Hot answers tagged incorporation
11
You could and should purchase your domain name as soon as possible. Anyone can own a domain name, you dont have to be a corporation. You simply register the domain name using a registration service such as Godaddy.com or Register.com.
Pay for the domain name using your own credit card, since you dont yet have a corporate bank account.
When you get to ...
10
You are missing an important big-picture issue:
To the extent that you fail to segregate corporate funds in a corporate bank account, separate from your personal bank account, you are opening yourself up for "alter ego" personal liability, i.e., you are inviting a court to disregard the corporation - making you personally liable - because you failed to ...
9
You need to hire an accountant. Even though you made no money and owe no taxes, your business still has to file a tax return. In addition, there will probably be loses your first year and your accountant will show you how to carry those loses forward into future years to lower your taxes when you do begin to make money.
9
By law, do we need to create a company to receive this cash?
No, you don't have to form a distinct entity to do so. This is called running a "sole proprietorship":
http://en.wikipedia.org/wiki/Sole_proprietorship
http://sbinfocanada.about.com/cs/startup/a/formsbusiness.htm
That said, business owners form distinct business entities to protect ...
7
I disagree - at least for now. Build something and test it. If no one buys anything, it probably wouldn't be in your best interest to spend the money to form an LLC.
An LLC will not protect you from a lawsuit, but it will protect your personal assets. As long as the company is adequately funded, you treat your finances correctly, etc, etc.. Most ...
7
There actually are two different questions: How many shares should be authorized? How many should be issued?
These questions are discussed in the post "How Many Shares Should My Corporation Authorize and Issue?"
I usually set up my clients' corporations to authorize ten million shares for the following reasons:
To allow plenty of flexibility in ...
7
Why would you want to incorporate in the US? You would have to pay US sales taxes and all the fees associated with incorporation.
If a U.S. company wants your EIN number you simply tell them you are based in Uruguay. You can fill out a U.S. W8 form for them to prove you are not subject to US withholding.
W8 Form
7
Much of this is really just advanced common sense.
Customer trust, which either helps or hurts sales. To some extent, seeing a physical company address builds trust with US customers, and perhaps some trust with other nationalities as well. Seeing an address on the Cayman Islands etc reduces trust -- the customer may quite rightly feel that he's at a ...
7
No.
The key to Dana's statement is "do business in". Every state has their own definition of what "doing business" in that state means, but in most cases selling a product over the internet to someone who happens to live in that state does not count as doing business in that state. You usually need something more tangible to be considered doing business in ...
6
Both LLCs and S Corporations offer limited liability while providing pass-through taxation. The way they are taxed, however, is entirely different under the tax code. LLCs are taxed under Subchapter K (the same as partnerships) and S Corporations under Subchapter S (unique to S Corporations). Here are a few things to keep in mind:
S Corporations
- Only ...
6
Be careful about the "parent company" strategy as it can be difficult from a branding perspective. I would suggest you make a company with the same (or close to) name as your website in order to keep the branding consistent.
Just look at Google. Almost everything they have is named "Google X". You know who is behind it and you recognize it instantly.
...
6
What you're looking for is a Registered Agent. Intuit explains it pretty well
Most states require businesses to
maintain a registered agent in the
formation state, individual, or entity
designated by your corporation or LLC,
to accept legal and official documents
on behalf of your business. This could
include, but is not limited to,
...
6
I think you should see a qualified tax adviser (fx a chartered accountant who is specialized in international tax).
The US system by default taxes US citizens of their global income. But there are double taxation agreements with many nations, which may dramatically change the taxation in your situation (depending on where you're living now).
Normally, I ...
6
Correct, protection from personal liability is the primary benefit of incorporating. This benefit involves more than just customer lawsuits against you - just think about any other party you will be signing a contract with for your business: 1) Potential investors also want limited liability, 2) limited liability also protects your personal assets from ...
6
You have two options in the UK, operate as a sole trader, or form a private limited company.
As a sole trader you pay special rate of income tax and national insurance, but you are personally liable for your work and any debts you take on board.
