
Startup incorporation checklist - hberg
https://github.com/leonar15/startup-checklist
======
swampthing
It's worth mentioning that incorporation by itself doesn't get you very far in
terms of protecting against personal liability. It's really just the first
step in company formation. You'll want to appoint directors and officers as
well. And to protect against departures, IP issues, etc., you'll also want to
issue stock with vesting to founders, and have everyone enter into IP
agreements.

We've automated all of this at Clerky - you can do everything completely
online using our software. We do a _ton_ of company formations. If anyone has
any questions on the topic, feel free to ask!

~~~
will_brown
The author raises 1 point that Clerky's services doesn't seem to include,
Qualification of the Foreign DE C-Corp. I think this is a service/legal
requirement applicable to almost any incorporated DE startup. Is this
something Clerky does behind the scenes or something Clerky customers are
advised to address with a local lawyer? Is there a chance some of these
startups are not properly qualified in the States they are physically located?

Along the same lines, while it appears Clerky annually renews a DE registered
agent for startups, I don't see anything regarding filing of the DE Annual
Report/paying Franchise Taxes. Is this a service behind the scenes or
something Clerky just prefers to defer to the startups and/or other
professionals?

~~~
swampthing
We definitely handle the "Register with CA" part of the checklist, and we have
that as part of our checklist that we send to companies after incorporation.
For companies not located in CA (where CA foreign qualification is usually not
necessary), we partner with a third-party service that handles all the other
states (we've negotiated a discount with them for our customers too).

DE Annual Report / franchise taxes - I personally think this is easy enough
that founders can do this on their own. We have a support article for it here:

[https://support.clerky.com/articles/how-does-a-company-
file-...](https://support.clerky.com/articles/how-does-a-company-file-its-
delaware-annual-report-and-pay-its-delaware-franchise-tax/)

But the registered agent that we partner with can also help people with this
if they need.

------
mcorrand
Some other resources that have served me well - not for incorporation per se,
but the next few steps in setting up a healthy corporation:

\- Docracy.com has some good templates (contributed by some incubator I can't
recall) for bylaws, ip assignation, founder terms, terms of service and
privacy policy and customer contracts, etc.

\- Listing a phone number with one of the large online directories helps with
various verifications (including EV SSL if you need it and facebook page)

\- insureon.com to shop for insurance.

\- Get bookkeeping software. Right away, and keep it up to date

Edit: the docracy docs are by Techstars:
[https://www.docracy.com/userprofile/show?userId=30](https://www.docracy.com/userprofile/show?userId=30)
and Orrick, a law firm:
[https://www.docracy.com/p/10881/orrick](https://www.docracy.com/p/10881/orrick)

~~~
espinchi
For bookkeeping I use Xero and love it. Then Expensify for expenses.

For payroll, Gusto (formerly ZenPayroll) is wonderful. I can't emphasize
enough how much of a headache this takes away from me.

------
gjkood
Setting up a corporate entity (any kind) in California gives you a mandatory
minimum $800/yr bill from the CA Franchise Tax Board.

So if you are planning to incorporate in CA, be sure you are serious and don't
mind an automatic $800 on the expense side without anything on the revenue
side.

Please correct me if I am wrong on this.

Also, does anyone know why this is the case? I haven't seen this in a few
other states where I have resided. What does this buy my company in terms of
benefits? Was there some ballot proposition that got passed to levy/enforce
this fee?

~~~
swampthing
Yes, that's correct - although for corporations, you typically don't have to
pay it for the first year (as long as you foreign qualify in CA for that
year). So at least you get a small reprieve there :)

~~~
jahewson
Actually you don't have to pay it for the first year, even if your business is
resident in California.

------
ttmarek
Has anyone here tried Atlas
([https://stripe.com/atlas](https://stripe.com/atlas))? I'd love to hear your
thoughts on it.

~~~
pbreit
I'd love to see a Stripe Atlas directed at US startups. I don't see why
incorporating should be so expensive and laborious.

~~~
pc
US startups are very welcome to use Atlas -- many already have!

~~~
wj
I was turned down. Have you opened it to everybody?

~~~
pc
Hm -- can you drop me a note? (patrick@stripe.com.) I'd like to dig into why.
It's still invite-only but you shouldn't have been turned down because you're
in the US.

~~~
boraturan
Patrick, it would be great if you could open a msg forum for Atlas companies,
like YCnews.

