9 ms·

Startup incorporation checklist

268 points by hberg 10y ago

a3camero 10y ago
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 10y ago
  Can you share contact information for your services to tech startups?
  - kejaed 10y ago
    User history is a useful thing: https://www.cameronhuff.com/ https://www.cameronhuff.com/
arturventura 10y ago
I would love If anyone extend this information for foreigners (in my case EU) wanting to open a US based company.
- raarts 10y ago
  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.
ttmarek 10y ago
Has anyone here tried Atlas (https://stripe.com/atlas https://stripe.com/atlas)? I'd love to hear your thoughts on it.
- mkagenius 10y ago
  Awesome experience. We were already incorporated in India and had gone through a month long process of back and forth to finally get the company registered. Scanning copies, attaching it to emails. Re-sending the documents when something was a miss. Lot of pain. While in stripe it was a breeze. We got incorporated + a bank account in 3 days, I guess. Signatures were online, no hardcopy or anything. (and the 15K aws credits) edit: Hey @cmadan, my email is <my_username>@gmail.com
  - cmadan 10y ago
    Do you mind sharing your email address? We are in a similar situation (India incorporated) and exploring incorporation in USA. Have a few questions.
- BinaryIdiot 10y ago
  I was invited to try it but haven't pulled the trigger yet (I'm currently working on simex.io, an A.I. related project, on the side and am trying to get closer to launch and monetization testing before incorporating). I am very, very interested in people's thoughts regarding it!
- gallonofmilk 10y ago
  we were turned down because we aren't located in a disadvantaged country... (in usa). kind of lame tbh.
  - pc 10y ago
    It sounds like there was some confusion here -- you do not by any means have to be from a "disadvantaged" country. Can you email me (patrick@stripe.com) and tmf@stripe.com so that we can investigate what happened?
    - morgante 10y ago
      It might be worth clarifying that on the website. I looked into Atlas and definitely got the impression that it's only for non-US businesses.
swampthing 10y ago
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!
- elmar 10y ago
  Swampthing :) do you think is a good idea to incorporate in DE with only 5,000 shares? that gives a minimum anual tax of $175. The minimum tax for the Assumed Par Value Capital Method of calculation is $350. you save $175/year and any time you wish or for example receive external investment you can do a stock split or authorise more shares.
  - swampthing 10y ago
    I think it really depends on your situation, in terms of how likely you are to receive external investment like you mentioned (and when), and how much that $175 / year matters to you. By external investment, I think venture capital is probably the most relevant category - other types of investors may not be as insistent. For example, amending the certificate of incorporation to authorize more shares is probably going to cost around $500 a minimum (and definitely much more if you use a lawyer). That's roughly triple the $175 in tax savings you get from authorizing 5,000. But of course by then, you probably would have already issued shares to people, so you would probably want to do a stock split. That's going to definitely require a lawyer... my guess is at least a few thousand in legal fees. So it seems like it could make sense if (1) you don't plan to ever raise venture capital or (2) you think it'll be at least 3 years or so before you raise venture capital and you can hold off on issuing stock until then (unlikely to be a good idea). I suppose the analysis would also be affected by the time value of the $175 / year. E.g. how much more that $175 means to your company now than it will a few years down the line.
tacos 10y ago
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 10y ago
  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.
harrisreynolds 10y ago
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 10y ago
  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.
mcorrand 10y ago
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 10y ago
  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.
usrbintaco 10y ago
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).
_RPM 10y ago
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.
- deleted 10y ago
  [deleted]
- gk1 10y ago
  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 10y ago
    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 10y ago
      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 10y ago
        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.
_RPM 10y ago
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 10y ago
  In the United States you will not be penalized for having no revenue.
  - snerbles 10y ago
    You are effectively penalized in California for zero revenue, see all the comments in this thread about the $800/yr minimum tax.
    - g10r 10y ago
      To clarify, I was assuming State and Federal fees not to be considered being penalized and simply cost of doing business.
  - jahewson 10y ago
    Oh yes you will. In Britain a zero-revenue company cost me £14 a year, in the US it's about $200. California is worse still.
- jackson23 10y ago
