Show HN: Incorporate your startup online with YC's forms (built by two lawyers)
clerky.com
clerky.com
The short-term aim of Clerky appears to be to tame the process by which founders take the legal steps to traverse the path from launch to first funding by giving founders and their lawyers the tools to do it all more efficiently and cost-effectively. I would think that is a worthy goal and a worthy market to target. How many founders over the years have given up as much as a percent or two of their equity just to get fee deferrals from law firms that would enable them to get to first funding? And paid sizable fees to boot? Credible founders do not begrudge a lawyer his hire they also do not want the legal part to take more than its fair share of the budget or the equity.
Clerky offers as a first step a standardized Delaware C-corp approach to startup launch, and a skillfully done one at that. Its site suggests that it will targeting as well the remaining steps on the standardized path, right down to ones that will facilitate efficient and low-cost handling of all the important steps leading to first funding. This is not a modest goal - it is huge.
In law, there are strict limits to how far anything "standardized" can go - law is simply too big and complex to be reduced to simple recurring steps in any important area. For this reason, the role of the lawyer (even as to the standardized aspects) will not soon be displaced. Indeed, traps and issues abound for founders in setting up their companies, in funding them, and in dealing with a whole host of legal issues that will crop up. It always has been, and remains, foolhardy for founders to wing it in this area once they get beyond the very early positioning parts of their ventures. The beauty of what Clerky seeks to do, however, lies in providing ways to make it all easier both for founders and for lawyers and thereby setting up ways of doing collaborative relationships by which all concerned will benefit. I am a lawyer. I have done this stuff for years. But I have no stake in wanting to do any of this the clunky way if there is a simple and elegant way at hand. I welcome what Clerky is trying to do and look forward to its benefits as they roll out their services. The fact that founders can save on fees is not a threat but instead an opportunity for me to focus on the parts I do best rather than the repetitive parts.
The beauty of Clerky, as I see it, is that the founders, having worked extensively as superb startup lawyers in their own right, have a keen sense of how all this works and are aiming to develop a service that truly deals with the issues that have burdened clients and lawyers alike. It is a tall challenge but, if anyone can do it, this is the right team, especially working within the innovative framework provided by YC and the startup community. It will be fascinating to see how it all unfolds.
Agree. I'm not a lawyer and I have no relatives that are lawyers, and nothing to gain by raining on the clerky parade at all.
That said I've been in business for a long long long time and I've dealt with lawyers, paid legal fees, seen the good and the bad and have seen mistakes lawyers have made - even good ones.
Seat of the pants, I think it's a mistake for anyone to take an important step and pay a fee to incorporate this way.
The principles running clerky have nice credentials but as anyone will tell you "speak to 10 lawyers/doctors get 10 different opinions".
It's foolish to not even want to have a conversation discussing specifics which is not the same as having to give up significant equity to get legal advice. It is "always Delaware" or "almost always Delaware"?
I wouldn't advise anyone fresh off the boat to go the clerky route although ironically since I know what I am doing I very well might be a customer! That doesn't mean either that clerky wouldn't be good for some startups in some situations but they don't know that.
As an aside the entire concept of someone giving equity to a lawyer in exchange for legal work is to me an example on the face of how little some people know about business. I've seen countless examples (non high tech traditional world) where business people have a lawyer as a partner which to me makes no sense at all. "He/She will do the legal work". Bullshit. This is like someone thinking that they can buy legal insurance and that their lawyer partner will spend 20 hours a week on their business problems at no charge. 20 hours (arbitrary) that they then have to give up in billing their clients. Not going to happen. [1] For the amount of legal work you need just pay for it and factor it into your costs. This is not partnering with a painter on a home rehab or something like that.
[1] The other fallacy that I've seen is someone feeling that if they are dealing with a lawyer that it is easy to get sued because "it doesn't cost the lawyer anything". It does it costs the lawyer his time and a lawyers time is how they make money. And they know that and if they sense a case or action will sap their time they will run for cover.
Many founders feel comfortable doing things themselves on Clerky, but many also loop in their lawyers (for the reasons you describe). It just makes for efficient use of legal fees, since you are paying your attorney for what they do best (advice and review) instead of rote tasks like word processing, printing, scanning, faxing, etc.
