

Legal advice every startup founder should know (with Fred Greguras of Fenwick and West) - nickb
http://blog.guykawasaki.com/2007/10/ten-questions-1.html

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DocSavage
We're considering immediate incorporation as an S Corp and then switching to a
C Corp at the beginning of next year. I've just left my job, and it would be
nice to have some of the initial startup expense flow through to my personal
taxes.

When checking on the California vs Delaware incorporation, I ran across this:
[http://venturebeat.com/2007/01/30/roundup-bombs-dont-do-
dela...](http://venturebeat.com/2007/01/30/roundup-bombs-dont-do-delaware-
mysql-ipo-more/) If we get into YC, our incorporation process seems mostly
set. If not, we might consider a California S Corp for this year.

~~~
Shooter
It's just as easy to convert an LLC to a C-Corp unless you've done something
really crazy in structuring it. Google the advantages that an LLC has over an
S-Corp and see how it all applies to your situation. Examine the differences
regarding taxes, fringe benefits, RULPA, etc. For most use cases, I strongly
prefer an LLC to an S-Corp. The S-Corp is basically dead as an entity for new
ventures, because most if not all of its benefits have been surpassed by the
LLC.

Since I'm not big on 'flipping' companies, I even prefer LLCs to C-Corps
USUALLY. I have also received VC funding for LLC startups multiple times,
despite reading that it is 'basically impossible' in numerous articles. It IS
more difficult to get funding as an LLC in most cases, but in some situations
it is actually easier to get outside investment as an LLC. [I received
investments from two international firms (Irish and Chinese) and they
specifically stated that they appreciated that we were an LLC instead of an S
or C Corp! There are fewer restrictions on foreign investment and ownership in
LLCs. We took the investment largely to get access to their distribution
networks, and the flexibility of the LLC helped us immensely because you can
separate 'ownership' interests from 'economic benefit' interests, etc. I also
know some angel investment groups that prefer LLCs because of their
flexibility.]

I've discovered that (well-intentioned) people often dispense bits of startup
advice like they are undisputed truths, when they are actually speaking to
their own specific history and goals. They will tell you that you MUST
incorporate as a C-Corp in Delaware, for example. That may be a MUST for them,
but not for you. Not every business wants to flip to Google or Yahoo within a
year. Not every business wants to go public. I can't think of very many
'Universal Truths" about startups...you just have to research everything and
make your own decision based on YOUR particular circumstances.

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henning
"Investors will examine the creation of IP very carefully in such a situation
as they don't want to buy into a law suit."

Unless the "IP" (a bullshit weasel word if ever there was one) is YouTube.com,
in which case investors are eager to pay billions of dollars for a site where
90% of the compelling content is copyrighted by someone other than the person
posting it.

~~~
pg
He means the IP of the startup itself, not of the content flowing through it.
Google would have been a lot more worried about buying YouTube if some of the
code had been written for one of the founders' previous employers.

~~~
henning
Eh, you're right, although I do think the fact remains that buying YouTube is
buying a lawsuit.

~~~
dfranke
That may have been the point.

<http://news.ycombinator.com/item?id=3930>

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daniel-cussen
His sentences are really long.

