Comments on: When do I need to incorporate a company?

By: Danzr_1

Danzr_1 — Fri, 11 Dec 2009 23:18:42 +0000

` ~ * " ... And most critically and lastly , were you dear soul referring specifically to Zoom.com or to their practices or ilk in general ?

By: Seattle Business Attorney

Seattle Business Attorney — Thu, 10 Dec 2009 12:02:28 +0000

Also having very good legal counsel is key when incorporating. Online legal forms certainly do not cut it these days. Too many traps and omissions with forms.

By: Seattle Business Attorney

Seattle Business Attorney — Thu, 10 Dec 2009 05:02:28 +0000

Also having very good legal counsel is key when incorporating. Online legal forms certainly do not cut it these days. Too many traps and omissions with forms.

By: Incorporation : Resources | Launch a company

Incorporation : Resources | Launch a company — Sun, 18 Oct 2009 14:51:11 +0000

[...] When should you consider incorporation: [...]

By: notalawyer

notalawyer — Wed, 26 Aug 2009 03:54:33 +0000

In theory, but in reality:
1. VCs dont care about IP or patents. You have them great. Otherwise don't bother.
2. LLC can provide liability coverage and pay employees MUCH cheaper.
3. C corps have double taxation, the last you need when starting out.
4. You have to have a certain number of employees to even apply for a visa. And for the most part, the quota is filled almost right away.
5. Funding…sure, but it better be close otherwise you are paying fees, taxes, IRS, registration, services to keep minutes, etc…
6. Splitting founders — can be handled via LLC or via simple agreement.

By: Ken Kaufman

Ken Kaufman — Mon, 03 Aug 2009 19:53:39 +0000

This is a very informative summary of the triggers for incorporating a new business. Great points on capital gains tax treatment, IP protection, and the necessity that more than one owner should be a trigger for formalizing the entity.

Most entrepreneurs and founders have a lot of questions on the right entity for their business as well as the timing, legal, tax, and operational implications of their entity selection. I appreciate this and the other content on this website to help educate them on these important matters!

By: When is the Right Time to Incorporate Your Business? | Starting Your Business

Thu, 23 Jul 2009 17:39:43 +0000

[...] You can find the original posting here. [...]

By: K9 Ventures » Blog Archive » Incorporate ‘yesterday’

K9 Ventures » Blog Archive » Incorporate ‘yesterday’ — Wed, 22 Jul 2009 16:40:52 +0000

[...] Ever since I found the blog Startup Company Lawyer, I’ve had a high regard for its author, Yokum Taku, a partner at Wilson Sonsini Goodrich & Rosati. Yokum’s posts are always chock-full-of-good-information. His most recent post was on the topic of When do I need to incorporate a company? [...]

By: Manu Kumar

Manu Kumar — Wed, 22 Jul 2009 15:11:52 +0000

Yokum, thanks for another great post! EAU (Excellent as Usual) as one of my favorite customers used to say!

You provided a great overview of the reasons to incorporate from a legal point of view, I wanted to chime in with some more subtle, but hopefully useful comments:

I maintain that the best time to incorporate is 'yesterday' — or as soon as you are 100% sure that you want to give this idea/company a real shot. To me incorporation is a 'show of commitment'. It sets a date and time in stone for the inception of the company, and, it starts the clock running. This has several advantages:
1) If you are going to be bringing on co-founders or employees, the fact that the company has already been incorporated, and is official, can have an impact on how the equity split gets portioned out.
2) Incorporating starts the clock on the corporate history — which can often be useful when dealing with customers. For example, when asked, 'How long have you been in business?' you can confidently point to your date of incorporation as the 'start of business.'
3) The same also applies when having valuation discussions with VCs. If the company hasn't even been incorporated yet, then they are likely to try and push you more on valuation. I'm sure several folks will disagree with this, but I am confident this happens — even if it happens subconsciously.
4) Likewise, the date of incorporation often plays a role in what portion of the founders' stock is already vested at the time of a venture financing.
5) Incorporating forces you to start maintaining the books (or so I hope!) and also forces you to learn all the administrative details it takes to run a company. While this isn't something that directly adds value to the company, it is something that needs to be done. The sooner you learn this, the better it is. Doing this from the beginning and keeping things clean will be something you appreciate when you get into due diligence.

There are of course some disadvantages to incorporating as well:
1) Cost — even though most law firms will defer some of the legal costs involved, incorporating through a law firm is still an expensive process (deferring is not the same as not charging!)
2) Administrative overhead — once you incorporate, you are expected to comply with federal and state regulations. So you have to file taxes for the entity every year (Federal Taxes, DE Franchise Tax, California Tax ($800 minimum if I remember right)).

Tip: If you are thinking of incorporating and it's close to November/December already — WAIT till January! That way you don't have to file all this paperwork for just a month or two of existence! And you'll have a full year ahead of you to find an accountant/tax person to help for tax time.

But all in all, I say, incorporate as soon as you are sure you want to give this a real shot. Stop hedging, and just do it!