I look at Clerky as kind of a stim pack for lawyers (except it doesn't reduce the health of the attorney).
If clerky is good and allows lawyers to focus on charging for the things they are good at while avoiding things that they make little money at then you should attempt to market the service to lawyers so they can refer that business to you that you are good at. Similar to what the "Company Corporation" and others do.
Generally when I quote prices to someone I am eager to offload anything that I can't make money on and have someone pay directly so it reduces the total amount of my bill and my pricing looks more reasonable.
Anyway, best of luck in your endeavors.
Perfectly reasonable question - that's what I'd ask myself!
Rather than seeing it as a way to move themselves up the value-chain, they keep trying to defend the low-hanging fruit. That makes no sense.
The real value and real big bucks are further up the chain. I would think that all lawyers would welcome a service like this, which allows them to focus on M&As and much more complex deals and structures that can't be outsourced.
It just makes for a much better world overall.
I think it comes from an insecurity in them thinking they can't adequately compete for the higher-value-add (which may be true), but we are all better off if those professionals stop practicing anyway.
If the old guard aren't the ones destroying their business, then they should be petrified of anyone who gains a beachhead.
A professional is trading hours for dollars, the only way to increase their income is to either arbitrage cheap tasks (i.e. hire low-paid professionals and bill them out at a higher rate), increase the amount of hours they bill, increase their hourly rate.
The best paid in an industry tend to have the highest hourly rate - not necessarily the most amount of hours worked.
So, it would seem to me, that all professionals should be looking to move up the value-chain.
Clerky forces lawyers to make a choice. They can either fight for the 'automatable stuff' or they can move up the value-chain.
http://www.law.harvard.edu/faculty/directory/index.html?id=7...
Very smart guy - I think he was top of his class at IIT.
Thanks for the tip!
It'd be nice if there was a link to a discussion of the pros and cons of local incorporation versus Delaware incorporation, and of C-corp verses S-corp or LLC.
Here are some pretty decent links:
http://www.expertlaw.com/library/business/where_to_incorpora...
http://www.lawfirms.com/resources/business/business-operatio...
http://mashable.com/2012/02/09/business-incorporation-taxes/
http://mashable.com/2012/02/17/small-business-incporporation...
http://www.nolo.com/legal-encyclopedia/s-corporation-facts-3...
http://www.nolo.com/legal-encyclopedia/how-corporations-are-...
I'm a little vague on the requirements for additional registration in a principal's home state or in state(s) with declared office(s) when the LLC was formed elsewhere.
A startup may not want to deal with the additional fees for registering in another state, maintaining registered agents in each...
Did you have to do something similar while you were filing as NY Headquartered S corp established as an LLC in DE?
We've never had to show transactions in Delaware.
Legal entities are like "clothes" that need to be changed as a company grows and changes. Nothing ever stays the same forever, so theres a lot to think over.
Generally speaking, you want to incorporate a C-corp or LLC in the state where you do business. Alternatively, you can use a biz-friendly state like DE and register as a "foreign" corporation in the state of your primary location.
None of this matters unless/until you get sued, and then it matters a whole lot.
DE is chosen because you can state in all of your contracts that disputes are resolved in DE which has a special business court that handles corporate actions. There are also some outside tax and compliance benefits.
(This has come up on HN before.)
But more generally, forming a corporation means that you have ongoing legal responsibilities to fulfill. Doing that without at least an attorney on call is probably a good way to create the impression that you aren't "keeping up appearances". Minutes, board-meetings, shareholder ledger. Etc.
Anyhow, none of this matters if you use an LLC. Lots less red tape and lots less chance of accidentally tripping up some legal requirement for an arms-length transaction.
It's easy to wind up personally on the hook for corp expenses: accidentally agree to a contract that puts you on the hook personally. But again, that's not a company formation issue.
I generally agree with you that LLCs are the right first step.
Can you re-phrase this in a way that's googleable? Thank you.
http://www.calstartuplawfirm.com/business-lawyer-blog/califo...
But if you don't reg. as a 'foreign agent' or are incorporated in the state you can't legally do business in NY state.
