
Why incorporating my startup was my worst mistake - chamza
http://heyhamza.com/why-incorporating-my-startup-was-my-worst-mis
======
grellas
Corporations are not particularly hard or expensive to start, maintain, or
dissolve - _but_ you need to be at a stage of life where a thousand dollars
here or there is not a major burden. If you are not yet at that stage, that is
a different story and there is no doubt that forming or dissolving an entity
such as this will normally set you back a thousand or two on either side. In
that case, you should tread cautiously unless you can raise some funds (even
if it friends-and-family money) to be able to handle such costs without too
much pain.

As a lawyer, I would have to say that you should do it by the book and
dissolve the entity. I have, however, had a variety of clients over the years
who left a Delaware corporation to die without dissolving it and they have not
had trailing personal liabilities as a result of the accrued corporate
franchise taxes (of course, it is a different matter if the corporation earned
a net profit and has an obligation to file income taxes - in that case,
failure to file can cause serious problems for the corporation and for its
management).

The $89K tax bill is typical of any Delaware corporation that has large
numbers of authorized shares, even with a low par value. This often proves a
shock to unsuspecting founders who file a do-it-yourself entity without
understanding the issues. However, in almost all cases involving an early
stage startup, you can deal with this easily by using the alternative
valuation method tied to value of assets in the company. Use of the
alternative method usually reduces the franchise tax to a very low level. It
is easy to find out how to use the alternative method (forms and instructions
are available online through the Delaware Secretary of State).

It seems that you needed to set up the entity in order to try to manage the
issues with your co-founder and so the choice to set up a corporation was not
really a mistake. The choice to set it up in Delaware for a simple situation
can be a mistake, in my judgment, but I am probably in the minority among
startup lawyers on this issue in believing that a home-state incorporation in
the interests of keeping things simple can be and often is the best choice for
founders (see <http://grellas.com/faq_business_startup_002.html>). It is no
disgrace for a Silicon Valley startup to incorporate in California, even for a
public company (no less than Apple itself is a California corporation). Had
you done a home-state incorporation, you would have avoided the hassles with
the $89K tax bill, as most states besides Delaware states have a fixed, low
amount that you pay every year as a minimum franchise tax (in California,
$800).

Incorporation is definitely not for everyone. When and if to incorporate can
be tricky questions. I also have outlined a few of the factors to guide that
decision as well (<http://grellas.com/faq_business_startup_007.html>).

There are a good number of early-stage startups that really can't easily
afford professional fees and so the answer is not to use a lawyer in all cases
to incorporate. But, even if you can't afford a lawyer, it is always worth
consulting with one for strategic advice on incorporating before you do so.
Such a first consultation is dirt cheap in most cases, and sometimes free. The
modest amount paid is well worth it just to be alerted to the main issues and
pitfalls involved in setting up an entity. Thus, while it was probably not a
mistake in itself to set up your corporation, it likely was a big mistake to
do so without some guidance of this type (I had made this comment in
connection with your original piece as well -
<http://news.ycombinator.com/item?id=1924719>).

Sorry to hear about the business failure. I know the HN community often
stresses what a valuable learning experience this can be but there is no
denying that it is a very painful affair by any measure.

~~~
tzs
Another good example of a big, high revenue/high profit corporation that isn't
a Delaware corporation is Microsoft. They are incorporated in Washington.

I believe that at least at one time (early '90s, when I got this information
from my corporations professor in law school--maybe it is different now),
Delaware was basically a rocket docket for complex corporation cases, such as
shareholder lawsuits against large public companies. That was one of the
attractions of them for large public companies, which might be worth adding to
your FAQ. Who wants their cool merger delayed by many years over a suit from
grumpy shareholders?

~~~
GFischer
Microsoft does avoid paying taxes, but by using the Irish tax haven:

[http://techrights.org/2009/05/02/microsoft-evading-tax-
irela...](http://techrights.org/2009/05/02/microsoft-evading-tax-ireland/)

(I couldn't find the original, less biased account, but it's been well
documented)

------
BerislavLopac
Oh, come on guys, if you think these are troubles related to incorporating a
business, you should really try to do it in Croatia.

For starters, all companies need to be registered at the Court of Commerce,
and each new company needs to have a name approved by a judge. Second, you're
legally bound to have a name either in Croatian, Latin or Ancient Greek (or
presumably another "dead" language, if you can prove it); and even if you do,
a judge has to OK it (a friend of mine has recently been through about 30
names and still hasn't been approved; the whole process of approving a name
can take days).