  If a C or S corp, you still need to file a Form 1120 [1] U.S. Corporation Income Tax Return: "Who Must File Unless exempt under section 501, all domestic corporations (including corporations in bankruptcy) must file an income tax return whether or not they have taxable income. Domestic corporations must file Form 1120, unless they are required, or elect to file a special return. See Special Returns for Certain Organizations, below" LLCs have a similar requirement. [1] https://www.irs.gov/businesses/small-businesses-self-employed/corporations https://www.irs.gov/businesses/small-businesses-self-employe...
- ryandrake 10y ago
  It's worth pointing out that California imposes a MINIMUM tax of $800/yr on LLCs (even if you have zero revenue). This disincentives you from going and forming an LLC "just because".
ex3ndr 10y ago
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 10y ago
  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 10y ago
    We are not US-residence, i forgot to mention about this
- homero 10y ago
  Capital one spark is incredible and free
guiseppecalzone 10y ago
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 10y ago
  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 10y ago
    Nice, really appreciate you listing us. Down with the fax machines! :)
ErikAugust 10y ago
How about shutting down a company? Anyone have any tips on that?
- hberg 10y ago
  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 10y ago
    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 10y ago
      My experience with InCorp was exactly as described earlier. They resigned and that was that.
      - swampthing 10y ago
        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!
  - desdiv 10y ago
    What's the difference between a orphaned corporation and a dissolve corporation? Will Delaware still come after you for the annual $350 franchise tax if your corporation is orphaned?
deleted 10y ago
[deleted]
donatj 10y ago
Where is CAAS "Company as a Service" as a business? Particularly for single person companies, I could see this being a very useful service.
archagon 10y ago
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 10y ago
  A lot of what Delaware buys you is a transparent, functioning, and predictable state legal framework and court system.
  - hberg 10y ago
    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 10y ago
      If you plan to sell anything in Californa you must also register there as a foreign entity. And pay taxes.
- optimuspaul 10y ago
  Being that I'm not in California I can't think of any good reason to incorporate in Delaware. Many other states are just as friendly to corporations if not better.
- jahewson 10y ago
  If you reside in or sell to California then yes, California will tax you. $800 a year plus a share of California-derived income. The reason to incorporate in Delaware is if you want to sell your business or to get investors - this is the standard investment vehicle in the US.
pbreit 10y ago
Someone should do Stripe Atlas for US startups.
merrywhether 10y ago
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?
- mcorrand 10y ago
  I used a sole proprietorship until the money started getting more substantial; that may not be a good idea if your business has large risks though.
- gk1 10y ago
  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).
- jahewson 10y ago
  For your case incorporation is not necessary. Being in a single-member LLC doesn't necessarily limit your liability all that much. Declare your earnings on your tax return and pay state and federal self-employment taxes. Simple.
Scarbutt 10y ago
As a foreigner (non-US), why create the company in the U.S. instead of somewhere like Ireland which has lower taxes?
- kawera 10y ago
  Two reasons: main target is the US market and/or raising american venture capital.
smnscu 10y ago
[Sorry for off-topic] Could someone point me to a similar resource for starting a startup in Germany, preferably in English?
MarlonPro 10y ago
Any additional requirements if one of two partners live outside US?
spriggan3 10y ago
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 10y ago
  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.
gjkood 10y ago
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?
- nodesocket 10y ago
  +1. They dipped in my business account and took backed CA LLC fees plus interest.
- swampthing 10y ago
  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 10y ago
    Actually you don't have to pay it for the first year, even if your business is resident in California.
pstrazzulla 10y ago
What about trademarks?
nodesocket 10y ago
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 10y ago
  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 10y ago
    "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 10y ago
      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 10y ago
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.
louprado 10y ago
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 10y ago
  Third item on the checklist: - Buy registered agent service in DE - 1 yr Free
  - louprado 10y ago
    Exactly. Why implicitly suggest it is recurring, but then deliberately exclude it from the recurring fees section.
emilyfm 10y ago
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.
homero 10y ago
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.
joshuaheard 10y ago
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.
eonw 10y ago
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

