Ask HN: Getting Legal advice for non-SV startups

https://news.ycombinator.com/item?id=3799315

by Killah911 • 14 years ago

2 3 14 years ago

news.ycombinator.com

I've spoken with a bunch of lawyers and accountants to get advice regarding how to form a legal entity, taxes etc. However, so far, most of the advice I got would be great if I was buying a subway or opening a restaurant, but not quite what I needed for a tech startup.

Any recommendations how one could get legal advice on how to form a corporation/LLC etc as it pertains to a tech startup? I'll be in SV over the weekend, are there any Startup Lawyers who are available off times like weekends?

eli_gottlieb• 14 years ago

I could use the same advice myself, but I'm in Massachusetts!

sebandr• 14 years ago

Start by looking over the documentation on YC's site - a lot of great free legal docs and frameworks to use. Most of this would cost you a ton if you went to a lawyer directly.

The choice between LLC and Corp. depends on your business and tax status. Cost is a lot less for LLC, and also a lot less of a pain to do - taxwise it's also simpler. Corporation has other advantages because it's a separate entity that comes in handy to shield yourself from some personal liabilities. Again, it depends on what you're doing.

Incorporation depends on your needs - many choose delaware - they make it easy and cheap but there are hidden issues. Alternatively you can incorporate in your state - in California it's a bit more expensive but a clean process.

I'm not a lawyer but I've done several start ups so some of this comes from my own experience.

mchannon• 14 years ago

When in doubt, C Corporation.

Every bit of advice I got about corporate structure was mealy-mouthed, noncommittal, and almost completely useless. Unless you have a very strong set of attorneys and can afford to pay them to get you out of messes, you want a C Corp (or, if you do have them, you probably still want a C Corp).

What they never tell you about an LLC is that:

a) LLC operating agreements are roll-your-own documents without widely established boilerplate examples. Imagine trying to write a somewhat complicated word processing program that needs to allow for numerous bells and whistles (multiple typefaces and fonts, footnotes, and multiple paper sizes), but not being able to compile it or test it (or modify it) until after somebody buys it. It isn’t enough that a few years later when someone does compile it and run it (with a newer version of the compiler), that it works flawlessly, but that it has to have every feature they want! Oh, it doesn’t? See you in court. You can afford your own personal legal counsel, right? b) Many investors won’t touch companies with LLC structures (probably because of reason a). Most investors (if the round is big enough) will toss them aside for a C Corp formation (also because of reason a). c) Your state (even if it isn’t Delaware) has default rules for things in a C corp that you would forget to include in an LLC operating agreement. d) MicroSoft L.L.C., Google LLC, Facebook Ltd.? No? They all started as C Corps. Bonus points for naming a company you do want to emulate that started as an LLC.

The only real pro to having an LLC as a startup is the lack of requirement for documenting regular meetings, which is a pain and easy to overlook (but a major screw-up when you do overlook it) in a C corp. Your CFO should know how to do this properly and take care of it promptly or you need a different CFO.

Ask HN: Getting Legal advice for non-SV startups

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