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How to register a company in the USA: the most comprehensive guide for founders

310 points by anuriev 7y ago

peter_retief 7y ago
This is brilliant thanks. Perfect help for someone outside the US
deleted 7y ago
[deleted]
Rudi9719 7y ago
Good article, pleasant read, but it's missing https?
- idlewords 7y ago
  Are you worried that a malicious attacker will MITM the connection and give you inferior advice about starting a company?
  - nrb 7y ago
    Or deliver malware, or malicious tracking.
    - idlewords 7y ago
      Thanks to online ads, you can get all the malware and malicious tracking you want securely delivered to your device over https.
rasebo 7y ago
Step 1: do not misspell the word "company".
sf_berk 7y ago
Very valuable article! Thanks for it.
jlangenauer 7y ago
One thing to be aware of is that registering a company in the US (or anywhere else) does NOT mean that it's not taxable where the founders or management are resident. For example, in Australia, a foreign company is taxable if i) Australian tax residents control the company’s voting power; or ii) Its “central management and control” is in Australia. Other jurisdictions have similar laws.
- Lordarminius 7y ago
  > One thing to be aware of is that registering a company in the US (or anywhere else) does NOT mean that it's not taxable where the founders or management are resident. I always wondered about this and how it affects startups. In particular, YC requires that all the companies it funds be registered as US entities. How do these companies manage double taxation ?
  - rmah 7y ago
    By filing taxes in every jurisdiction they are legally required to file. Let's use the grandparent post's example: australian founders, company registered in deleware, USA. They need to file at least the following: 1) US federal corporate income tax 2) Deleware state franchise tax 3) Australian income tax Probably more. If you want to stay fully legal and compliant, it's just what you have to do.
    - estebarb 7y ago
      And if this is extended to sales taxes: how companies actually pay taxes worldwide? I mean, a SaaS would require the company to be registered anywhere it gets a new customer? In real life how it is handled? Also, I have read that some services like 2checkout offer "name of record" where they seems to pay taxes on behalf of a company globally. But I haven't seen any other company offering that, so I'm not sure if it it's standard or not...
      - gamblor956 7y ago
        Sales taxes are a US-centric concept. Most of the world uses VAT, though Australia uses a variant known as the GST. (And not to be outdone, Hawaii has a variant of VAT based on gross income.) That being said, for SaaS, it is still currently generally the prevailing rule that sales/VAT/GST/whatever compliance isn't required in the customer's country unless you have a physical nexus to that country (i.e., office, employee, etc.) However, the US tech dominance has resulted in many countries proposing or even adopting rules that would subject SaaS transactions to VAT/GST/whatever compliance regardless of the location of the vendor. Most intl tax experts agree that this will become the standard within a decade, though there is substantial disagreement as to how soon within the next decade the transition will occur.
Kiro 7y ago
Can't disagree more with Step 1. Just split it 50/50. Anything else will cause problems further down the road.
- jasode 7y ago
  >Just split it 50/50. Anything else will cause problems further down the road. It's not that simple. There are plenty of horror stories from founders explaining how the ideals of 50/50 or 33/33/33 equal splits actually caused problems and resentment about unfairness. Sometimes equal splits will lead to problems. Sometimes unequal splits will lead to problems. Therefore, there isn't any one-size-fits-all advice. Each group of founders have to figure out what type of equity split is appropriate for their startup.
  - terryschiavo22 7y ago
    I encourage you to share some of these stories. Future entrepreneurs are in this very thread and such experience could greatly help them out.
    - jasode 7y ago
      I happened to make a previous comment about this.[1] To add some observations. Equal split can work if the cofounders have known each other for a long time and have already worked together on a previous project. They have the history to confidently gauge each others' future work dedication. An example would be family siblings. Another example is Larry Page & Sergei Brin of Google. When they cofounded Google Inc in 1998, they had already met in Summer 1995 and worked on the "Backrub" research (precursor to google) for more than 2 years. Unequal split may be more prudent when the entrepreneurs haven't worked together much and therefore haven't tested each others' resolve and dedication to a startup. A famous example would be Drew Houston and Arash Ferdowsi of DropBox. Drew needed to add a cofounder in a hurry and a friend helped him connect with a possible candidate. In this case, he gave cofounder Ferdowsi a smaller ~25% instead of 50%. Other examples of unequal splits include WhatsApp, Instagram, Youtube, Microsoft. Every situation is different. Robin Chase (Zipcar) thought she was in the 1st scenario of equal cofounders giving equal effort when she was really in the 2nd scenario of unequal effort. That ignorance led her to regret her decision for equal split. Another generalization I've noticed is that more experienced founders that had equal splits in their 1st startup prefer unequal splits for their 2nd startup. I can't think of any famous founders that went the opposite direction of unequal to equal. [1] https://news.ycombinator.com/item?id=17376634 https://news.ycombinator.com/item?id=17376634
CoreFailure 7y ago
This is wonderfully detailed about which exact steps to take. Even if I don't agree with each point it gives me a framework for further research. Thanks for the read!
- howard941 7y ago
  I shuddered reading through this but I attribute that to my trained paranoia from the other non-engineering career. For heaven's sake treat the contents as CoreFailure recommends, a starting point or a framework of topics to raise with a professional versed in the laws in all of the states you'll be doing business in.
immichaelwang 7y ago
Can't all of this be done via Stripe Atlas for $500?
- divbzero 7y ago
  This too was my immediate reaction. Are there situations where Stripe Atlas would not be the best choice? (Also curious if anyone has experience with Clerky or Gust Launch, which are also mentioned in the article.)
  - shafyy 7y ago
    I use Clerky and can only recommmend it.
  - nostrademons 7y ago
    Also used Clerky, it's great. Just fill out a form and give them a credit card and it handles all the paperwork, generates incorporation documents & bylaws, files with the relevant secretary of state, and gives you instructions for what to do afterwards. I've talked to a couple lawyers since that are familiar with the Clerky paperwork, and they said that legally it's pretty solid as long as you're doing something fairly standard. If you've got complicated ownership structures (converting from an LLC, founders quitting or joining after incorporation, spinning off IP that might not be yours) you probably want to talk to a lawyer, but for the standard situation where a bunch of friends get together, can all agree on ownership percentages, and start a company from a clean slate, Clerky's great.
  - emptysongglass 7y ago
    Stripe Atlas won't help you start a company with ethics baked into its mandate so that's worth considering. Clerky will help you to incorporate as a Public Benefit Corporation if that is of interest. https://www.clerky.com/public-benefit-corporations https://www.clerky.com/public-benefit-corporations
- ve55 7y ago
  Yes, Stripe atlas can be a pretty good choice for some of this. With that said, if you don't need anything fancy, and just need a basic LLC for yourself, you can save money (and also choose your state of incorporation if desired) by using some other legal services, which will be slightly cheaper, as all they really do is file the documents for you, which is pretty easy to do on your own as well. But Stripe atlas obviously comes with more than what those services offer in case you need it.
speeq 7y ago
How do foreign founders deal with the visa situation when doing business in the US?
- shafyy 7y ago
  As long as you are not employed by your company, you don't need a work visa. If you want to be employed by your company and live in the US, currently the E2 is the best option (for that, you already need ongoing substantial operations in the US).
chmaynard 7y ago
Thought experiment: Suppose that every employee in the USA decides to go into business as a sole proprietor. I really mean everyone. Workers contract out their services and file a Schedule C to report income and expenses. Is this possible? Is it desirable? How would it affect the corporation as we know it today?

