3 ms·

How to Register a Start-Up

13 points by asnyder 17y ago

DenisM 17y ago
Step 1. Find local group of entrepreneurs, ask them for a good lawyer to create startup. Step 2. Pay said lawyer $500 to talk you through relevant options and pick the ones you like. Step 3. Sign a pile of papers. Step 4. A year later as your company changes pay same or different lawyer to bring the paperwork up to date.
- grellas 17y ago
  This is a reasonable way for a sole founder to start but there is usually more to consider when a founding team is involved - I explain this issue here (http://grellas.com/faq_business_startup_001.html http://grellas.com/faq_business_startup_001.html). In essence, with a team, you will need to consider so-called "restricted stock," where a founder's equity interest vests over time. Because the stock can be forfeited, this requires the filing of 83(b) elections to prevent nasty tax problems. It also means that founders need to discuss and negotiate whether there will be acceleration of vesting if there is a termination of a founder's service relationship with the company without cause. Likewise upon acquisition. On top of all this, you need to get IP assignments from all founders who did pre-incorporation work on the startup's IP and you need to set up work-for-hire provisions to ensure that all IP subsequent to the founding is captured for the company. Finally, you normally need to have an equity incentive plan to be able to make grants to second-tier people who might join after the founding team. All of these steps are above and beyond the normal routine steps of corporate setup (filing of articles, doing first minutes of directors, adopting bylaws, getting EIN, doing securities law filings, doing indemnity agreements for directors and officers), which in themselves normally cost you anywhere from $1,000 to $1,500 if you set up in Silicon Valley (maybe half that with an online service, which does nothing to guide you with the process), for example, or more if you incorporate in Delaware and need to qualify as a foreign corporation in your home state. And this is not to mention the time it takes to explain all the issues and options to the founders so they can make informed decisions on these issues (including whether to incorporate at all, as opposed to doing an LLC, for example). Don't get me wrong. I'm all for austerity at the start and (even as a lawyer) strongly believe that founders are foolish if they spend too much on legal when they don't have to or if they front-load such expenses when they can be spread. However, with a founding team, doing a proper setup with lawyer help will definitely cost more than $500 at the start. In my experience, with a savvy founding team, the costs can usually be reduced to $2K or $3K (if you do all the pieces described above), more like $5K with a large firm doing the work. With a sole founder, the budget approach you describe will work and has much to commend it.

13 points by asnyder 17y ago

Step 1. Find local group of entrepreneurs, ask them for a good lawyer to create startup. Step 2. Pay said lawyer $500 to talk you through relevant options and pick the ones you like. Step 3. Sign a pile of papers. Step 4. A year later as your company changes pay same or different lawyer to bring the paperwork up to date.

grellas 17y ago
This is a reasonable way for a sole founder to start but there is usually more to consider when a founding team is involved - I explain this issue here (http://grellas.com/faq_business_startup_001.html http://grellas.com/faq_business_startup_001.html). In essence, with a team, you will need to consider so-called "restricted stock," where a founder's equity interest vests over time. Because the stock can be forfeited, this requires the filing of 83(b) elections to prevent nasty tax problems. It also means that founders need to discuss and negotiate whether there will be acceleration of vesting if there is a termination of a founder's service relationship with the company without cause. Likewise upon acquisition. On top of all this, you need to get IP assignments from all founders who did pre-incorporation work on the startup's IP and you need to set up work-for-hire provisions to ensure that all IP subsequent to the founding is captured for the company. Finally, you normally need to have an equity incentive plan to be able to make grants to second-tier people who might join after the founding team. All of these steps are above and beyond the normal routine steps of corporate setup (filing of articles, doing first minutes of directors, adopting bylaws, getting EIN, doing securities law filings, doing indemnity agreements for directors and officers), which in themselves normally cost you anywhere from $1,000 to $1,500 if you set up in Silicon Valley (maybe half that with an online service, which does nothing to guide you with the process), for example, or more if you incorporate in Delaware and need to qualify as a foreign corporation in your home state. And this is not to mention the time it takes to explain all the issues and options to the founders so they can make informed decisions on these issues (including whether to incorporate at all, as opposed to doing an LLC, for example). Don't get me wrong. I'm all for austerity at the start and (even as a lawyer) strongly believe that founders are foolish if they spend too much on legal when they don't have to or if they front-load such expenses when they can be spread. However, with a founding team, doing a proper setup with lawyer help will definitely cost more than $500 at the start. In my experience, with a savvy founding team, the costs can usually be reduced to $2K or $3K (if you do all the pieces described above), more like $5K with a large firm doing the work. With a sole founder, the budget approach you describe will work and has much to commend it.