268 points by hberg 10y ago

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 10y ago
Can you share contact information for your services to tech startups?
- kejaed 10y ago
  User history is a useful thing: https://www.cameronhuff.com/ https://www.cameronhuff.com/

arturventura 10y ago

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

raarts 10y ago
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.

ttmarek 10y ago

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

mkagenius 10y ago
Awesome experience. We were already incorporated in India and had gone through a month long process of back and forth to finally get the company registered. Scanning copies, attaching it to emails. Re-sending the documents when something was a miss. Lot of pain. While in stripe it was a breeze. We got incorporated + a bank account in 3 days, I guess. Signatures were online, no hardcopy or anything. (and the 15K aws credits) edit: Hey @cmadan, my email is <my_username>@gmail.com
- cmadan 10y ago
  Do you mind sharing your email address? We are in a similar situation (India incorporated) and exploring incorporation in USA. Have a few questions.
BinaryIdiot 10y ago
I was invited to try it but haven't pulled the trigger yet (I'm currently working on simex.io, an A.I. related project, on the side and am trying to get closer to launch and monetization testing before incorporating). I am very, very interested in people's thoughts regarding it!
gallonofmilk 10y ago
we were turned down because we aren't located in a disadvantaged country... (in usa). kind of lame tbh.
- pc 10y ago
  It sounds like there was some confusion here -- you do not by any means have to be from a "disadvantaged" country. Can you email me (patrick@stripe.com) and tmf@stripe.com so that we can investigate what happened?
  - morgante 10y ago
    It might be worth clarifying that on the website. I looked into Atlas and definitely got the impression that it's only for non-US businesses.

swampthing 10y ago

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!

elmar 10y ago
Swampthing :) do you think is a good idea to incorporate in DE with only 5,000 shares? that gives a minimum anual tax of $175. The minimum tax for the Assumed Par Value Capital Method of calculation is $350. you save $175/year and any time you wish or for example receive external investment you can do a stock split or authorise more shares.
- swampthing 10y ago
  I think it really depends on your situation, in terms of how likely you are to receive external investment like you mentioned (and when), and how much that $175 / year matters to you. By external investment, I think venture capital is probably the most relevant category - other types of investors may not be as insistent. For example, amending the certificate of incorporation to authorize more shares is probably going to cost around $500 a minimum (and definitely much more if you use a lawyer). That's roughly triple the $175 in tax savings you get from authorizing 5,000. But of course by then, you probably would have already issued shares to people, so you would probably want to do a stock split. That's going to definitely require a lawyer... my guess is at least a few thousand in legal fees. So it seems like it could make sense if (1) you don't plan to ever raise venture capital or (2) you think it'll be at least 3 years or so before you raise venture capital and you can hold off on issuing stock until then (unlikely to be a good idea). I suppose the analysis would also be affected by the time value of the $175 / year. E.g. how much more that $175 means to your company now than it will a few years down the line.

tacos 10y ago

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 10y ago
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.

harrisreynolds 10y ago

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 10y ago
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.

mcorrand 10y ago

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 10y ago
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.

usrbintaco 10y ago

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).

_RPM 10y ago

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.

deleted 10y ago
[deleted]
gk1 10y ago
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 10y ago
  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 10y ago
    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 10y ago
      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.