Then you have to physically go (yourself, or your lawyer) to 3 or 4 offices to
file various registration papers; all in all it can take a better part of the
month to incorporate. And to top it all, even if your company does nothing,
has no income or expenses, it has some monthly dues to the state from day one,
simply because it exists.

~~~
nikcub
Why don't you open in Bosnia or Montenegro? Both are very liberal and have
western banks. I have used businesses + accounts in both as offshore vehicles.

You can get a business registration, bank account and merchant account with
gateway in Montenegro for a few hundred dollars and in a couple of days.

Heck, with a few thousand dollars you can register your own bank in
Montenegro.

~~~
BerislavLopac
Nik, if the solution is to open a company in another country, I'd rather do it
in the UK, which is even more sophisticated than the ones you mention, and is
only a couple hours' flight away. Actually, I did it already. ;)

------
A1kmm
It sounds like Franchise Tax associated with annual returns is payable by the
corporation, not you personally.

From 8 Delaware Code §503: "All corporations accepting the provisions of the
Constitution of this State and coming under Chapter 1 of this title, and all
corporations which have heretofore filed or may hereafter file a certificate
of incorporation under said chapter, shall pay ...".
<http://delcode.delaware.gov/title8/c005/index.shtml>

It is 8 Delaware Code §277
(<http://delcode.delaware.gov/title8/c001/sc10/index.shtml>) which says that
Franchise taxes have to be paid _by the corporation_ before the Corporation
can be dissolved.

It sounds like the corporation is behind on franchise tax, and so is therefore
insolvent - it has liabilities exceeding the assets.

If the corporation simply doesn't pay the franchise taxes for a year, the
charter will be repealed (see 8 Del C. § 511,
<http://delcode.delaware.gov/title8/c005/index.shtml>). Expect to lose all
assets owned by the corporation, including any code.

IANAL, but I suggest you get advice from a lawyer or accountant about this.

~~~
jrockway
_Expect to lose all assets owned by the corporation, including any code._

How does this process work?

------
arn
You really should update your original "How I Incorporated My Startup" article
<http://heyhamza.com/33994010> to admit you got in over your head. It really
changes the whole lesson of the first article. I see you've added disclaimers,
but you need to also link back to the potential $89,000 mistake.

------
michaelpinto
Incorrect: Your worst mistake was not talking to a lawyer and an account
before doing your incorporation. The value of these professionals isn't their
ability to file paperwork but to give you advice that's customized to your
situation. Too many geeks think they can reverse engineer what goes into
passing the bar or getting a CPA, but the reality is that the smart ones
really know enough to know what they don't know...

~~~
nethsix
Consulting a lawyer/accountant would have set someone back even before they
started. I asked for the price to consult a lawyer before and it cost around
$2500 just to have a chat regardless of the outcome. There is an unwritten
guideline "do first, ask for forgiveness later" among people trying to blaze
new trails. (NOTE: felons need not apply =) ).

~~~
michaelpinto
"do first, ask for forgiveness later" applies to software design, but it
doesn't apply to the IRS. Firstly you could have spoken to a personal
accountant for next to nothing, and there is such a glut of lawyers out there
that it's easy to get one for much less. As with any other pros pick these
helpers via recommendation from other that have had good results.

PS I say this as someone who did a DIY incorporation and had to un-do it at a
later date when it didn't make sense...

~~~
nethsix
I think "do first, ask for forgiveness later" may apply generally to any
institution/community where the authority are people who wants the institution
to function in the spirit it was setup rather than based solely on the rules
that were implemented to govern it. If the IRS was run in that spirit, then
such abnormal cases can be dealt with by 'taxing' the person for IRS wasting
resources to deal with it but not the rather astronomical figure of tens of
thousands of dollars.

------
petercooper
It's a shame these things aren't more straightforward. This is a somewhat
detached and subjective view of the US but it _seems to me_ that US
regulations are designed to nickel and dime you at every turn. If you
incorporate here in the UK, don't trade, and dissolve, you owe diddly squat
and any taxes you do pay are reasonably simple and well known.

I'm far from a defender of the UK in most cases - especially tax _rates_ \-
but as a business person in the UK, I at least don't feel like the government
or regulations are out to trick me and that I need an expert or a lawyer by my
side for every decision I make.

~~~
nkassis
It's mostly due to delware (other states are very different). The state of
Delaware uses its lenient coporation laws as a way to make a ton of revenues
for the state. These laws attract most corporations (for foreigners some of
these laws are very useful) in the US and franchise taxes for a state the size
of Delaware are incredibly important.

Like I said other states have very different laws but most people will tell
you that with all the bad delaware is still not decent choice to incorporate.

