don't.
- Tax personhood — the company files its own taxes, can elect treatments, and can hold assets under its own tax ID.
- Institutional standing — courts, banks, and investors have centuries of precedent for registered forms. Some counterparties simply require one.
What it does not add is organizational substance. Your members, rules, ownership, and history exist either way. Incorporation wraps them in a recognized legal form; it doesn't create them.
Choosing a jurisdiction
De facto, your venture isn't tied to any single jurisdiction — its records are on a global network and its members can be anywhere. When you register, you pick one:
- Delaware (US) — the default for ventures raising from US institutional investors. Deep case law, standard documents, every investor knows it.
- Wyoming (US) — early recognition of digitally-native organizations (including DAO LLCs); popular for member-run structures.
- Your home jurisdiction — often right for revenue-triggered incorporation, since that's where you'll owe taxes and serve customers.
- Others — Singapore, UK, Estonia, UAE and more each have niches. Follow your investors, customers, and tax advice — in that order.
Because your venture's records are portable and independently verifiable, the jurisdiction decision stops being a day-one guess and becomes an informed choice you make when the trigger is real.
Continuity: what carries over
When you incorporate, the venture's substance maps onto the legal form:
| Venture (de facto) | Registered company (de jure) |
|---|---|
| Constitution | Operating agreement / bylaws |
| Members & ownership splits | Members/shareholders & cap table |
| Governance decisions | Resolutions and minutes |
| SAFE issuances | Investment agreements on the cap table |
| Treasury | Company accounts |
| Public address & history | Continues unchanged, records the registration |
The registration becomes an event in your venture's history rather than the start of a new one. Practically, that means no re-papering of agreements already made, no reconstructing who owns what, and diligence that takes days instead of months.
Next steps
- Incorporating your venture — the practical guide
- How verification works — why the records are portable