------
nodesocket
All this legal tape and bureaucracy is really an impediment to a young
startup, especially if you're trying to bootstrap. I was personally hit with
the california LLC fee of $800 a year (was three years behind) and one day I
logged into my Silicon Valley bank account and saw $3,300 withdrawn by CA
Franchise Tax Board. Not the happiest day of startup life.

~~~
curtisz
That California business AMT ("franchise tax" of $800 a year, even if your
business earns $0, or negative dollars, even if your business is a nonprofit)
is a small business assassination program. I moved to California unaware of
it, and was unable to migrate my non-profit to help fellow combat veterans
with civilian reintegration, because the AMT was around my operating budget
for the year. That's not a lot, but I can tell you that combat veterans have
come to me asking for help, and I am unable to provide assistance except from
my own pocket. California is infuriating.

~~~
gjkood
"small business assassination program"...

Thank you. Thats exactly what I would classify it as. Drown the startup in a
bathtub (using a bit of Grover Norquist rhetorical flourish there). I am just
not bright enough to see what the upside of this fee is, especially in CA
which I thought was a business/startup friendly state.

~~~
curtisz
The "upside" of the fee is nothing more than feeding the voracious appetite of
the state of California. The explanation for this AMT franchise tax literally
uses the phrase "for the privilege of doing business in California". The state
tax board knows what it's doing, and it doesn't care, because the truth is
that loads of people want to start a business in California or run a business
from within California as a resident, and have no other choice but to pay the
AMT franchise tax ( _even if_ the business is incorporated in Nevada or
Delaware, if most of the business occurs in the state of California, the tax
man still cometh).

It is greed. Plain and simple.

------
jahewson
Warning: there's a really important point missing from this list - pay taxes
in California. There's a minimum "Franchise Tax" of $800 plus a percentage of
California-derived revenue. All entities doing business in California (be that
selling to customers based there or having employees there) must register with
the state and pay this. The first year is free though - the minimum is waived.

------
a3camero
HN has a global audience. Might be worth noting that this advice is aimed at
Americans. This could be very bad advice for non-Americans.

I'm a lawyer who deals with startups in Toronto. Quite a few people ask about
how to set up a Delaware corporation because they've seen online that that's
how you create a startup.

~~~
aareet
Can you share contact information for your services to tech startups?

~~~
kejaed
User history is a useful thing:
[https://www.cameronhuff.com/](https://www.cameronhuff.com/)

------
emilyfm
Although I appreciate this list is aimed at a narrow case (incorporation in
Delaware with operations in California), I'd still pay a little more attention
to the "choose a name for your business" stage to avoid surprises.

At the very least, check the name isn't a registered trademark in a similar
business (at uspto.gov), and that there isn't another significant company with
the same name globally (opencorporates.com is a good starting point, as well
as Google).

You don't want to limit international expansion later by picking a name that
is a well-known company already. For example, when Burger King expanded to
Australia in the 1970's the name Burger King was already trademarked locally,
so they had to rebrand as Hungry Jack's.

Of course also do a Google search to see if words in the name are widely used,
perhaps meaning something unsuitable in another language.

Finally, although maybe becoming less important, it's useful if the .com
domain is available (either unregistered, or at a reasonable price).

Better to do all this before spending the money on incorporating with a name
you might need to change later.

------
archagon
I've heard that for small businesses in California, incorporating in Delaware
for tax reasons doesn't legally make a whole lot of sense because California
will want to tax you anyway. Is that the case? If so, why are so many people
still set on incorporating in Delaware?

~~~
sokoloff
A lot of what Delaware buys you is a transparent, functioning, and predictable
state legal framework and court system.

~~~
hberg
You're right. If you plan to build a business and raise VC money for it,
Delaware is the standard place to incorporate (which is the case for my
company and checklist, btw).

California does add an extra layer of burden and compliance that I did not
expect, but if you plan to have employees in California you must incorporate
there as a foreign entity (also my case).

I've also heard from a fellow entrepreneur who has a distributed workforce
that you need to incorporate in every state with an employee. This is
certainly outside the scope of my checklist.

~~~
jahewson
If you plan to sell anything in Californa you must also register there as a
foreign entity. And pay taxes.