Hopefully your business lawyer knows their stuff and complained about the NY state LLC publishing law (posting ads in newspapers announcing your LLC). If they didn't, I would be skeptical of them.
NOTE: IANAL and take all of this with a grain of salt, I may be completely wrong.
https://www.myusacorporation.com/articles/delaware-vs-nevada...
I agree just do what it takes to get past distraction. Everything can be fixed later, for a price. I read in an earlier post that YC pretty much demands DE incorporation. Seems extremely "un-hackerish" but, maybe there is something I missed.
Probably just lawyers not wanting to actually practice their trade and not have to be familiar with codes of more than one state. (I worked in a lazy lawyer insult into the comment, I should get bonus points!)
As someone outside the US could someone explain why it appears to be so complex to start a company in the US?
I live in the UK and it is very simple if you want to register a private limited company (i.e a private company where shareholder liability is limited by the value of your shares). You can even do it online directly with Companies House (agency of the UK government where all companies are registered) for £15 and does not require any specialist legal services or for you to have any expert knowledge. This fee also includes the assignment of initial shares. See:
http://www.companieshouse.gov.uk/infoAndGuide/companyRegistr...
Just looking at the pricing on Clerky I'd be looking at $680 + $99 annually to accomplish a similar thing in the US so obviously this seems very strange to me.
Perhaps I'm missing something here but as I see it there just appears to be excessive red tape when it comes to company incorporation in the US and might even deter me if was considering setting up business in the US.
As the person responsible for handling most of our early-stage paperwork and financing documents, I can't tell you how much easier it made our lives to have Clerky around. There was no need for a lawyer; we could just forget about this part of things, trust Chris and Darby to get it right, and get on with the business.
If there's money flowing through your company, get a good accountant. You can either do it now, or in a mad scramble when the IRS puts a lien on your bank account.
Of courses, there's not much money to be made serving startups that have no money.
Last time I went C-corp because I was certain my company will be a great success, ended up switching directions a couple of times, then ran out of money and took a job. Thinking about another go, but this time thinking I might start off as an S-Corp to make taxes simpler and filing less costly. Perhaps a LLC might not be a bad choice either, but I'd really like is to find a good accountant to help me choose the right entity.
It is EXCEEDINGLY difficult but it can be done. The number of people who can do this well is probably very small -- take a few million words of ever-changing law, regulations, case law, etc. and convert it into code.
Yet it has been done. Just look at tax return preparation software. It's out there. And it is, for the most part, shit.
I offer that judgment as a tax lawyer whose office prepares tax returns. And who cleans up messes created by people using the software out there in the world.
Tax software alone is not the end to shoot for, however. You need to bolt together a bank plus accounting software plus the tax software. If you have a fashion-forward bank that will host a better Quickbooks (not just "oh, yeah, my bank talks to your software" -- make it F-ing work), then have that accounting data speak directly to the tax software -- this is a winner. For extra added bonus points, this system collects all of the documentation required by the IRS on audit.
For the bulk of people out there, tax and accounting is a schlep problem and not a brain damaging intellectual exercise. And if you solve 80% of the problems leaving 20% for the owner/accountant to solve, you've saved a ton of time and money.
I have been cobbling together a system for nonresident consulting types to do business in the USA: a corporation, how to sign the contracts with consulting clients, how to allocate the income to taxable in the USA vs. not taxable in the USA, how to pay the employees/consultants properly in the USA, what paperwork to file, etc. etc. But it has humans where software would be useful. That's because of one key constraint.
The biggest problem is that people don't want to do the schlep work -- not even download data from the credit card or bank sites into their software. And if they download, they don't want to look at it. They'd rather allow magic to occur.
Someone should write magic software. :-) It's either magic software or intelligent and expensive humans.
By the way, I love the pattern where someone experiences unsolved problems within their industry and creates a startup to address them.
I can't imagine any VC denying you funding because you are not a DE corp. Plus, you save ~$400 per year in Delaware Franchise Fees. Even if you are a DE corp, you'd need to file paperwork to qualify to operate in CA. You also need to pay taxes in CA, even if you are a DE corp.
