Hot answers tagged corporate-structure
7
The first answers here accept the basic premise of the question, that one should consider incorporating overseas to benefit from lower tax levels / less regulatory overhead / more streamlined intellectual property regulation, etc.
I'm going against the grain, and say that 99% of all entrepreneurs should not consider this, they should initially focus on ...
7
I debated this question for several months in my own business. We are about to launch an application, and trying to decide if we should do it under a separate entity. Ultimately for me it came down to a couple of things:
1) Was I worried about getting sued in one company, and so wanted separate assets to keep from losing everything?
2) Was I planning on ...
6
You do not need separate DBAs (Doing Business As) for individual services. It can be as simple as one LLC and multiples services/products. Think of it like a hardware store. You go in and buy different products from the same store. Same idea.
I don't know how they do their accounting but I assume they track them separately.
You can have multiple LLCs but ...
5
Here's an overview of the different taxes for each entity type:
C Corporations
There will be 1) Corporate Income Tax (with a top rate of 38%) 2) Dividend Tax when taken out personally (15% currently), 3) Payroll tax on officers (which are required) which is roughly 7.2% to the corporation and 7.2% to the officer, but only on the salary. The officer is then ...
5
S corp can have only 100 shareholders who must be natural people--not corporations and not overseas entities. There are other limitations; just look it up on Wikipedia.
S corp also avoids double taxation of the corporation and its shareholders.
If the shareholder limitations are broken, then it's a problem. You must cancel the S corp election that you ...
4
So Paul Allen & Bill Gates, Bill Hewlett & Dave Packard, and Larry Page & Sergey Brin were all unwise to start companies because they were friends?
I should check your source of information. Many (if not most) companies were started by a small group of friends.
Yes, there are problems in working with friends. Successful companies have to ...
4
There is no company structure that is going to guarantee that your personal assets will be 100% safe in the event you are sued. Otherwise that would lead to unscrupulous people taking advantage of it to harm good citizens such as ourselves. You can't protect yourself 100%, but that shouldn't be a reason for you not to "get in the game". As a business and an ...
4
[I'm going to stick to answering your first question: "How do I determine who is responsible for which tasks/jobs/responsibilities?" since that matches the title.]
First: in any startup, everybody does everything. Yeah, you may try to specialize a little bit, but you're not really at the point where one person can be Lord High Executioner and the other can ...
4
Articles of Incorporation are generally considered public records that anyone can access. Sending him a copy is not giving him anything that he could not get from the Secretary of State's office anyway.
If what he wants to do is verify that you are legit, that is a corporation in good standing, he should verify that for himself directly with the Secretary ...
3
We just got organized as an LLC...Should we opt to be treated like a default LLC or an 'S' Corp?
You might be a bit confused here. An LLC can elect to be taxed in one of two ways:
Pass-Through taxation: In this case the LLC will be taxed like a partnership.
Corporate taxation: In this case the LLC will be taxed like a C Corp.
So your choices are ...
3
I would suggest that you all hold board positions and one of you should be chairman of the board. That way, you control the direction of the company.
You can also give yourself founders stock and/or issue preferred stock in exchange for the IP rights. This preferred stock will be owned by the founders and can have a majority position until you start to get ...
3
I believe this is more a business question than a legal question.
From the legal perspective, there is not a huge difference between converting to shares of a corporation vs. converting to LLC units or membership interests.
The business difference is that many investors insist on investing in corporations rather than LLCs.
Disclaimer: This post does not ...
3
Many, many startups are started by friends and some of them end up being successful. The friendship tends to evolve based on what happens in the business as well as out of it. Some of my best friends are people that were my partners in my startups. Then again, I know of friendships that were destroyed around disagreements in startups.
The chain of command ...
3
I believe it all depends on the maturity level of the individuals. It is also important to define the roles each individual will play in the organization.
If the individuals are level headed, are able to bear failure collectively and as a team, then I think it would make a very good team.
Startups, founded by multiple individuals should have a collective ...
3
After James' update to my comment, I think I can answer (somewhat).
