Come for the Ride…

This post is written by Trevor Mi, a guest blogger from Soft Launched Corp. that’s currently working on a Facebook application.

After what seems like ages (3 weeks), I finally got my incorporation papers back. Upon closer inspection, I found 1 minor error in the name. I wanted Soft Launched Inc. and the certificate is for Soft Launched Corp. This is a small fix but will take time and money, so I am going to have to stick with Corp for now. It’s just a name.

In the progress of setting up a corporation, I have discovered the following:

1. Location
If you are an internet company who is hoping to receive funding, Delaware corp is probably the best way to go. While tax benefits are no longer relevant as most of the states have passed new laws to become more competitive, the sheer volume of existing Delaware companies make it a huge plus. VCs prefer startups that are incorporated in Delaware because they understand the law there. There has been many precedent lawsuits involving companies in Delaware to fall back on, making most legal issues swift to resolve.

2. Who to use
I used www.incsmart.biz. You can do a quick google search for Delaware incorporation and shop around. Incsmart is the cheapest I found. Others range from $300-500. I think I paid around $300 for the incorporation, registered agent service (if you don’t live in Delaware, you need to have a physical address there to receive mail from the government. Registered agent provides a physical location in state to forward these mail to you), and a corporate kit which includes a nice thick binder with bylaws (constitution for your company), corporate stamp, stock certificate printouts and other toys that make you feel more legit. Would I use them again, maybe. Like I mentioned, they got the name wrong. They just did not provide much confidence with their website design but they did get the job done. They were also very responsive with their email. If you decide to use them, make sure to ask them to email you a scanned version of the application before give them the green light.

When you shop around, make sure to look into how much you are being charged for the registered agent services. This is a recurring cost. Since every penny counts if you are bootstrapping like me, this future expenditure should be factored in. Incsmart charges $50 but I have seen as high as $150.

3. EIN
EIN is like the social security number for companies. You need it to open a merchant account, to buy things without sales tax , report corp taxes etc etc. Many incorporation services offer to obtain your EIN for an additional $25 to $50. Do not use this. You can obtain your EIN number at http://www.irs.gov/businesses/small/article/0,,id=98350,00.html for free and receive it as soon as you complete the online app. If you use a 3rd party, not only do they charge, they will not be able to file online and will take up to 2 weeks.

Next step for me-sign the bylaws, shareholders agreement and issue stocks (stocks can be issues with printouts from your printer. It feel like I am print money lol). So far, no lawyers yet. However, I did work in corporate finance for a while so I do understand superficially a lot of the agreements involved. If you get stuck, I would recommend a trip to your local library or bookstore. There are many good reference books on this topic. Nolo is the terrific publisher for this sort of books.

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