------
spriggan3
Nice thanks, I'd like to see such lists or guides for other countries such as
Canada or European ones, if it makes sense. Of course it doesn't replace a
good lawyer but at least to get an idea on how hard it is for founders.

~~~
hberg
I'd love to see other guides pop up as well. Still shocked at the number of
agencies, documents, forms, and faxes that are required just to set up a
simple company.

------
usrbintaco
You can save on the incorporation services by downloading forms directly from
a given state's Secretary of State site. Most states have clear instructions
on how to fill everything out and where to submit the paperwork and payment.
Incorporation service companies are great, but if you're trying to bootstrap a
startup every dollar counts.

Additionally, if there will be multiple owners/members of the new entity I
strongly suggest buy/sell agreements (basically a contract stating who can
sell their interest and when and to whom - saves a lot of headache later to
figure these things out up front).

------
guiseppecalzone
As a quick plug, you can sign your incorporation docs with HelloSign
([http://www.hellosign.com](http://www.hellosign.com)) and fax Delaware with
HelloFax ([http://www.hellofax.com](http://www.hellofax.com)).

(Co-founder of HelloSign and HelloFax)

~~~
hberg
HelloFax has been a great service in my incorporation process (and I listed it
in the "Tools & Resources" part of the checklist!).

In my case, I used the InCorp service to file my DE docs since I needed an
expedited service and they could walk the documents over on my behalf. In the
past, I did that portion myself.

Thanks for building a great service and down with the fax machines!

~~~
guiseppecalzone
Nice, really appreciate you listing us.

Down with the fax machines! :)

------
harrisreynolds
Cool checklist. Would you mind if we input this checklist into our tool? -
[https://www.processd.com/](https://www.processd.com/)

We have a way to publish checklists like this so users can actually check
things off.

See our Show HN post for more details! :-)

~~~
hberg
Checklist author here...

Thanks! Glad you liked it. This checklist is what I've been going through for
the past many months with my startup. Creating the list was a cathartic
process and my original audience was meant to be friends who are building
their own businesses. Glad to see it's getting more attention now.

I'd be fine with it getting added elsewhere as a more usable checklist as long
as there's a link back to the github repo. I plan to update the checklist as I
learn about new requirements and/or get pull requests.

------
joshuaheard
This checklist is a fine first step in completing the externalities of
corporate formation. However, it is only the first step. There is a whole
second step of issuing stock, appointing directors, holding a first meeting,
electing officers, adopting bylaws, and a whole slew of internal items that
should be on the check list as well. Most of these are forms that could be
handled by a lay person as well, but you won't get any corporate liability
protection without them. There are also annual meetings and such that are
required to maintain the corporation. If you are serious about DIY
incorporation do some research, you could probably find some good manuals out
there with forms and everything.

------
_RPM
If my company won't be making money or revenue for quite some time, what does
that mean for me in terms of the IRS? Will we get penalized for NOT having
revenue?

~~~
g10r
In the United States you will not be penalized for having no revenue.

~~~
snerbles
You are effectively penalized in California for zero revenue, see all the
comments in this thread about the $800/yr minimum tax.

~~~
g10r
To clarify, I was assuming State and Federal fees not to be considered being
penalized and simply cost of doing business.

------
donatj
Where is CAAS "Company as a Service" as a business? Particularly for single
person companies, I could see this being a very useful service.

------
homero
Can someone please tell me what to check under management for a ca llc?

[http://bpd.cdn.sos.ca.gov/llc/forms/llc-1.pdf](http://bpd.cdn.sos.ca.gov/llc/forms/llc-1.pdf)

I've been told I'm a member. I'm also the only person. Should I be the
manager? Is all members plural and I shouldn't use that? Thanks.

------
louprado
InCorp is referenced in the non-free tools section but not in the recurring
fees section. Is this an oversight ?

Isn't there a DE requirement that you have an _agent_ (?) operating within the
state if your HQ is in CA ? Incorp currently charges me $100+ a year to do
this.

~~~
jahewson
Third item on the checklist:

\- Buy registered agent service in DE - 1 yr Free

~~~
louprado
Exactly. Why implicitly suggest it is recurring, but then deliberately exclude
it from the recurring fees section.

------
eonw
i always incorporate in my home state when starting a new venture, its much
easier to manage.

all assets can later be sold to another LLC or Corp as the need arises, but
doing all these steps in advance can just cause undue headache and
complexities.

also, california is about the least small business friendly state in the
union. and AFAIK, having a delaware corp doesnt save you all that much in
taxes anyways. so glad i no longer have to deal with that state.

complex corp setups also confuse some investors, certainly if you are raising
capital from those not savvy in the plethora of ways corps are setup to
circumvent taxation and game the domicile game. they basically think you are a
scammer(been there)

just 0.02

------
merrywhether
How relevant is this to a single person wanting a corporate front to make
small amounts of side money from a website or app? Is an in-state LLC more
preferable in that situation? Is any type of incorporation even necessary?

