andrew_gust

the overall trends we saw in the data reflected how investors really think about startups, which is based on risk. the more progress you can show with the funds you've used so far, the less risky your startup will look to investors.

Hah, definitely true. Even without the Uber approach, though, many people just use 1099s at inappropriate times because it seems like a way to avoid paperwork.

Gust Launch, which is the product attached to this blog post, makes it extremely easy and quick to file as a Delaware C-Corp and set up the company, then follows it up with bookkeeping/accounting, equity management, and, yes, tax support. Among other things.

Sure, but there isn't an out-of-the-box mechanism to do that. You have to create a way to grant equity, which means you'll need to pay a lawyer—and hourly rates add up quick.

If they don't want to grant equity or take investment, sure. But doing one of those two things means the legal costs of starting with an LLC (which aren't standardized) substantially outweigh any tax savings, and almost no startups prior to that point have positive cash-flow anyway so taxed profits aren't much of an issue.

The subscription cost isn't for the incorporation and formation. Being a Delaware C-Corp is just a prerequisite for users, so we include it as the first step.

Absolutely! For many kinds of businesses, LLCs make sense, but this post is specifically about startups.

Figured it was obvious from the username, but I'll put it in my profile as well. Sorry if that was confusing!

This is exactly the part of the process that the first iteration of Gust Launch solved. All the paperwork for incorporation and company formation are streamlined and pretty easy to fill out, and included in the monthly cost. So conversion is much, much more expensive.

It's actually pretty easy and the difference in cost between LLC and C-Corp isn't substantial (if you use Gust Launch it's all included in the $199-$239 monthly) but either way, since the double-taxation mostly doesn’t apply to high-growth businesses that reinvest capital instead of paying it out, there isn’t actually much difference in tax burden, and what there is is significantly outweighed by cost of converting to a C-Corp later.

The post addresses this, but double-taxation doesn't usually apply very much to early-stage high-growth startups—most high-growth startups spend their positive cashflows for growth and thus don’t have any positive net income to pay taxes on.

While yes, this isn't legal advice, I'd just like to add that the product and software were both built with heavy involvement from experienced startup lawyers.

Part of the premise of Gust Launch is that it's far simpler to start this way, as a Delaware C-Corp with expected structure, than it is to convert later. The conversions range from easy to extremely painful but they're almost all avoidable.

Hmm, I'm not sure that's accurate. What would you be converting to if your company was already a C-Corp?

It's pretty quick to set up a C-Corp too—it's much, much more annoying to change the LLC into a C-Corp when you do want to fundraise.

IANAL, but I'd imagine being limited to one class of stock would really shoot you in the foot for fundraising (no preferred stock for investors, etc.)

Thanks! We specifically designed it to remove the barriers and costs that come with starting up, especially for first-time founders who may not be aware of all the bases they have to cover.

Good question! Most of the tools and services included are ongoing, rather than one-time. We designed Gust Launch to support your startup through its entire lifetime, and many of the things you need (like legal advice, bookkeeping, tax prep, and cap table management) are ongoing for that reason. Aside from the incorporation, basically everything else included in the product is subscription-modeled by other businesses that solely offer that one piece of the product.

Hey, Andrew from Gust here. Thanks for asking! Stripe Atlas has some of the same functionality but it's just designed for the first step of the process. In addition to incorporation, Gust Launch helps you through the company formation process, includes cap table management, and also gives you bookkeeping and tax services. It handles your accounting/bookkeeping needs and offers other ongoing support on top of the legal advice and bank account setup that Stripe Atlas offers.