~~~
cyrus_
In fact, Delaware makes so much from these taxes that it doesn't even have a
sales tax. Other taxes for Delaware residents are also very low compared to
its neighboring states.

------
CoachRufus87
I'm going through this exact same issue right now. I created a C-Corp in DE
naively thinking that thats what everyone did and I expected to pay no more
than the minimum ($75 or so) in franchise taxes at the beginning. Apparently,
since the state needed more revenue, they passed a law that dramatically
increased the minimum to $400. I was shocked when i realized this and called
the state repeatedly to make sure that there wasn't a mistake. I paid $400
back in Feb and I'll pay another $400 soon so that I can dissolve the C-corp.
I now have an LLC in Texas (my home state) which more than satisfies my needs,
for now.

Talk about an expensive mistake.

~~~
tptacek
Can I ask why you created a C-Corp in the first place?

~~~
seaotter002
Can't speak for CoachRufus87, but I did because my business partner was not a
US citizen and we planned on taking on funding.

------
ryanfitz
I don't think incorporation was the mistake here, but rather incorporating
with no help and without knowing what you're really doing is. I recently
incorporated using harvard business services, for $300 I had everything taken
care of for me and had all the paperwork in 2 days, well worth the money.

~~~
rosenjon
Totally agree. It would be unfortunate if anyone takes away from this that
incorporating is a bad idea. What is a bad idea is incorporating with no idea
of what you're doing. I disagree that this is a story of dissolution. It is a
story of having incorporated with no understanding of the consequences, and
finding out too late that he should have sought legal advice to begin with.

There is a lot of talk online about Delaware being the best state for
incorporation. This is true if you are seeking outside financing, and most
angels/VC's want to see a Delaware C Corp prior to investing. However, if you
are going to raise investment, you need to have a lawyer anyway. So at the
point you take investment, your lawyer can handle doing an incorporation in
Delaware. No one should be filing for C-corporation status by themselves, with
no background in the legal requirements.

In the meantime, if you are a startup who wants to put out a product for
public use, or need to bring aboard paying customers of any kind, you should
probably have an LLC. These are relatively cheap to create (and dissolve) and
you can generally find law firms who will do pro bono work for startups in
filing the appropriate paperwork (I have found several). Even LLCs require
operating agreements and other paperwork before they are considered true legal
entities. Any decent law firm does this all the time, and has the appropriate
documents on file. Doing this yourself is again asking for trouble. For
example, if you do business on behalf of your LLC as the "CEO", "President",
or "General Manager", and have not specified that title in an operating
agreement, you may be at risk of having the veil pierced
(<http://en.wikipedia.org/wiki/Piercing_the_corporate_veil>), because you are
transacting business on behalf of the company in a role that does not legally
exist.

In most states, if you have an owner run LLC, your official title is "Member".
However, most people don't want to represent their company as "Member", as
this sounds weird, and is not a commonly used term. So in practice, you call
yourself something else, like General Manager. If your operating agreement
says that you can run the company under the title of "General Manager", or
anything else you want to call yourself, then you are totally cool. If not,
then you will be in trouble if a customer ever takes you to court.

~~~
theoj
Can you post some cases or background regarding piercing the corporate veil
for an LLC based on "transacting business on behalf of the company in a role
that does not legally exist"? Who is to say what does or doesn't exit? Based
on this logic, a large LLC or LLP would be required to have its whole
hierarchy listed in the operating agreement.

~~~
rprasad
Bad news: there aren't any landmark cases. The area is so new that most states
haven't even had this issue come up in court yet.

However, I can tell you that the general consensus is that LLCs borrow from
corporate law where piercing the veil is concerned.

Veil-piercing isn't about "transacting business on behalf of the company in a
role that doesn't legally exist." That's an indemnity issue (the LLC is trying
to shuffle blame from itself to an employee). Veil-piercing is about going
after the _owners_ of a company on the grounds that the company is really just
an extension of the owners' will and bank accounts.

Key factors for veil-piercing (for an LLC): \- Owners use the LLC funds for
personal expenses without reimbursing the LLC. \- Zero/below-market loans from
the LLC to the owners. \- LLC business decisions made to benefit the owners
rather than the business. \- Undercapitalization (LLC not have enough money to
pay its bills/expenses/liabilities without the owners covering some of these
expenses).

There are more, but those are the big ones. The piggy-bank, low-interest-loan,
and undercapitalization factors are usually the most important.

