
How to Register a Start-Up - asnyder
http://www.nytimes.com/2010/04/01/business/smallbusiness/01sbiz.html?8dpc
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DenisM
Step 1. Find local group of entrepreneurs, ask them for a good lawyer to
create startup.

Step 2. Pay said lawyer $500 to talk you through relevant options and pick the
ones you like.

Step 3. Sign a pile of papers.

Step 4. A year later as your company changes pay same or different lawyer to
bring the paperwork up to date.

~~~
grellas
This is a reasonable way for a sole founder to start but there is usually more
to consider when a founding team is involved - I explain this issue here
(<http://grellas.com/faq_business_startup_001.html>).

In essence, with a team, you will need to consider so-called "restricted
stock," where a founder's equity interest vests over time. Because the stock
can be forfeited, this requires the filing of 83(b) elections to prevent nasty
tax problems. It also means that founders need to discuss and negotiate
whether there will be acceleration of vesting if there is a termination of a
founder's service relationship with the company without cause. Likewise upon
acquisition. On top of all this, you need to get IP assignments from all
founders who did pre-incorporation work on the startup's IP and you need to
set up work-for-hire provisions to ensure that all IP subsequent to the
founding is captured for the company. Finally, you normally need to have an
equity incentive plan to be able to make grants to second-tier people who
might join after the founding team. _All_ of these steps are above and beyond
the normal routine steps of corporate setup (filing of articles, doing first
minutes of directors, adopting bylaws, getting EIN, doing securities law
filings, doing indemnity agreements for directors and officers), which in
themselves normally cost you anywhere from $1,000 to $1,500 if you set up in
Silicon Valley (maybe half that with an online service, which does nothing to
guide you with the process), for example, or more if you incorporate in
Delaware and need to qualify as a foreign corporation in your home state. And
this is not to mention the time it takes to explain all the issues and options
to the founders so they can make informed decisions on these issues (including
whether to incorporate at all, as opposed to doing an LLC, for example).

Don't get me wrong. I'm all for austerity at the start and (even as a lawyer)
strongly believe that founders are foolish if they spend too much on legal
when they don't have to or if they front-load such expenses when they can be
spread.

However, with a founding team, doing a proper setup with lawyer help will
definitely cost more than $500 at the start. In my experience, with a savvy
founding team, the costs can usually be reduced to $2K or $3K (if you do all
the pieces described above), more like $5K with a large firm doing the work.
With a sole founder, the budget approach you describe will work and has much
to commend it.

