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Ask HN: What legal steps should I take as a hacker/founder with many MVPs?
I am a developer which has created a fair number of MVP/prototype websites and apps. My goal is to keep building new products and iterating existing ones and turn one of them into a business. Most likely this will be done by raising an angel round as the next step.
So far, none of products I've built have had enough traction or promise (from my perspective) for me to seriously attempt to raise money. But, when the time comes, I would like to have the proper legal structuring in place to do it, and hopefully to move rapidly.
The only thing I really know is to create an LLC every time I make a website. I'd like to avoid that. Is it reasonable to create a single LLC that would cover everything I build? Would that cause problems down the line? Should I just not even worry about it and figure it out when I start getting some real traction or revenue?
Thanks in advance!
- will_brown 12y agoYou need to consult with an attorney who can analyze the specifics of your situation. Food for thought. Liability: As the assets appear to be owned by you individually you could be personally liable for any liabilities of said websites/MVPs (usually liabilities of websites or MVPs will be non-existent, but certainly it depends on the nature of the website/service). Additionally, if you have personally liabilities in theory a judgment holder could collect against the websites/MVP's perhaps including foreclosing the asset(s). LLC: It is my understanding it will be more difficult to raise funding as an LLC, most investors require a Delaware C-corp and the business structure. Series LLC: If you are intent on the LLC structure, then discuss the idea of a Series LLC with the attorney. Consider this structure (series LLC) as a mother permitting the creation of "Series" underneath, so instead of an LLC/website or MVP as you suggest, you could have a single series LLC with a series/website or MVP, and if in compliance each series should have liability protection from the others. Only a few states offer the Series LLC and there is no uniform approach taken by the states, but you can find states where there is no legal filings (ie. no cost) to forming each series once you have organized the Series LLC at the state level, but other states do have filing requirements for each series.
- wuliwong 12y agoHey, thanks a lot for your response. I will definitely look into the C corp. I have been told that before but kinda forgot when I asked the question. :) Right now, my apps are basically free consumer stuff, so there probably is very little liability. That being said, there are some ideas in the backlog which would involve money and then I would think the possible liabilities would be much more risky. The series LLC is interesting, I've never heard of that. I'm ok with the risk/liability being shared across all of the different apps I make for the time being, so I am thinking the C-corp is probably the thing to look into as long as I can have some document that I can update and resubmit with a new website or app added to the assets. Thanks again!
- akg_67 12y agoAvoid pre-mature optimization and spending time on things (overhead) that don't matter to the success of your projects/customers/users/partners directly. I will suggest just have one LLC and keep introducing your projects/MVP through that LLC. This will keep the overhead minimal and you reap some liability protection and personal tax reduction if LLC generating losses. If and when a project/MVP gains traction and an outside investor ready to invest, spin out that project from LLC into an entity that is preferred by everyone involved. IANAL, please consult a lawyer to analyze your specific situation.
- wuliwong 12y agoThanks for responding too! You are definitely hitting on the main idea I'm hoping to accomplish. Enough basic protection/structure that I can proceed without much worry but not so much that I'm focusing a lot of effort on legal things. The idea of having everything under one umbrella and spinning something out if people are ready to invest sounds like the best idea.
- wuliwong 12y agoA follow up question: Could people point me to any semi-simple online resources that might help me get started? I used legal zoom once in the past, not sure if that is an ok way to proceed. I remember going through the process and getting to a place where there was a bit of an up-sell portion. I had no clue whether I needed what they were offering but it either doubled or tripled the price. If I recall, the up-sell was related to them promising to handle all of the follow up paper work with the state. It was a little while ago, so I forget the exact details. Sorry :/
- logn 12y agoI don't think the corporate structure matters at this point. If you get investors they'll want a C-corp anyhow and you can hire a lawyer to create it once you have investor interest. If you want to limit liability, an LLC won't matter until you have enough money to separate your personal finances from the company. Rely on a copyright notice and a disclaimer of liability (like the ones found in any software license in all caps). Basically until you have income or investors, registering a business is just a waste of your money. IANAL - not legal advice