VC's don't care (that much) about the method, they care about the probable end result. So will VCs care that I'm using a continuous improvement product development methodology? Well, there is no way to answer that question in general, it comes down to the specifics of each case.
The most ...
3
I believe this is a marketing, accounting, systems, etc. issue, but not a legal issue.
Once you obtain the fictitious business name (DBA), the legal underpinnings are taken care of. From that point on, you are talking about operational issues. The multiple brands / divisions do not have legal ramifications (beyond whatever you do to protect the brands via ...
2
It may actually be appropriate to set up a new company - unless you want to piggy-back on your brand for the old product.
From a business perspective, your P&L in the development and launch of this new product should probably be absorbed (and losses carried forward) on its own right including all sunk costs for R&D.
Another reason to set up a new ...
2
The same problem is being faced at my day-job company (mobile software) - we have two separate and distinct product lines (b2b communication middleware vs. b2c mobile coupons), with no overlap as far as customers go. Organizationally speaking, the marketing resources and efforts are distinct too, but there's overlap as far as engineering resources.
In our ...
2
Most of the time I start with 10 million for my clients.
Definitely just common, to start. Even if you can anticipate that preferred shares will be required (e.g., VC investment), there's no way that you can know today exactly which preferences will be appropriate.
Whether to have par value, and what it should be, depends on the state of formation.
For ...
2
The answer is that it depends on a few things:
Where you live. Mostly if you live in the US, Canada, Australia, UK and you want to operate legally you should have your business in your country in order to avoid potential tax disadvantages of operating the business offshore. If you live in a place that does not tax you on your worldwide income you should ...
2
Brian makes some good points. To expand on his answer, the only reason to form a separate entity would be to:
Spin it off: It's a lot cleaner to already have a P&L just for the business you want to sell. It makes the revenue claims and expenses a lot easier to justify.
Contain Liability: As long as the entity has it's own management structure and is ...
2
Track record, track record, track record.
Has he been successful with this type of partnership before. (not the factory)
Can you talk to those people, and hear what they have to say about how it is to partner with this guy?
When he's been successful before, have the characters you are been successful in the same partnership?
If you've checked all of the ...
2
Get General Liability Insurance if you incorporate.
As others mention, your corporation might protect your personal assets, yet liability insurance helps cover legal and other expenses regardless of the outcome. Liability insurance for at least $2 million is not too expensive (certainly far less expensive than legal fees) and your corporation can claim the ...
2
I'd want to get paid out of money that I could get my hands on. Whatever cash flow is coming through the US subsidiary should be fair game.
Typically I see companies without much money paying salary and just having it deferred (so it accrues and the cash payout is when the company has the cash), and then having a bonus based on sales, etc., but in this ...
2
Dan, I get what you are saying. If you create 10 different .com's and say use PayPal Pro to collect payment you wouldn't want to pay their $30/mo for each account plus transaction fees. Same would go for Authorize .Net or whatever payment gateway you went with.
And with PayPal to get 'yourcompany' to show up on their credit card statements you would need ...
2
Consider a possibility that you're trying to solve a problem that might not exist.
At this point it's only your gut feeling that customers will get confused. That might or might not be the case in reality.
Start simply and cheaply as a single DBA. Start charging for your products. If the confusion ever comes up, create separate DBAs.
2
Make a point to document and get into legal contracts if necessary as much as possible up front. There should be provisions to reevaluate everything in the future.
Decide how responsibilities are divided
Evaulate if everyone is meeting expectations of time, expertise and performance.
Come up with a tie-breaker system. Maybe those with expertise in that ...
1
Were you just throwing out this figure of 97% or have you thought it through? Have you thought about all the non-technical work involved? There are non-programmer founders of fairly technical companies that are invaluable to the business. From helping fine-tune user experience, marketing, fund-raising, finances, etc. If you feel this potential partner will ...
1
in our ideal world, the bank account associated with this startup would just accumulate money
Hey look at that, we live in the same world :-)
Fact is, in either scenario, you will have to pay the same tax. And no matter how you do it, the tax will be on top of your day job's salary, which means that it'll be at whatever marginal rate you're at or ...
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