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5 Reasons You Shouldn’t Incorporate Your Business

6 points by alain94040 18y ago

alain94040 18y ago
I'll add that I went to Guy Kawasaki's presentation yesterday at Plug&Play (introduced by Ron Conway). As usual, great quotes from Guy, plus a free tutorial on twitter. If only this was taped for eternity to pass to fellow entrepreneurs everywhere...
- teej 18y ago
  I feel like "great quotes" are the only good thing that comes out of Guy Kawasaki.
tptacek 18y ago
I'm confused. If you don't incorporate "correctly", the author says, then you run the risk of being "very sorry" down the road when one of your founders wants to leave with all her stock in hand. On the other hand, if you don't incorporate at all, then you can't work with other companies in terms of PO's and invoices, you can't get professional liability insurance for your group, you can't get group health insurance, you can't offer equity to employees, and you can lose your house to a frivolous lawsuit. What part of the risk of writing that $75 check to Agents & Corporations in Delaware am I missing? On an unrelated note: you guys got rolled by your attorney.
- ricardog 18y ago
  Never understood the obsession with Delaware Corps. You have to register where you live anyway (presumably that's where you make $$$). So what's the big deal with Delaware?
  - tptacek 18y ago
    I'm not sure what you mean by, "have to register where you live". Apart from all the standard BS about corporate-friendly laws, the reason to do Delaware is simple: Delaware makes it really easy to incorporate. You pay a small (periodic) fee, and that's pretty much it. You don't have to run an ad in the paper (like you do in NYC!). You don't have to wave a rubber chicken around. You can do it from a web app with a PayPal account, and then a week later have an EIN/tax id.
    - ricardog 18y ago
      If you want to do business in California (for example because that's were I live) and your business is incorporated in Delaware, you have to "register" the business in California and designate a "registered agent". Plus you have to file & pay taxes in California and then file taxes in Delaware. Any business incorporated outside California is called a Foreign Entity (not kidding). Here's a link for you http://www.sos.ca.gov/business/corp/corp_faq.htm#question8 http://www.sos.ca.gov/business/corp/corp_faq.htm#question8 I agree the whole "corporation friendly" stuff is BS. Don't know abut NYC, but you can form a business in CA just as easily. Go to a web page, press the buttons and a week later you get the legal looking documents. I did this to form an LLC. A final comment. After I had setup my LLC (to do consulting) and I proudly showed up at my accountant's office at year's end, he basically told me I was wasting my time and money. Until you get to $1M is revenue per year lawyers won't go after you (there's no money in it for them). His words, not mine.
      - tptacek 18y ago
        $1MM/yr is 4 consultants at heavy utilization, or a very good second year of shipping a product, so that number isn't at all scary, but more to the point, my tolerance for risks to my family and personal assets is pretty low. I guess if you live in California, form a California corp. There are other reasons to avoid Illinois and New York corporations, hence Delaware.
  - inklesspen 18y ago
    Delaware is business-friendly. They have a special court set up (http://en.wikipedia.org/wiki/Delaware_Court_of_Chancery http://en.wikipedia.org/wiki/Delaware_Court_of_Chancery) with a whole lot of business case precedent. So, if you have a dispute with a Delaware corp, it's easier to predict the outcome.
ryanwaggoner 18y ago
Here's the most useful and relevant nugget from this article: I am not a lawyer so I can’t pretend to be giving any legal advice. Edit: I had missed the last paragraph until now...apparently this guy is pushing an alternative to incorporation and is advising against incorporation, but has no legal expertise to be doing so. He's going to wish he had incorporated when someone sues his ass :)
amobilebiz 18y ago
Funny, the company making this software is incorporated. So much for eating your own dogfood.
quellhorst 18y ago
1 great reason you should incorporate: So a business dispute doesn't end up destroying your credit for 7 years.

6 points by alain94040 18y ago

I'll add that I went to Guy Kawasaki's presentation yesterday at Plug&Play (introduced by Ron Conway). As usual, great quotes from Guy, plus a free tutorial on twitter. If only this was taped for eternity to pass to fellow entrepreneurs everywhere...

teej 18y ago
I feel like "great quotes" are the only good thing that comes out of Guy Kawasaki.

tptacek 18y ago

I'm confused. If you don't incorporate "correctly", the author says, then you run the risk of being "very sorry" down the road when one of your founders wants to leave with all her stock in hand. On the other hand, if you don't incorporate at all, then you can't work with other companies in terms of PO's and invoices, you can't get professional liability insurance for your group, you can't get group health insurance, you can't offer equity to employees, and you can lose your house to a frivolous lawsuit. What part of the risk of writing that $75 check to Agents & Corporations in Delaware am I missing? On an unrelated note: you guys got rolled by your attorney.

ricardog 18y ago
Never understood the obsession with Delaware Corps. You have to register where you live anyway (presumably that's where you make $$$). So what's the big deal with Delaware?
- tptacek 18y ago
  I'm not sure what you mean by, "have to register where you live". Apart from all the standard BS about corporate-friendly laws, the reason to do Delaware is simple: Delaware makes it really easy to incorporate. You pay a small (periodic) fee, and that's pretty much it. You don't have to run an ad in the paper (like you do in NYC!). You don't have to wave a rubber chicken around. You can do it from a web app with a PayPal account, and then a week later have an EIN/tax id.
  - ricardog 18y ago
    If you want to do business in California (for example because that's were I live) and your business is incorporated in Delaware, you have to "register" the business in California and designate a "registered agent". Plus you have to file & pay taxes in California and then file taxes in Delaware. Any business incorporated outside California is called a Foreign Entity (not kidding). Here's a link for you http://www.sos.ca.gov/business/corp/corp_faq.htm#question8 http://www.sos.ca.gov/business/corp/corp_faq.htm#question8 I agree the whole "corporation friendly" stuff is BS. Don't know abut NYC, but you can form a business in CA just as easily. Go to a web page, press the buttons and a week later you get the legal looking documents. I did this to form an LLC. A final comment. After I had setup my LLC (to do consulting) and I proudly showed up at my accountant's office at year's end, he basically told me I was wasting my time and money. Until you get to $1M is revenue per year lawyers won't go after you (there's no money in it for them). His words, not mine.
    - tptacek 18y ago
      $1MM/yr is 4 consultants at heavy utilization, or a very good second year of shipping a product, so that number isn't at all scary, but more to the point, my tolerance for risks to my family and personal assets is pretty low. I guess if you live in California, form a California corp. There are other reasons to avoid Illinois and New York corporations, hence Delaware.
- inklesspen 18y ago
  Delaware is business-friendly. They have a special court set up (http://en.wikipedia.org/wiki/Delaware_Court_of_Chancery http://en.wikipedia.org/wiki/Delaware_Court_of_Chancery) with a whole lot of business case precedent. So, if you have a dispute with a Delaware corp, it's easier to predict the outcome.

ryanwaggoner 18y ago

Here's the most useful and relevant nugget from this article: I am not a lawyer so I can’t pretend to be giving any legal advice. Edit: I had missed the last paragraph until now...apparently this guy is pushing an alternative to incorporation and is advising against incorporation, but has no legal expertise to be doing so. He's going to wish he had incorporated when someone sues his ass :)

amobilebiz 18y ago

Funny, the company making this software is incorporated. So much for eating your own dogfood.

quellhorst 18y ago

1 great reason you should incorporate: So a business dispute doesn't end up destroying your credit for 7 years.