~~~
rosenjon
"Veil-piercing isn't about "transacting business on behalf of the company in a
role that doesn't legally exist." That's an indemnity issue (the LLC is trying
to shuffle blame from itself to an employee)."

No... you are confusing the issue.

By way of example, let's say that I am running a member (owner) managed LLC.
My official title under state law is "Member". But I sign all my documents
with customers and suppliers as "CEO". Then, the company goes broke, and owes
money to its suppliers. The suppliers could argue that I did not represent the
company in good faith, because I was not the CEO of the company. That position
doesn't exist. So they might want to come after me personally instead.
Depending on the laws of your state, the court may agree that you did not
represent the company in good faith, and allow your suppliers to pierce the
veil and come after your personal assets.

The only way to shift blame to an employee would be in cases of fraud or gross
negligence, and even then, your company would probably still be liable. What I
am discussing is only really relevant in cases where the owner and manager are
one and the same (as in the case of the original poster's situation). This
doesn't apply to employees who may sign on behalf of the company for routine
transactions, but don't have any controlling interest in the company. However,
as a manager, it is best to make sure that anyone with signatory authority in
your company is given such authority in the operating agreement. However,
there is no such thing as piercing the veil with regards to an employee of a
company who does not have a substantial ownership stake. They will always come
after the owners of the company if it seems that the company is a sham to
protect personal assets. The more loosely you operate your company without
specific legal agreements (ie operating agreement), the more likely someone
will be able to prove that the company is a sham.

------
dgallagher
I made a similar mistake myself, forming an LLC in Massachusetts. I did IT
consulting for the SoHo and home market. It was around $550/year to keep the
LLC in business ($500 plus filing fees), ~$50 to register with the town you're
based for four years, and something like $250 to dissolve the LLC with the
state. Every state has different fees; some are quite high, and others very
low, pending on the type of business created.

I did it mainly to limit liability, among other reasons. However a little
while after forming, I spoke to a lawyer and he said that it basically doesn't
limit you from being sued personally. You "can" attempt to deflect personal
lawsuits with the LCC (easiest if you keep its finances/files/bank-account
separated from your personal stuff, which I did), but it's no guarantee.

He basically advised me that forming the LLC was a waist of money in my
situation, and I would have been better off simply as a sole-proprietor (e.g.
DBA - doing-business-as). From the IRS's perspective, I was treated as a sole-
proprietor for tax purposes (they don't recognize LLC's for single
individuals). Of course by then, it was too late to easily dissolve the LLC
and "switch" it to a DBA, so it was money wasted.

What annoyed me the most is the same problem Hamza had in the article. You
have to pay money to dissolve a business! Really? REALLY?!? Obviously the
business failed, or is being abandoned, because it didn't make enough money.
Charging a "death tax" on a business seems pretty harsh. I understand if
there's a filing fee of $20 or $30, but anything higher than that is
ridiculous. Delaware wanting $1,600 from Hamza is downright insane. Perhaps
there's more work involved dissolving a C-Corp than an LLC, but still, $1,600
is ridiculous.

Charging a business death-tax reduces seed capital needed to form a new
business. Second, it reflects badly on the state, reducing the likelihood of
incorporating in it again. Lastly, why not ignore paying the fee altogether,
declare bankruptcy, and waste the time/money of the court system dealing with
it all? I'm not sure about the legal implementations of that, but it might be
a valid option if the C-Corp has no assets left. AFAIK you cannot ask
shareholders to pay for it since they're legally shielded from the debts of a
C-Corp.

~~~
rprasad
What your lawyer meant was that its very easy to "pierce the veil" of the
business entity (your LLC) to go after the owner when the business is owned
and operated by a single person. In such instances, it is very difficult to
show that the business has a separate identity from the owner. This is
especially true for consulting, where the consultant _is_ the business.

On the other hand, it is very difficult to pierce the veil of a business
entity with more than one owner (unless the second owner is a spouse or family
member of the first).

~~~
markklarich
The ease with which one can "pierce the veil" varies dramatically from state
to state. Another reason to be careful about your choice of location for
corporate headquarters, employment, "significant contacts," and so forth.

In the meantime, how about IRS code that allows an inventor who owns his
invention personally to take capital gains treatment on the sale of that
invention contrasted with ownership by an LLC (even single person LLC) or
other entity which subjects the owner at sale to normal income taxes at
(usually) a much greater rate? I can imagine many convincing reasons for the
entity to own the code. But why do that unless you have to? I would tend to
want to own the code personally. More flexibility.

