

Ask HN: $3000 to incorporate. Is it a good deal? - Inebas

I listen to mixergy interviews and they recommend scott edward walker and so i talked with the guy and he has a startup package. It's 1500+500+900 for filing. The total comes down to around $3000. Is this a good route to go for a startup?<p>Background: I'm a single founder, looking for co-founder down the line.
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trapexit
Folks who have been there before will tell you not to waste a single cent on
incorporating until you absolutely have to.

Wait until at least one of the following is true:

    
    
      1. You have investors who are ready to go.
      2. You hire an employee.
      3. You have actual customers and actual revenue.
      4. You have any significant exposure to liability.
    

Don't bother with _any_ of the paperwork B.S. of setting up a business until
you actually _are_ a business. Once you go down that road, not only are you
spending a bundle on getting papers filed, but you now have recurring expenses
for annual report fees, state minimum taxes, business licenses, accountants,
attorneys, etc.

I'll go even further and say don't even bother spending time or money on a
name, logo, domain name, website, or business cards until you've talked to
enough potential customers to be sure you've understood their problem and are
building the right product.

If you bring on a co-founder later, you can draw up a simple agreement (find a
template online, or get an attorney to help you) that spells out the
understanding between the founders in terms of ownership and control of the
company once it is incorporated, who owns the leftover IP if the company fails
before you get to that point, what happens if one founder leaves, etc.

I know it's exciting to finally "be a real business" and print business cards
naming yourself "CEO". But that's all just vanity. Hiring a lawyer and filing
some forms doesn't make you a real business; creating a product and selling it
to people does.

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oortlieb
I couldn't agree more with this post. Don't pay the money just to stroke your
ego.

The cofounders at my current project were antsy about having the credibility
that comes with becoming "official", so we incorporated very early. Currently,
we're working R&D and looking for money -- not a single investor has asked if
we're incorporated or been impressed by our business cards. They do, however,
want to learn about the progress we've made with our product and the projected
size of our market. Use the money for marketing and product development.

Another thing to keep in mind: we went the LLC route, and its likely that
if/when investment comes, we'll have to amend the hell out of our Operating
Agreement.

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the_economist
I've started several small businesses, dating back to 2001, and have never
done more than filling out my state corporate commission's articles of
organization.

This is not the safest route, but definitely the easiest and cheapest way to
get started. Doing this will let you open a business bank account, get
merchant services setup, get an EIN (tax id) from the federal government, etc.

In Arizona it takes about 3 minutes and costs $50:
[http://www.azcc.gov/Divisions/Corporations/forms/starpas/for...](http://www.azcc.gov/Divisions/Corporations/forms/starpas/formsSTPS/L010-Articles-
of-Organization.pdf)

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bdfh42
Its between £5 and £50 here in the UK - depending on a few factors. You can do
it online with a credit card in a few minutes...

~~~
jamesjguthrie
£15 to do it online with Companies House, just done it myself last week.

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kitcar
Need some more info - State/Province/Country of incorporation? Federal or
State/Provincial incorporation(again, depends on country) Includes any
shareholder agreements as well?

Also, why not wait for the co-founder first, to save $$ on getting papers re-
drawn / filing amendments?

~~~
OafTobark
This. If you have no cofounder, and have no immediate need for the company to
be formed, put it off as long as possible until there are reasons i.e.
cofounder(s), hiring, launch, etc..

~~~
dear
That is a question I have. At what stage should a company (limited or
unlimited) be formed for a startup? If there is no company I believe you would
have to do business with your own name, which doesn't look professional. All
incomes and expenses would be treated as personal income/exp.

~~~
OafTobark
This is the wrong way to look at it. Your expenses prior to launch (with
exception to employees and all), would be minimal (unless you're just
outsourcing a ton of work). Hosting and a domain name is like nothing.

That said, until you launch, hire employees, have a cofounder, raising money,
etc... no one is going to know you really exist and the "looking" professional
or whatever is non-existant, nor do most early adopters really care or think
that way.

The reason most people advise (including really good attorneys) to put off
incorporating until you actually need it is basically to save you money and
avoid having to undo, amend, or fix anything.

Hope that help better answer the question.

~~~
dear
Does a launch itself warrant incorporating (or just registering a business
name instead of using own's name)?

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lgsilver
A lot of the value of incorporating is "getting to know" your legal team.
Wilson Sonsini in SV and SF will often defer or waive fees for a very small
chunk of equity on ideas that they like, and other legal teams are open to
similar arrangements.

The benefit of extending your network is huge here. A good legal team can be a
gateway to capital, while a missfiled c-corp can scare away investors.

Aside from the oft-repeated, "don't do it until you absolutely have to", I
would suggest that you to do some research on law firms that are specifically
working with startups in your industry and area.

You may be surprised that many will set up your c-corp for just the cost of
fees if they believe that your idea and future with them is strong.

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Inebas
Thanks for all the comments. So ya the attorney will incorporate in delaware
as a c corp. i do sell apps on the app store right now as an individual.

I am outsourcing some of the development and so he mentions it is important to
incorporate to protect the ip. It will include some form for freelancers to
sign.

The third thing is that i plan to do this at night and weekends while i test
out the market and i dont want it to potentially conflict with work ip. I plan
to release and sell small pieces of software to test each step of the way. Or
maybe just free software.

Thanks.

Ps: oh and he advice me to wait on patents since it is not critical and will
cost 20,000. Just execute and that gets investor interested.

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GoTeamMN
I agree with all the comments that recommend for you to wait on filing,
especially since you are a single founder company.

However, if you were in a two founder situation, there might be some benefit
to incorporating particularly because it would force you and your other
cofounder to ask yourselves tough questions about the future.

I have a 2 cofounder situation myself, and I would like to get the legalities
out of the way, but I find the fees prohibitively expensive. The best startup
package (most comprehensive and from a reputable firm) I've seen was priced at
$5,000 USD. $3,000 sounds like a deal, but caveat emptor.

Good luck,

Jenny

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calbear98
Take a look at Clerky. <https://www.clerky.com/>

From their web site: Clerky helps startups get the legal stuff done fast.

Incorporation, convertible notes, employee documents, NDAs - everything the
typical startup needs. Use Clerky to get your paperwork out of the way so you
can get back to building your company.

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JimWestergren
I heard good things about the startup lawyer Ryan Roberts and he charges
$1,250 + filing fees ($148) as a standard fee when I checked with him (March).
That's for a Delaware c corporation.