310 points by anuriev 7y ago

peter_retief 7y ago

This is brilliant thanks. Perfect help for someone outside the US

deleted 7y ago

[deleted]

Rudi9719 7y ago

Good article, pleasant read, but it's missing https?

idlewords 7y ago
Are you worried that a malicious attacker will MITM the connection and give you inferior advice about starting a company?
- nrb 7y ago
  Or deliver malware, or malicious tracking.
  - idlewords 7y ago
    Thanks to online ads, you can get all the malware and malicious tracking you want securely delivered to your device over https.

rasebo 7y ago

Step 1: do not misspell the word "company".

sf_berk 7y ago

Very valuable article! Thanks for it.

jlangenauer 7y ago

One thing to be aware of is that registering a company in the US (or anywhere else) does NOT mean that it's not taxable where the founders or management are resident. For example, in Australia, a foreign company is taxable if i) Australian tax residents control the company’s voting power; or ii) Its “central management and control” is in Australia. Other jurisdictions have similar laws.

Lordarminius 7y ago
> One thing to be aware of is that registering a company in the US (or anywhere else) does NOT mean that it's not taxable where the founders or management are resident. I always wondered about this and how it affects startups. In particular, YC requires that all the companies it funds be registered as US entities. How do these companies manage double taxation ?
- rmah 7y ago
  By filing taxes in every jurisdiction they are legally required to file. Let's use the grandparent post's example: australian founders, company registered in deleware, USA. They need to file at least the following: 1) US federal corporate income tax 2) Deleware state franchise tax 3) Australian income tax Probably more. If you want to stay fully legal and compliant, it's just what you have to do.
  - estebarb 7y ago
    And if this is extended to sales taxes: how companies actually pay taxes worldwide? I mean, a SaaS would require the company to be registered anywhere it gets a new customer? In real life how it is handled? Also, I have read that some services like 2checkout offer "name of record" where they seems to pay taxes on behalf of a company globally. But I haven't seen any other company offering that, so I'm not sure if it it's standard or not...
    - gamblor956 7y ago
      Sales taxes are a US-centric concept. Most of the world uses VAT, though Australia uses a variant known as the GST. (And not to be outdone, Hawaii has a variant of VAT based on gross income.) That being said, for SaaS, it is still currently generally the prevailing rule that sales/VAT/GST/whatever compliance isn't required in the customer's country unless you have a physical nexus to that country (i.e., office, employee, etc.) However, the US tech dominance has resulted in many countries proposing or even adopting rules that would subject SaaS transactions to VAT/GST/whatever compliance regardless of the location of the vendor. Most intl tax experts agree that this will become the standard within a decade, though there is substantial disagreement as to how soon within the next decade the transition will occur.

