Startup incorporation checklist • Hacker News Board

Re: Startup incorporation checklist

#81

Post by jahewson » Tue, Jun 28, 2016, 8:42 PM UTC

swampthing wrote: post #71

gjkood wrote: post #62

Setting up a corporate entity (any kind) in California gives you a mandatory minimum $800/yr bill from the CA Franchise Tax Board. So if you are planning to incorporate in CA, be sure you are serious and don't mind an automatic $800 on the expense side without anything on the revenue side. Please correct me if I am wrong on this. Also, does anyone know why this is the case? I haven't seen this in a few other states w…

Yes, that's correct - although for corporations, you typically don't have to pay it for the first year (as long as you foreign qualify in CA for that year). So at least you get a small reprieve there :)

Actually you don't have to pay it for the first year, even if your business is resident in California.

Re: Startup incorporation checklist

#82

Post by jahewson » Tue, Jun 28, 2016, 8:45 PM UTC

hberg wrote: post #48

sokoloff wrote: post #34

Earlier quoted context omitted.

A lot of what Delaware buys you is a transparent, functioning, and predictable state legal framework and court system.

You're right. If you plan to build a business and raise VC money for it, Delaware is the standard place to incorporate (which is the case for my company and checklist, btw). California does add an extra layer of burden and compliance that I did not expect, but if you plan to have employees in California you must incorporate there as a foreign entity (also my case). I've also heard from a fellow entrepreneur who has a…

If you plan to sell anything in Californa you must also register there as a foreign entity. And pay taxes.

Re: Startup incorporation checklist

#83

Post by jahewson » Tue, Jun 28, 2016, 8:46 PM UTC

g10r wrote: post #17

_RPM wrote: post #11

If my company won't be making money or revenue for quite some time, what does that mean for me in terms of the IRS? Will we get penalized for NOT having revenue?

In the United States you will not be penalized for having no revenue.

Oh yes you will. In Britain a zero-revenue company cost me £14 a year, in the US it's about $200. California is worse still.

Re: Startup incorporation checklist

#84

Post by jahewson » Tue, Jun 28, 2016, 8:51 PM UTC

merrywhether wrote: post #32

How relevant is this to a single person wanting a corporate front to make small amounts of side money from a website or app? Is an in-state LLC more preferable in that situation? Is any type of incorporation even necessary?

For your case incorporation is not necessary. Being in a single-member LLC doesn't necessarily limit your liability all that much. Declare your earnings on your tax return and pay state and federal self-employment taxes. Simple.

Re: Startup incorporation checklist

#85

Post by jahewson » Tue, Jun 28, 2016, 8:59 PM UTC

Warning: there's a really important point missing from this list - pay taxes in California. There's a minimum "Franchise Tax" of $800 plus a percentage of California-derived revenue. All entities doing business in California (be that selling to customers based there or having employees there) must register with the state and pay this. The first year is free though - the minimum is waived.

Re: Startup incorporation checklist

#86

Post by louprado » Tue, Jun 28, 2016, 9:02 PM UTC

InCorp is referenced in the non-free tools section but not in the recurring fees section. Is this an oversight ?

Isn't there a DE requirement that you have an agent(?) operating within the state if your HQ is in CA ? Incorp currently charges me $100+ a year to do this.

Re: Startup incorporation checklist

#87

Post by jahewson » Tue, Jun 28, 2016, 9:03 PM UTC

louprado wrote: post #86

InCorp is referenced in the non-free tools section but not in the recurring fees section. Is this an oversight ? Isn't there a DE requirement that you have an agent (?) operating within the state if your HQ is in CA ? Incorp currently charges me $100+ a year to do this.

Third item on the checklist:

- Buy registered agent service in DE - 1 yr Free

Re: Startup incorporation checklist

#88

Post by jahewson » Tue, Jun 28, 2016, 9:09 PM UTC

_RPM wrote: post #49

hberg wrote: post #44

Earlier quoted context omitted.

Yes, agreed. No need to incorporate just to get together and hack on a project. That said, I would certainly consider (at the very least) signing an agreement with your hacking buddy before launching anything that might generate revenue. I've seen and heard multiple co-founder friendships fall apart once things started to get "real". Good luck!

I want legal agreements in place before I start writing code with a non technical co founder. We've agreed upon a 50/50 equity split.

Write that fact down on a piece of paper and both sign it. Then get it stamped by a public notary. Right now you're looking to make an agreement, not operate a company. Most likely your only ownable asset for the foreseeable future is copyright, which you can agree to share equally with just a piece of paper - having a business entity won't actually help you unless you have either income or are ready to take on investors.

Re: Startup incorporation checklist

#89

Post by louprado » Tue, Jun 28, 2016, 9:14 PM UTC

jahewson wrote: post #87

louprado wrote: post #86

InCorp is referenced in the non-free tools section but not in the recurring fees section. Is this an oversight ? Isn't there a DE requirement that you have an agent (?) operating within the state if your HQ is in CA ? Incorp currently charges me $100+ a year to do this.

Third item on the checklist: - Buy registered agent service in DE - 1 yr Free

Exactly. Why implicitly suggest it is recurring, but then deliberately exclude it from the recurring fees section.

Re: Startup incorporation checklist

#90

Post by hberg » Tue, Jun 28, 2016, 9:22 PM UTC

swampthing wrote: post #80

hberg wrote: post #46

Earlier quoted context omitted.

That'd be a great list! I guess this depends on multiple factors like how many employees you have, how many investors, etc. I've heard that for pre-funded DE corporations you can basically ask your registered agent to formally "resign" as your agent and then the corporation is orphaned. The proper way involves filing paperwork to dissolve the entity along with paying some filing fees.

That might work with some registered agents, but it won't with Incorp - they will require you to either have a new registered agent in place, or you need to dissolve your company.

My experience with InCorp was exactly as described earlier. They resigned and that was that.