

Ask HN: Company Structure and Timing - startingPains

I'll keep it short and without much fluff:<p>My partner and I are committed to starting a company (so this is no "dream," rather a real commitment). We checked the market (it's viable, profitable, and growing), we wrote some test code for a proof of concept (so we'd be convinced it can actually work), we spoke with some potential business partners (they're interested), etc.  On the surface, everything is going smoothly.<p>At this point, we believe we should incorporate: to avoid potential problems between us in the future (so far so good), to allow investors to come in, and to allow us to work with other business partners and affiliates.  We have no revenue at this point (we haven't put anything out in the open, yet, only tests).<p>1) What does your experience tell you about forming:
  a. LLC
  b. C Corp (Delaware)<p>We understand the differences between LLC and C-Corp.  My question is really whether LLCs are so "bad" (we were told by a lawyer that VCs would be reluctant to invest in us in the future, if we choose this structure).  Is it such a big deal to change the LLC to a C-Corp in the future?<p>2) Considering we also want to bring in other individuals and offer them equity (again, we don't have money so our idea, proof of concept, and equity are the only way), is it the right time to incorporate now, or can the incorporation wait?<p>3) Did you defer payment to the law firm, or pay upfront? We spoke with one prominent Valley firm and we were told that it could cost us ~$5000 to set up a C Corp and write up all the stock verbiage.  Is it better we bite the bullet, dig deep, and pay now, or defer (again, from your experience)?<p>4) How much do you normally pay equity to UX specialists? A one time job (could take 3 months) vs. long haul.
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leslyn
I will just share my experience:

We opted for an LLC and did it with Company Corporation (.com). If I remember
correctly it was about $350. We then had an attorney look over the documents
($75 for initial consult) who said they were fine for a 'beginning'. We were
careful to require vesting so that one of the partners couldn't 'walk away'.
My only suggestion would be to have someone with LLC or legal ease experience
walk with you through the application process as it isn't in plain English (at
least not in my mind). You can dictate in your LLC agreement how to add equity
employees and distribute more shares as needed. At some point in time, if you
need to change over to a C-corp it will probably as you earn money or get
funded.

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mrkmcknz
From my experience when on a budget the best thing to do is work with a good
agent, I used CSC who can advise on most things. Then combine this with the
document driver from Goodwin Procter
<http://www.goodwinfoundersworkbench.com/document-driver/>

The document driver is a really invaluable tool for startups on a budget. Even
if you then have the documents looked at by a lawyer. It will be much cheaper
then having them draw the documents up.

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glimcat
LLCs are fine for many things - but not generally for dealing with investments
or equity. Whether they're worthwhile as an intermediate step depends on what
you're doing and when. They're rarely appropriate for "build to sell"
companies whereas they're often appropriate indefinitely for "build to own"
companies.

Equity is for founders, core team, and investors. Equity is not for
contractors.

