
Startup Legal Setup Guide - howsta
https://medium.com/@howietl/the-startup-legal-setup-guide-439b63bf68e8#.wlo6x4wpp
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justinlardinois
This seems like it's more intended to promote Airtable than actually provide
information. I've never heard of Airtable but it doesn't seem to be a good
format for long blocks of text.

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nihonde
Speaking of which, a spreadsheet widget is the worst possible delivery format
for the long-form text in this article.

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howsta
You can expand the long text cells by clicking the expansion arrows that
appear in the top right corner of the cell. I would also highly recommend
using the full-screen version rather than embed (by clicking "View Larger
Version"):
[https://airtable.com/shrOQ3Gf4Hs3Gvvvc](https://airtable.com/shrOQ3Gf4Hs3Gvvvc)

I would also add that, while I'm certainly biased, there is benefit to making
this a "cloneable" database that you can then use as a personal checklist, add
notes, further attachments, etc which you wouldn't be able to do with a simple
blog post, for instance.

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justinlardinois
Now I'm kinda curious, especially since you emphasize the cloneable part: what
makes this better than a Google Sheet?

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howsta
For starters, 1) File attachments 2) Better mobile UI (Airtable's database
records can be displayed as cards on touch devices, whereas a traditional
spreadsheet is always a 2d grid). 3) Interactive fields like checkboxes,
dropdowns, etc. 4) Ability to expand records into a form detail view for
better readability of long text, etc.

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justinlardinois
Sheets does have #3.

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nihonde
(IAAL.) While the author is very likely coming from the right place, I find
this kind of "legal" advice totally useless——hence the fact that half of this
"article" is a disclaimer that you shouldn't bother relying on it. If I were
one of the lawyers whose name is attached to this advertorial, I would hasten
to get my name removed from it.

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howsta
Author here, for the sake of constructive criticism, would love to hear why
you don't find it useful?

The disclaimer is there because, while I tried my best to make sure all info
in the guide is accurate, I don't think it's fair or necessary for me to take
on legal liability if someone makes (or claims to make) a mistake by using
this (free) guide. I certainly hope readers do not interpret this guide as a
definitive and comprehensive substitute for proper legal counsel and research
of their own--rather, it contains information which is designed to act as a
supplement to those things.

In other words, it will hopefully help folks avoid false negatives in legal
steps (i.e. forgot to file an 83b within 30 days or register with their city's
business department), expose them to lesser-known alternatives that their own
lawyers may not have told them about (using FF preferred stock to provide a
small measure of founder liquidity down the road without skewing 409A
valuations), and understand _why_ it's necessary to do certain things (like
adopt bylaws, file a Form D, etc).

The scope of the guide is strongly biased towards U.S. startups incorporating
as a Delaware corp (a common approach, even for companies not based in
Delaware itself).

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nihonde
Why don't I find it useful? "Find legal counsel" and "Comply with State-
Specific Regulations" are actual line items on your checklist. Your checklist
can be reduced to one line item: hire someone who knows what they're doing.

It wouldn't bother me if you were simply sharing your experience in setting up
a company, but this article is presented as advice wrapped in a thinly-veiled
promotion of your product (and some lawyers/law firms).

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bpchaps
Agreed with rpgmaker. My experience with the law (IANAL) is that it's
sometimes just easier to pull up the books, read the relevant portions
yourself, then confirm it with your lawyer for some quick answers. This is
what I was doing before having a lawyer and it worked just fine, but having a
validation source saved me many, many hours. Simply a hiring a lawyer and
somewhat blindly trusting them sounds like poor advice in itself. That said,
in an attempt at CYA, please please please just use a damn lawyer.

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nihonde
I said: "hire someone who knows what they're doing". I didn't say "blindly
trust someone who holds themselves out as an expert and don't do any homework
yourself". In fact, you said you hired an expert to validate your findings,
which is exactly consistent with my advice.

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greenspot
Ok, this thing is just Marketing to push Airtable. Once you liked the provided
info you click on "Copy Base" and voila, Airtable gets a new user.

But I do think that Airtable looks nice. And I appreciate any new approaches
to spreadsheets. This space lacks a bit of innovation and the advice seems to
be not that bad.

Upvoted.

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patio11
Some day I'm going to write about the boring backoffice mechanics for folks
who are doing business on the Internet but do not expect to ride the startup
trajectory.

In the meanwhile: LLC incorporation. You'll almost certainly pick an LLC as a
solo founder because the costs are lower, the protections are roughly
equivalent, and the pass-through nature of the business makes your tax
planning easier. You'll make your LLC in your choice of Wyoming or Nevada.
Wyoming is institutionally more privacy conscious than Nevada is, which may
matter to some of you. ("Do you want your home address trivially available on
the Internet?" is a question which gives some entrepreneurs pause. Not wanting
that is a totally legitimate reason to incorporate in Wyoming.) Nevada is
fairly cheap, has no state income tax and no prospect of attempting to
retroactively impose one later on your income, and has a fairly nice portal
where you can do the one thing a year they'll require you to do. (Robosign
your "annual list" and then pay a few hundred bucks for the privilege of
limited liability for another year.)