_RPM 10y ago

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 10y ago
In the United States you will not be penalized for having no revenue.
- snerbles 10y ago
  You are effectively penalized in California for zero revenue, see all the comments in this thread about the $800/yr minimum tax.
  - g10r 10y ago
    To clarify, I was assuming State and Federal fees not to be considered being penalized and simply cost of doing business.
- jahewson 10y ago
  Oh yes you will. In Britain a zero-revenue company cost me £14 a year, in the US it's about $200. California is worse still.
jackson23 10y ago
If a C or S corp, you still need to file a Form 1120 [1] U.S. Corporation Income Tax Return: "Who Must File Unless exempt under section 501, all domestic corporations (including corporations in bankruptcy) must file an income tax return whether or not they have taxable income. Domestic corporations must file Form 1120, unless they are required, or elect to file a special return. See Special Returns for Certain Organizations, below" LLCs have a similar requirement. [1] https://www.irs.gov/businesses/small-businesses-self-employed/corporations https://www.irs.gov/businesses/small-businesses-self-employe...
ryandrake 10y ago
It's worth pointing out that California imposes a MINIMUM tax of $800/yr on LLCs (even if you have zero revenue). This disincentives you from going and forming an LLC "just because".

ex3ndr 10y ago

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 10y ago
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 10y ago
  We are not US-residence, i forgot to mention about this
homero 10y ago
Capital one spark is incredible and free

guiseppecalzone 10y ago

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 10y ago
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 10y ago
  Nice, really appreciate you listing us. Down with the fax machines! :)

ErikAugust 10y ago

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

hberg 10y ago
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 10y ago
  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 10y ago
    My experience with InCorp was exactly as described earlier. They resigned and that was that.
    - swampthing 10y ago
      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!
- desdiv 10y ago
  What's the difference between a orphaned corporation and a dissolve corporation? Will Delaware still come after you for the annual $350 franchise tax if your corporation is orphaned?

deleted 10y ago

[deleted]

donatj 10y ago

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

archagon 10y ago

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 10y ago
A lot of what Delaware buys you is a transparent, functioning, and predictable state legal framework and court system.
- hberg 10y ago
  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 10y ago
    If you plan to sell anything in Californa you must also register there as a foreign entity. And pay taxes.
optimuspaul 10y ago
Being that I'm not in California I can't think of any good reason to incorporate in Delaware. Many other states are just as friendly to corporations if not better.
jahewson 10y ago
If you reside in or sell to California then yes, California will tax you. $800 a year plus a share of California-derived income. The reason to incorporate in Delaware is if you want to sell your business or to get investors - this is the standard investment vehicle in the US.

pbreit 10y ago

Someone should do Stripe Atlas for US startups.

merrywhether 10y ago

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?

mcorrand 10y ago
I used a sole proprietorship until the money started getting more substantial; that may not be a good idea if your business has large risks though.
gk1 10y ago
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).
jahewson 10y ago
For your case incorporation is not necessary. Being in a single-member LLC doesn't necessarily limit your liability all that much. Declare your earnings on your tax return and pay state and federal self-employment taxes. Simple.

Scarbutt 10y ago

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

kawera 10y ago
Two reasons: main target is the US market and/or raising american venture capital.

smnscu 10y ago

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

MarlonPro 10y ago

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

spriggan3 10y ago

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 10y ago
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.

gjkood 10y ago

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?

nodesocket 10y ago
+1. They dipped in my business account and took backed CA LLC fees plus interest.
swampthing 10y ago
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 10y ago
  Actually you don't have to pay it for the first year, even if your business is resident in California.

pstrazzulla 10y ago

What about trademarks?

nodesocket 10y ago

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 10y ago
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 10y ago
  "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 10y ago
    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 10y ago

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.

louprado 10y ago

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 10y ago
Third item on the checklist: - Buy registered agent service in DE - 1 yr Free
- louprado 10y ago
  Exactly. Why implicitly suggest it is recurring, but then deliberately exclude it from the recurring fees section.

emilyfm 10y ago

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.

homero 10y ago

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.

joshuaheard 10y ago

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.

eonw 10y ago

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