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Ask HN: Legal timeline for a successful web startup?

• tstegart 18y ago
  They're called corporate lawyers, but many small firms and individual lawyers do corporate law along with other areas of practice. There are tax issues on what you get to deduct before and after starting a company, but really I think your main concern should be the reason why you want to start a company. If you have considerable individual assets and your venture might be risky in terms of owing people money if it fails, then you would want the strong legal protection a company can provide. If you're doing something very benign, like starting a blog thats unlikely to get you into trouble, well, you can wait. It also matters how much capital you have. If you spend it all on a lawyer you might end up with a nice document and not enough capital to carry on a real business. On the other hand, you can have a great business and get caught without legal protection. This question was much more easily answered before the internet when people started businesses with real profit estimates and business plans. Its a little harder now with the "build first, worry about profitability later" attitudes because you might build a web 2.0 business and it never takes off, so you'll come away thinking your thousand dollar investment in a lawyer was wasted. It probably wasn't, but you'll think it was because the venture wasn't successful. When actual money starts to change hands, the legal protections become more easily visible and the value they provide is clear. If you're not sure you'll make money, i.e. you're building a website and hoping it will take off, my down to earth advice is to get a Nolo book, pay the $200 to incorporate an LLC somewhere, and live with that crappy legal situation until you start to make money. Its at least some protection at a cheap price.
• vaksel 18y ago
  Just fyi the copyright symbol has nothing to do with being a company or not. The copyright law in this country basically says that if you made it, its yours. As far as timeline, I would go with registering an LLC. Its cheap and will give you a form of legitimacy.
• michael_dorfman 18y ago
  Is this webapp a hobby, or a business? Are you serious about it being a start-up? If so, I'd definitely talk to a lawyer before you launch, and get yourself organized. Do you have a business plan? A budget?
• jon_dahl 18y ago
  1. You can probably file LLC papers with your state (or another state) for ~$200. I did that for my first company and didn't hire a lawyer until 3 years later. I highly recommend doing this before you launch your startup. You really should talk to a lawyer before launch, but this is better than nothing. 2. Nothing stops someone from stealing your idea, except: (a) patents, (b) copyright, (c) trade secrets. You only have to file paperwork for (a), not (b) or (c). 3. You can build on someone else's idea, unless it violates (a) or (b). (c) only protects you as long as it remains secret. 4. Talk to a lawyer. :)
  • tstegart 18y ago
    re: #2. Actually, that doesn't stop them either, only your willingness to sue them and the amount of money you have to sue them with does.
    • deleted 18y ago
      [deleted]
  • spencerfry 18y ago
    (RE: #1) That's fine and dandy for LLC documents, but if you're working with partners and don't have a clear Operating Agreement written out then you're asking for trouble. I had serious issues with my first successful startup because our Operating Agreement was basically pieced together from little things my partner and I found on the Net with collaboration from a first year Yale law school student. Terrible, terrible, terrible idea. To make a long story short: the company became wildly successful very quickly and re-doing the Operating Agreement wasn't really on the top of our minds -- it never is when you're doing well. Then three years later the two of us grew apart and wanted to take the company in different directions. Sadly, we had a poorly written agreement that made this a very difficult process with lawyers on both sides fighting to interpret it. If you do nothing else, I'd say get this done professionally sooner rather than later.
    • tstegart 18y ago
      Yeah, my advice was definitely for a one person company. Two people should get it done professionally. With one person the focus is on protecting yourself from others. With two or more, the focus is not only protecting the principals, but regulating the relationship between the principals and the process by which that relationship might end. One thing a good lawyer will make you do is think about what will happen if your company breaks up, and they can advise you on how to structure your document to avoid a giant litigation mess.
• tptacek 18y ago
  I'm not a lawyer, but I have helped launch a couple companies: * Form an LLC now, so that your business operates under limited liability, as its own entity that can invoice and be invoiced, instead of out of your bank account. Cost: $200-300. You don't need a lawyer to do this in a one-person shop; just fill out the web form and give them your credit card number. * You want a business lawyer once you have multiple employees (whereupon you'll restructure the company, often to a C corp so you can issue equity) or before you sign your first complicated contract. * If you charge money, you probably have terms and conditions, and you probably want those reviewed before you publish them. * You don't need to do anything special to claim copyright in the US, or anywhere else the Berne Convention applies. * Nothing stops anyone from copying your idea and launching their own site except for a contract that they actually sign that prohibits them from doing so. When you launch, the clock starts ticking. * Regarding your next question: welcome to the Internets.
• MicahWedemeyer 18y ago
  Forming an LLC is cheap and easy, but be sure to keep up with paperwork. I showed our "books" to an accountant and he told me that if we ever went to court with that, our LLC status would be stripped away immediately and we'd be personally liable on everything.
  • aasarava 18y ago
    Micah, could you share a little more about what state your books were in and what you would have done differently?
    • MicahWedemeyer 18y ago
      Well, the books were in the "nonexistent" state. We had a bunch of receipts from web hosting providers, plus maybe $100 in ad revenue. We wanted to declare all the hosting costs as a loss on our income taxes. The accountant recommended setting up QuickBooks online, I believe. The basic idea is to track each and every bit of income and expenditure. It can be a real pain, but that's what it means to run a business. Note: We're still in the "nonexistent" state now, because we just never get around to it. So, don't listen to my advice!
  • tstegart 18y ago
    Good advice Micah. A lot of people think once they sign the LLC document they're magically protected and can just ignore it until something comes up. One of the advantages of LLC's over C-Corps is that they get rid of a lot of the formalities, but that doesn't mean you get to ignore everything. There are a few things that can get you in trouble, but like you mentioned, mixing your books is a HUGE deal.
    • MicahWedemeyer 18y ago
      Yep, magically protected. That's what we thought :)
• tonystubblebine 18y ago
  I'd be interested to know more about what people actually did versus what they should have done. And how did it work out? There's more legal work than just incorporation. Do you need business insurance? Do you need to register somewhere for DMCA protection?
  • tstegart 18y ago
    "You only need insurance when you need insurance" Ok, I just made that quote up, but its true. You can never really answer that question, because the people that paid for it and never used it would say it was a waste of capital, and the people that never bought it and needed it will say you should always buy it. Insurance is, and always will be a risk calculation that only you can do. A lawyer just reminds you of a lot more bad things that can happen to you than you probably had on your list, but ultimately, you need to decide the chances of them happening to you, and how much you're willing to pay to be protected. With that said, some businesses are required to have insurance and bonds by law, but that's usually something you can easily find out by looking at a government website or Googling.
    • tonystubblebine 18y ago
      Actually, we just took on a customer who required insurance. So sometimes you need it when you don't need it. I was pretty surprised when the request came through and didn't know anything about how to get it or what to look for.
• mattmaroon 18y ago
  Mistake number 1 is asking hackers for legal advice. This is far worse than asking lawyers for programming advice, because at least lawyers will tell you they don't know. You're going to get 100 opinions here ranging from uninformed to semi-informed, and all answers will be based on their own experiences and not your specific legal needs. Talk to a business lawyer immediately. They won't charge you anything for the initial consultation and will answer these questions.