~~~
gk1
You should be fine just forming a disregarded-entity LLC in your state.

There's no reason to do it in Delaware, except want to part with a lot more of
your money. Even if you form the LLC in Delaware, you will have to register it
as a foreign entity in your home state, so you're only doubling your paperwork
and annual costs.

It's worth chatting with an accountant about this. Many of them offer a free
30- or 60-minute consultation to new clients (or potential clients).

------
ErikAugust
How about shutting down a company? Anyone have any tips on that?

~~~
hberg
That'd be a great list! I guess this depends on multiple factors like how many
employees you have, how many investors, etc.

I've heard that for pre-funded DE corporations you can basically ask your
registered agent to formally "resign" as your agent and then the corporation
is orphaned. The proper way involves filing paperwork to dissolve the entity
along with paying some filing fees.

~~~
swampthing
That might work with some registered agents, but it won't with Incorp - they
will require you to either have a new registered agent in place, or you need
to dissolve your company.

~~~
hberg
My experience with InCorp was exactly as described earlier. They resigned and
that was that.

~~~
swampthing
Good to hear... we repeatedly ran into this issue with them over the course of
several years. I can't tell you how many times we argued with them over this.
But it sounds like they may have reformed their ways!

------
ex3ndr
How we can open checking account in SVB? They rejected to open account for us
saying that we are not tech vc-backed startup, but we are! Or any other
possibilities?

~~~
hberg
FWIW, you can easily open a business checking account at any bank and they
usually have better online services than SVB. Often you can ask your personal
bank to waive the fees on a business account if you've been with them for a
while.

~~~
ex3ndr
We are not US-residence, i forgot to mention about this

------
pbreit
Someone should do Stripe Atlas for US startups.

------
smnscu
[Sorry for off-topic] Could someone point me to a similar resource for
starting a startup in Germany, preferably in English?

------
Scarbutt
As a foreigner (non-US), why create the company in the U.S. instead of
somewhere like Ireland which has lower taxes?

~~~
kawera
Two reasons: main target is the US market and/or raising american venture
capital.

------
arturventura
I would love If anyone extend this information for foreigners (in my case EU)
wanting to open a US based company.

~~~
raarts
I'm from the EU and opened an LLC in the US. I think this list just applies.
Except for the visa, that is actually the biggest hurdle. Unless you invest >
$500k.

------
MarlonPro
Any additional requirements if one of two partners live outside US?

------
_RPM
This is great. Just what I need. My non technical co founder and I are
starting a company and I want to make it a real company before we start
meeting 3 days a week.

~~~
gk1
Why should making it "a real company" be necessary before meeting any number
of times per week?

You're probably better off having those meetings first, and waiting to
incorporate until you're sure you have a business.

~~~
hberg
Yes, agreed. No need to incorporate just to get together and hack on a
project. That said, I would certainly consider (at the very least) signing an
agreement with your hacking buddy before launching anything that might
generate revenue.

I've seen and heard multiple co-founder friendships fall apart once things
started to get "real". Good luck!

~~~
_RPM
I want legal agreements in place before I start writing code with a non
technical co founder. We've agreed upon a 50/50 equity split.

~~~
hberg
One reason to incorporate as a C or S-corp is that it's easy to add 4-year
vesting to founder shares. This protects you if your co-founder walks away
after 6 months. It's much harder (if it's even possible) to vest "shares" in
an LLC.

In your case of a 50/50 split, make sure your agreements also have a clause
that deals with disagreements. IT's likely you'll come to a point in your
business where you do not agree and 50/50 ownership can make your business
stall. Codify how those disagreements are solved before you get there.

------
pstrazzulla
What about trademarks?

------
tacos
I see no mention of sales and use taxes. Welcome to Hell.

[https://www.boe.ca.gov/info/taxoverview.htm#sales](https://www.boe.ca.gov/info/taxoverview.htm#sales)

~~~
donatj
There are a number of "Sales tax as a Service" businesses like Avalara out
there, which honestly ANY small business that can afford it should partake.

I worked for a company that tried to build an in house sales tax rule
calculator, it's damn near impossible unless you want to devote a team of
people just to sales tax, and certainly not worth the risk.