------
forensic
Someone never learned what "limited liability" means.

The whole point of a corporation is that you aren't personally liable for its
debts! You just paid $400 for no reason!

------
nikcub
the company is bankrupt and can't pay its taxes. File ch11. I don't know why
you think you have to pay this, it isn't money you owe (the whole point of
setting up the business, isn't it?)

~~~
originalgeek
This is a good object lesson in why you shouldn't take legal advice from
someone posting on the web. The dude was wrong once, and perhaps twice if you
are correct. Not to argue with your point, I just want to avoid playing
armchair lawyer.

~~~
nikcub
I had a Delaware C corp go bust and my advice from a highly-paid startup
lawyer was to file bankruptcy and let it go.

It was eventually struck off the registry and I never heard anything again,
and have even registered other corps since.

The only time you wouldn't is if you have taken an investment and want to
provide a tax writeoff to investors, or if there are assets to divide. Then it
needs to be disolved properly.

(Edit: to add here, if you have been negligent or criminal the creditors will
usually be granted a court order to chase up debt with the directors
personally. This is rare. In this case you have franchise fees that were run
up in the course of doing business. The one thing to learn here that should
have been in the original article is that Delaware's main source of revenue is
franchise tax, which is calculated on the number of shares issues, so keep
that number very low (ie. 3 founders = 3 shares). That is a pretty big thing
to miss, IMO.)

------
alain94040
This is the poster child for using <http://foundrs.com> : virtually
incorporate with your co-founders, see how far it goes, when it gets serious
convert into a real corporation.

Benefits: no corporate taxes, no accountant to pay. Vesting is automatic (4
years, monthly, just like founder stocks in a Silicon Valley startup). And
it's legally binding (thank you copyright law, for once you were useful).

~~~
rprasad
Stock is treated as _taxable compensation_ once/as it vests, whether or not
the entity is incorporated. Even worse, because the entity is not
incorporated, the IRS could treat the stock as a partnership interest.
Partnership tax accounting is a goddamn nightmare.

You could find yourself on the hook for thousands of back taxes plus fines if
your "virtual corporation" is successful. And that doesn't even include
potential state tax liabilities or self-employment taxes.

------
ericb
Has anyone stopped to consider what the real risk of being sued (and losing)
is for your average startup website?

Is incorporation premature optimization?

~~~
georgieporgie
Simple incorporation is really quite low cost, and very quick. CA is the worst
I know of, with its $800 minimum franchise tax.

I just (re) incorporated in Oregon. I think it cost $150 (was $50 until 2009),
and took about two days. IMO it's well worth it for legal protection from
losing personal assets.

~~~
ericb
What are you paying your accountant each year? Is there a minimum corporate
tax in Oregon? In MA I think it is 400 minimum a year.

~~~
georgieporgie
I don't have an accountant. I'll get one once I'm making money so consistently
that it's not worth my time to do it myself. :-)

The minimum corporate tax in OR is $150. In 2009, they raised it from $50, and
(I think) increased the tax rates across the board. The biggest change is that
they now tax on _gross receipts_ which means you can't deduct expenses.

------
davidu
IANAL and this is probably bad advice, but...

You can let the company fall into bad standing.

I have heard of the various risks with doing that, and I've never understood
how those risks go away with dissolution.

If the company is shutdown and not making money, then failure to file annual
reports and tax returns is irrelevant because you will have no income to be
taxed or fined against. You would have annual state filing fees that would go
unpaid, but you would never be personally liable for them. And I can't imagine
how you would be personally liable for the actions or inactions of a
corporation that conducted no business.

~~~
chamza
I've thought about this and asked around. I was told that if I did not pay my
tax returns and annual reports, the State of Delaware can go after me
personally. I'd rather not risk that, and there is a monthly fee that gathers
up if I don't pay the annual reports on time; which is what happened this time
around.

~~~
fleitz
Have you spoken to an attorney about this? They may be the best people who can
advise you in this situation. Look around your area some lawyers offer free
consults.

------
dlevine
It cost me about $1000 recently to dissolve a Delaware Corporation.

------
fourply
This article should be entitled, "Why failing to hire an attorney was my worst
mistake." It's easy to think that some googling and reading statutes will get
you where you need to be, but there are very real pitfalls and tax traps out
there that attorneys are far better equipped to help you avoid.