You do not need to have any connection to the state you incorporate in
whatsoever. Full faith and credit clause of the US constitution for the win:
all states can create legal entities for anyone which all other states must
treat like their own legal entities and, accordingly, states compete with each
other to get corporate formations (as a source of revenue and for knock-on
economic purposes). Delaware has planted the flag in "We are a very
predictable jurisdiction for litigating complex court matters if it comes to
that; we're going to charge you for this." Wyoming picked privacy/"low fees
low services." Nevada picked "We're cheap and reliably funded by sin taxes."

You will pay taxes anywhere your business has an economic nexus. For almost
all of you, this will be "where you do the work that earns the money."
Importantly, this is _not not not not not_ where your customers are, where the
people paying you money are, where the money actually changes hands, where
your corporation is registered, or where your bank account is. If you sell
$10,000 of software on the US App Store from a Nevada LLC with a bank account
in London but you physically coded the app in Croatia, your sole economic
nexus is Croatia. (Run this by an accountant or lawyer if you doubt me, but if
they doubt me, I'll offer them 100:1 odds that I'm right.)

Not too much changes about your life after incorporating. You'll want to get a
business checking account in the name of the LLC, primarily to start
segregating funds for bookkeeping purposes and secondarily for maintaining the
corporate veil. You'll register for accounts/leases/etc in the name of the LLC
rather than in your personal capacity. You will almost invariably be asked for
a personal guarantee for any debt/lease/etc until your business has millions
in revenue -- this sucks, but you'll do it. You should get a credit card
(doesn't have to be a "business" card) which you use exclusively for business
purposes, because this assists in you doing your most important bit of tax
planning, which is keeping very, very accurate books regarding business
expenses.

You will almost certainly be amazed at the variety of expenses which are
legitimate business expenses. There are fairly few bright lines, and
navigating the gray area is one of the reasons you will hire an accountant.
They will, almost certainly, categorize thousands of dollars of things you
thought were personal as business expenses; this is one of their primary
functions when working for small businesses. (Examples: 100% of your WSJ
subscription; 40~60% of your Internet fees; 100% of your coworking space rent;
some percentage of depreciation on your laptop; etc etc.)

In the US, you'll typically file a Schedule C attached to your 1040, showing
the revenue of the business, expenses, and net profits. You'll pay taxes on
the net profits, and also pay self-employment taxes on them (Schedule SE).
Your accountant will identify a variety of tax-saving strategies for you; the
most important (after "keep good books!") for most small businesses on HN will
be "establish and generously fund a retirement account."

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hundt
> You will pay taxes anywhere your business has an economic nexus. For almost
> all of you, this will be "where you do the work that earns the money."
> Importantly, this is not not not not not where your customers are [...]

This seems to be a common belief among entrepreneurs, but all the evidence I
have found (and my accountant) point to it not being true, at least not in all
states. For example, here is a page from California's FTB web site:

[https://www.ftb.ca.gov/businesses/Sales_Factor.shtml](https://www.ftb.ca.gov/businesses/Sales_Factor.shtml)

> Jill, a nonresident of California, owns a web design business that she holds
> as a sole proprietorship. She works from her home out of state but has
> customers in various states including California. For the 2013 taxable year,
> Jill's sales receipts from California customers are $300,000 out of the
> total sales receipts everywhere of $1,000,000. Does Jill have a filing
> requirement in California?

> Yes, nonresident individuals are taxed on all California source income.
> Jill's sole proprietorship is carrying on a business in and out of
> California and will be required to apportion its income to California using
> UDITPA rules. Under market assignment, sales of services are assigned to
> California if the purchaser of the service received the benefit of the
> service in California. Accordingly, $300,000 will be assigned to the
> California sales factor numerator for Jill's sole proprietorship and Jill
> would apportion 30% ($300,000 CA sales/$1,000,000 total sales) of its
> business income from her sole proprietorship to California.

I would love it if you had some evidence you could share that the popular view
(you only pay taxes where you do the work) is correct so that I could stop
paying taxes in California :)

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kchoudhu
If you're registered in Nevada or Wyoming, does UDITPA apply? Those states
haven't enacted the rule.

[http://www.uniformlaws.org/Act.aspx?title=Division%20of%20In...](http://www.uniformlaws.org/Act.aspx?title=Division%20of%20Income%20for%20Tax%20Purposes)

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hundt
I am not any kind of lawyer, but my understanding is that each state follows
its own rules and does not defer to the rules of any other state just because
you live, work, or registered your business there. So for the states that
follow UDITPA, they will apportion income to themselves, and assess the
resulting taxes, according to UDIPTA rules regardless of what other rules your
business might be subject to in other states.

But, again, I am far from an authority on this topic, so don't take my word
for it, and if you find out a way to find out for sure please let me know :)

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oliviajune
Great post!

