dealing with competent lawyers is bad enough, do not subject yourself to what will amount to a miserable experiment in futility just because he's the only lawyer you know.
if you need money (first off ask yourself what you actually need money for), get someone with money who will let you do your thing
to set up the C-crop, you SHOULD use a lawyer. ask friends or friend's of friends for recommendations. get a lawyer who will charge a flat fee, ours is only charging us $750 to issue the stock/create the bylaws/etc. use a bigname incorporation service to actually incorporate you in delaware if you have not yet done so (we used www.ctadvantage.com, cost us like $900 but only because we were stupid and had started off as an LLC and then decided to switch to C-corp).
the mental-illness dude does not sound like he can help you with either money or legal matters and will be more trouble than he's worth. STAY AWAY FROM HIM
hope this helps
If all you're doing is creating a corporation for legal protection, then do it yourself.
One word of advice though, think through how many shares you want to issue. If you're going to offer stock options, then issue a huge number - like 10 million. If you don't think you'll need options, then go for just a few.
If you pick too few now, you'll need to hire a laywer in the future to help you with a stock split or share issue to increase the number of shares.
Also, one other word: if you're just incorporating for yourself and don't plan on getting any venture funding in the foreseeable future, incorporate as an LLC so you can pass the tax losses from your company on to your personal taxes.
Since you're incorporating in Delaware, keep in mind that Delaware taxes are calculated based on the number of shares you authorize. You could end up paying tens of thousands of dollars in taxes (http://www.corp.delaware.gov/frtaxcalc.shtml).
I used incorporate.com and they cost about $200 or so for a Delaware corporation, and I would recommend them. If you're the sole owner then there is not much to worry about. After you incorporate, you can have your "accountant" look at the documents and tell you if you're missing something. They usually know how these things work. You don't necessarily need an attorney at this early stage.
Upon further reflection, I probably don't need it. And when I reach the stage where I do need it, I probably want to get it from a real angel investor. Even if that didn't work out, I still have better places to get funding than this guy.
Guess I'll just have to pay a lawyer who specializes in tech startups.
This really clarifies the decision. Thanks!
A friend of mine, a corporate lawyer, is interested in funding my startup and providing the initial legal services, but there are a few big catches: this guy is extremely difficult to deal with (history of mental illness) and doesn't seem to know much about the issues surrounding startups. I had to explain to him why I want to be a C corp, and I'd think he should already understand that.
My intuition obviously tells me to avoid this guy if I can help it, but here's the real problem: I'm a complete bootstrap startup and I have to pay the bills in San Francisco. If my friend doesn't incorporate me, I'll have to use one of those incorporation websites - I can't afford to actually pay a lawyer to do it. Am I insane to even consider this option?
Run. Run far away from this guy.
Now for the rational explanation: What is he offering besides money? It's nice that he is willing to give you money, but does he have any contacts or experience or skills that might put you in a better position? Doing something just because you are cash strapped is a horrible idea.
There was a good convo here a while back for lawyers with software start up experience: http://news.ycombinator.com/comments?id=16419 pg uses WSPR in SF and Goodwin Procter in MA.
You're right - I know dealing with this guy is a bad idea and I'm not going to do it. What I'm really trying to figure out here is what my options are.
Remember, you can always transform an LLC into a C corporation at a later date. To me it made sense to start small, and only spend that money when I'm sure I need it.
As you say, it's easy to move from LLC to C. Start it easy and quick (but do your trademark homework) and see if you can build a successful product. Statistically speaking, you probably can't, in which case you haven't wasted dollars on lawyers.
If you start to feel like your product is taking off (or has potential to), get off your butt and invest in some real legal help to get your ducks in a row.
Of course, if YC will help you do it right out of the gates-- that's dandy.
Sure, but the process is not easy nor cheap! It will cost you more to convert LLC to a C than by forming C right away.
What you should have done is form an S and then convert it to C later on. Converting S to C is a matter of filing one form and you don't even need an accountant/lawyer to do it.
"Shareholders must be U.S. citizens or residents, and must be natural persons"
Since I live in Europe, the potential to find and add a co-founder or two who is not a US citizen is there, and an LLC would still work for that, afaik. Or at least it may be a possibility, whereas I'm sure it isn't with an S-corp.
Cost of an SrL in Italy: north of 3000 Euro
Cost of something similar in Austria, where we recently moved, and I don't speak the language yet: much closer to the Italian one than the Oregon one.
It would be insane for me to throw that kind of money away when I can just do it at 'home', and any businesses I do are likely to be internet based.
The verdict: I will not be going with my friend the lawyer, but rather look into some sort of fee-deferral arrangement with a firm that specializes in this type of thing.
Many top law firms will defer the fees, and it looks good to an investor when you have decent lawyer backing you up.
That said, having a good lawyer is important just for legal reasons and because the lawyer can foresee complex situations (founders splitting up and so on) that you wouldn't.
Some advice about what not to do is a good way to put it.
Having legal counsel in the know is certainly just one of many pieces, it all depends on which ones you need (most). (And that in turns depends on what precisely you're going after.)