If you're not serious enough about your new business to pay for professional
advice - you're not serious enough to start it.

~~~
lawnchair_larry
It is odd that you have conflated seriousness with access to capital.

------
nkassis
I don't think incorporating was a mistake, I incorporated a c-corp last year
and read that getting 5K shares was the maximum while remaining at a minimum
franchise tax. From my understanding, the initial amount of shares is not a
big deal as this can be changed later (emitting new shares, blah blah blah).

I created the corp as an experiment and will see how it goes.

~~~
ovi256
Consider it cost of learning. OTOH, you could have went to a lawyer who _may
have or may have not_ already known of the franchise increase. You would have
paid an amount in the same ballpark as your c-corp taxes for this
consultation.

------
resdirector
Wow. Incorporating in Australia is a breeze by comparison. AFAIK, a four page
form and ~$400. With an annual fee of $212.

------
mynewcompany
1) This is why we tell our clients, right on our online order form that
increasing shares will increase the cost. If they still insist on increasing
the # of shares, we'll call and explain to them that you can file a low # of
shares now and file "Articles of Amendment" to change it to a higher # later
when you are better capitalized. Besides, most VC's are going to amend your
original articles of incorporation _anyway_ to create multiple classes of
stock, etc. so it's really not worth it to authorize too many shares.

Finally, I've posted this link to our site before:
<http://www.mynewcompany.com/annual-report.htm>

Bookmark it, and then you can check a) when and if you have an annual fee due
for your company/state and b) what the filing fee is.

------
TheBaron
I've been here with several things in life. While winging it has been the
source of some "winning" in my life, it has also been the source of many
losses.

I'm more of a creative mind/sales guy. I'm an okay web designer, with very
minimal programming skills. I tried to develop a tech driven start up and
handle everything on my own including the programming. I worked so long & hard
trying to take care of things I wasn't skilled enough to do that I was too
exhausted to maximize on my talents.

So, I would say focusing on your strengths is a key to success. Marcus
Buckingham has nice insights on strengths. Check him out.

-Cheers

------
ecaradec
I'm surprised that nobody is horrified by how deceiving this is. Its definitly
a way for delaware to make money. May be it's just the way law is, you can't
use your own judgement on if something is fair or not.

Bringing it back to a computer metaphor would be : Of course you should have
done backup, everybody knows that ! You now need to pay 89000$ whether or not
you need your data on that drive. You should have consulted an enginineer
before buying a computer of course !

See... small mistake, disproportionous response.

At least think that you did nothing wrong, it's just that the law is unfair.

------
mjs00
Regarding the amount owed, from my lawyer when I did this two years ago:
Please note that there are two methods to determine the tax – the authorized
share method and the assumed par value capital method (both methods are
detailed on the website). DO NOT sure the authorized share method as this will
calculate a tax balance of over $75,000.00. Do use the assumed par value
capital method as this will calculate the balance at roughly the $75.00-125.00
range.

------
16s
When someone sues you, you'll better understand why having a corp, LLC, etc.
is important.

------
jasonkolb
Unless he signed and recorded something saying otherwise he is not personally
responsible for the debt of anyone else, including the Corp, and the state is
trying to levy a tax on ignorance.

------
nerd_in_rage
for a corp with no assets, i would've refused to pay and not bothered with the
annual reports. after a number of years that stuff just goes off the books.

you might get some nasty letters. yawn.

------
kirpekar
I hope you filed Form 1120 also

------
cheez
Why did he have to pay?

~~~
CoachRufus87
state law

~~~
cheez
Nice law.

------
georgieporgie
To anyone thinking about incorporating: unless you have a _very good_ reason
for doing so -- by which I mean solid legal and accounting advice, and money
to pay associated costs -- do not bother incorporating outside your home
state.

As others have said, DE has a great, business-optimized court system. But if
you don't live in DE, you're instantly at a huge legal disadvantage if
anything comes up. Meanwhile, you'll be stuck paying:

* annual corporate filing fees (WY), minimum franchise taxes (DE), licensing fees (NV), income taxes (many states), etc. in the state in which you've incorporated.

* foreign corporation fees/taxes and income taxes in your state of residence.

* foreign corporation fees/taxes and income taxes in any other state where you do conduct significant business beyond sales.

* registered agent fees in the state in which you've incorporated.

* possibly mail forwarding fees, depending on what you're trying to do.

(I incorporated in Wyoming last year, then realized how dumb that was,
dissolved the corporation, and re-incorporated in my home state this year)

