

Does YC not like c-corps? - Ian_Kung

Hello! My classmates and I have created a product and we're trying to decide whether or not to incorporate.  The main reason we're thinking about it is because our site deals with people sharing works that may not necessarily be their own property(for example: a user might post a link to a show he/she likes, but he/she does not own any rights to it).  Despite the protection offered by DMCA, we were worried we might face legal issues for unforeseen circumstances and figured we should protect ourselves.<p>On the other hand, we were possibly interested in taking our idea to YC once it has proven itself, but it appears in the FAQ's that YC would prefer we did not incorporate.  Can anyone offer some advice on the matter? Much appreciated!
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tptacek
Why would you use a C Corporation to solve this problem? You'd probably get
very similar protection --- perhaps the same protection --- from an LLC.

Here is roughly the mental model I've built about incorporation choices (there
are several lawyers on HN that may stomp on me for posting this):

* LLC - cheapest, all money goes straight to principals as if each was a sole proprietor or freelance, tricky to issue equity to employees

* S-Corp - enables the FICA "reasonable salary" cheat, enables employees to easily get shares, enables principals to get W2 wages instead of paying quarterly on everything (LLC's can get this too if they "file" as S).

* C-Corp - company pays corp taxes, company can have multiple classes of shares.

All of these structures provide people acting on behalf of the company, having
disclosed that fact clearly to their counterparties, with a reasonable belief
that they are authorized by the company, some measure of protection against
contract claims.

It's also very important to remember, if you're incorporating to avoid a
foreseeable legal event, that _corporate liability protections don't shield
you from torts_. The DMCA stuff you're talking about is tort law. If you are
negligent or deliberately cause damages or commit fraud, the corporation isn't
going to protect you. Similarly, some things you'd assume would be a matter of
contract law (such as payroll) might _not_ be depending on what state you're
in.

If I was in your situation, I wouldn't consider laying out money for a C-Corp,
and I'd only do something beyond the barest formality of an LLC if I had more
than a couple founders or more than one "kind" of founder.

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pg
If you feel you need to, go ahead; just try and do it properly.

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trueneverland
YC probably prefers they help you with the process vs you doing it yourself.
The problem is most people do it incorrectly and shoot themselves in the foot.
Not to mention it can be a costly thing to fix. If you must do it, as PG says,
do it properly. I recommend finding an attorney who is familiar with startups
to do it right. Some attorneys can mess you up to.

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jamesladd
I'm thinking that YC don't like incorporated companies where the IP is tied up
in the trading company, rather than licensed to the trading company by the IP
holding company. I could be wrong.