As a private LC, you would generally take a salary up to the national insurance start band and pay the rest in ...
6
Generally, it's least expensive to form an LLC in the state where you will be doing business. The reason: If you form the LLC in another state (such as NV or WY) because of its ostensibly low or non-existent taxes, you will pay annual fees to that state, but you also will pay annual fees as a "foreign" LLC to the state where you are doing business. Please ...
5
I will attempt to address here what many business owners don't know, but should know.
PERSONAL LIABILITY. As a business owner, you may be exposed to personal liability for activities related to your business. As such, your personal assets may also be exposed to the risk of attachment, seizure and sale. To reduce the risk of personal liability, ...
5
There isn't a definitive answer that's true for every mISV.
The best resource I've read to help you think through the options is LLC or Corporation? How to Choose the Right Form for Your Business from Nolo press. It's written by an attorney for small business owners. It contains a good overview of the issues and considerations.
5
Is it worth setting up a corporate bank account or finding an accountant?
Set up your business bank account now. It costs you nothing and keeps your personal and business finances separate. Right now you are basically operating as a sole-proprietor (assuming you're the only owner). Not only will this cause you to lose your liability protection, but the ...
5
Based on your Business Summary, a single-member LLC is probably a good fit.
My rule of thumb: If you anticipate managing lots of contracts, go with a corporation because it standardizes them, otherwise go with an LLC. Tax is the other major consideration.
Reasons?
One man shop. +1 LLC (no contracts!)
No intention on going public. +1 LLC (again, no ...
5
Incorporate in the state where the corporation will be doing business.
Please see "Why (not) Incorporate in Delaware?".
Disclaimer: This post does not constitute legal advice and does not establish an attorney-client relationship.
5
Respectfully disagree with Dana on this (who by the way is a good attorney and does a lot of work with start-ups in Silicon Valley), especially if you are planning to do business in almost every state, as most start-ups eventually plan to do. We think Delaware is usually the best option.
This one is easy, but bears explanation. Incorporate in Delaware. ...
5
Depends on a number of factors, including the state you incorporate in, type of entity, the number of authorized shares, and your business income.
For Delaware, the minimum cost is $89 for incorporation (corporation, S Corp is just a fax filing to the IRS (free)), $75 minimum franchise tax (5000 max auto shares, any higher and you pay more) + $25 annual ...
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
Don't focus on cheap. Focus on what's best for your investors and for you.
Delaware has done an outstanding job of working to become a remarkably "LLC Friendly" state. Good laws on the books and good infrastructure to help you get started.
Here's a link to "Why Choose Delaware?" from the state. Nicely done.
5
I don't know the state in which you incorporated, so I cannot be sure that the following will be true for you.
While is certainly is possible to provide notice to yourself, there are at least two commonly-used ways to avoid that task:
By attending the meeting (other than to object to its being held without notice), the shareholder consents to the meeting ...
5
If by "catch" you mean state taxes, your company will still have to pay state taxes in the state it actually does business in, regardless of where you incorporate the business entity. So if you incorporate in Delaware but set up shop in California, you will still have to register the Delaware corporation in California and pay California taxes. Online ...
5
I'm in the process of converting from an LLC to a c-corp, so I can give you some perspective:
To start, try searching for sample c-corp bylaws and scan a few pages. Every well-formed c-corp has bylaws -- the laws by which your corporation is governed. Most bylaws are dozens of pages used to describe board meetings and fiduciary duties and so-on.
It's a ...
5
For the moment, let's put aside the issue of saving taxes. Incorporating in a tax friendly country sounds great on paper, but IMHO it normally doesn't make sense for a startup.
First, if you are just starting out, odds are your business won't be generating a ton of income, so any money that you might save by incorporating off-shore will likely be very ...
4
The main reason is the notion of preferred stock. Corporations have it, LLC's and S-Corps don't. VC's want preferred stock so they can:
Control the board by having the preferred stock control more of the company
Setup conditions that allow for favorable conversions for certain events and multiples. This has to do with getting their money out ahead of ...
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