Kiro 7y ago

Can't disagree more with Step 1. Just split it 50/50. Anything else will cause problems further down the road.

jasode 7y ago
>Just split it 50/50. Anything else will cause problems further down the road. It's not that simple. There are plenty of horror stories from founders explaining how the ideals of 50/50 or 33/33/33 equal splits actually caused problems and resentment about unfairness. Sometimes equal splits will lead to problems. Sometimes unequal splits will lead to problems. Therefore, there isn't any one-size-fits-all advice. Each group of founders have to figure out what type of equity split is appropriate for their startup.
- terryschiavo22 7y ago
  I encourage you to share some of these stories. Future entrepreneurs are in this very thread and such experience could greatly help them out.
  - jasode 7y ago
    I happened to make a previous comment about this.[1] To add some observations. Equal split can work if the cofounders have known each other for a long time and have already worked together on a previous project. They have the history to confidently gauge each others' future work dedication. An example would be family siblings. Another example is Larry Page & Sergei Brin of Google. When they cofounded Google Inc in 1998, they had already met in Summer 1995 and worked on the "Backrub" research (precursor to google) for more than 2 years. Unequal split may be more prudent when the entrepreneurs haven't worked together much and therefore haven't tested each others' resolve and dedication to a startup. A famous example would be Drew Houston and Arash Ferdowsi of DropBox. Drew needed to add a cofounder in a hurry and a friend helped him connect with a possible candidate. In this case, he gave cofounder Ferdowsi a smaller ~25% instead of 50%. Other examples of unequal splits include WhatsApp, Instagram, Youtube, Microsoft. Every situation is different. Robin Chase (Zipcar) thought she was in the 1st scenario of equal cofounders giving equal effort when she was really in the 2nd scenario of unequal effort. That ignorance led her to regret her decision for equal split. Another generalization I've noticed is that more experienced founders that had equal splits in their 1st startup prefer unequal splits for their 2nd startup. I can't think of any famous founders that went the opposite direction of unequal to equal. [1] https://news.ycombinator.com/item?id=17376634 https://news.ycombinator.com/item?id=17376634

CoreFailure 7y ago

This is wonderfully detailed about which exact steps to take. Even if I don't agree with each point it gives me a framework for further research. Thanks for the read!

howard941 7y ago
I shuddered reading through this but I attribute that to my trained paranoia from the other non-engineering career. For heaven's sake treat the contents as CoreFailure recommends, a starting point or a framework of topics to raise with a professional versed in the laws in all of the states you'll be doing business in.

immichaelwang 7y ago

Can't all of this be done via Stripe Atlas for $500?

divbzero 7y ago
This too was my immediate reaction. Are there situations where Stripe Atlas would not be the best choice? (Also curious if anyone has experience with Clerky or Gust Launch, which are also mentioned in the article.)
- shafyy 7y ago
  I use Clerky and can only recommmend it.
- nostrademons 7y ago
  Also used Clerky, it's great. Just fill out a form and give them a credit card and it handles all the paperwork, generates incorporation documents & bylaws, files with the relevant secretary of state, and gives you instructions for what to do afterwards. I've talked to a couple lawyers since that are familiar with the Clerky paperwork, and they said that legally it's pretty solid as long as you're doing something fairly standard. If you've got complicated ownership structures (converting from an LLC, founders quitting or joining after incorporation, spinning off IP that might not be yours) you probably want to talk to a lawyer, but for the standard situation where a bunch of friends get together, can all agree on ownership percentages, and start a company from a clean slate, Clerky's great.
- emptysongglass 7y ago
  Stripe Atlas won't help you start a company with ethics baked into its mandate so that's worth considering. Clerky will help you to incorporate as a Public Benefit Corporation if that is of interest. https://www.clerky.com/public-benefit-corporations https://www.clerky.com/public-benefit-corporations
ve55 7y ago
Yes, Stripe atlas can be a pretty good choice for some of this. With that said, if you don't need anything fancy, and just need a basic LLC for yourself, you can save money (and also choose your state of incorporation if desired) by using some other legal services, which will be slightly cheaper, as all they really do is file the documents for you, which is pretty easy to do on your own as well. But Stripe atlas obviously comes with more than what those services offer in case you need it.

speeq 7y ago

How do foreign founders deal with the visa situation when doing business in the US?

shafyy 7y ago
As long as you are not employed by your company, you don't need a work visa. If you want to be employed by your company and live in the US, currently the E2 is the best option (for that, you already need ongoing substantial operations in the US).

chmaynard 7y ago

Thought experiment: Suppose that every employee in the USA decides to go into business as a sole proprietor. I really mean everyone. Workers contract out their services and file a Schedule C to report income and expenses. Is this possible? Is it desirable? How would it affect the corporation as we know it today?