If you do a search on http://kepler.sos.ca.gov/ you'll see that Google started out as a CA corp.
C2119530 09/04/1998 MERGED OUT GOOGLE TECHNOLOGY INC. DAVID C DRUMMOND
Since you are charging $100 / $300, you probably want to target as wide a customer base as possible. By concentrating only on DE C Corps, you are limiting yourselves to the Dropbox/AirBnB style startups. What about all the potential S-Corps / LLCs that could benefit from your service?
I run an S-Corp, and would have easily paid you $500 to get all the paperwork (correctly) filed for me in CA.
Once you have gained traction and secured VC backing, it is possible that they will ask you to convert to a DE corp. So basically, you are just delaying the hassle of dealing with DE (admittedly, it is only a small hassle).
If you end up bootstrapping and becoming a lifestyle business where you can fund your small team without ever getting VC funding, there is no great reason to be a DE corp (if your team is based in CA).
In the meanwhile though it can be considerably cheaper to file locally. It will cost more to change later, but you are going to have a lot more resources if you are in the situation of needing to convert.
So if you are looking to get funding right away your best bet is Delaware C-corp, if you are going the "lean" route then you should probably do whatever is quickest and cheapest (usually, but not always, a local LLC).
IANAL, but for North Carolina if you have an employee in the state you must register as a foreign corporation and pay whatever fees are associated with it. It also seemed like you had to do double the paperwork each year once for DE and once for NC.
I agree though that NY LLC is not the easiest process in the world, but then again neither is NY foreign corporation registration.
Maybe I'll look into it next time it comes up.
Cheers.
But we totally agree with your general point - we're definitely going to be looking into how we can serve other types of companies! (it's in our FAQ but not apparent from the homepage)
Form filling is nice and does empower clients a bit, but I would advise users to pay a lawyer for an hour or two of their time, and then fill out forms and get documents generated, whether through this service or somewhere else. That approach is cost effective and combines the strengths of both. You don't want to pay your $500/hr lawyer to generate documents for you. You do want to pay them $500/hr for their advice and to pick their brain.
Maybe you could even just integrate that with Stripe, so you are a 1-stop shop. We go to Clerky to incorporate, setup bank account, and Stripe.
Signed, sealed and delivered.
1. Other services tend to focus on main street, traditional small businesses. So their forms are missing provisions and documents that are important to startups.
2. Our software lets you do everything completely online. LegalZoom lets you do some stuff online, but then snail mails you a bunch of stuff to sign.
3. Not sure about other services, but LegalZoom takes 20-35 business days to return your filed certificate of incorporation. you can pay extra to expedite this to 7-10 business days. Clerky does it in 1-3 business days.
I tend to find most nonprofit information (especially on Legalzoom and maybe nolo) to be shaky at best, most everything appears to be written by for-profit corp lawyers that quickly read nonprofit statutes and modified a few for-profit corp templates/forms.
One example—unemployment & worker's comp regulations seem to be very, very different (YMMV, depending on state) for nonprofits, which led me (on a lawyer's advice) on a weeklong snipe hunt trying to procure insurance and trying to pay taxes that I didn't need.
The number of lawyers who will review a corporate formation package you bought online is laughably small.
Asymptotically zero in fact.
A better idea would be to provide the option to connect with the lawyers who drafted these specific documents and have them tailored to meet your requirements.
Having legal work done is not like getting a Wordpress theme. If you screw up, it costs real dollars and huge headaches in lost opportunities, liability, and lawsuits.
For the love of god, if you are planning on taking a partner or outside investors, please use reputable counsel and get things done right. Once you signed the documents, filed the papers, and taken the money, it's WAY TOO LATE.
Otherwise, you might find yourself in a nasty lawsuit arguing about the meaning of some obscure term of art that is only exposed by some recent case law generated by a finding having nothing to do with your industry. And for the privilege, you could find yourself paying not only your own legal fees but the other sides too.
Caveat emptor.
I agree that a lot of online forms out there aren't great - it's why we built Clerky, to fill that need. Our forms are very well-vetted by some of the best startup attorneys in the industry (you can look at our About Us page to see our advisors).
And I'm positive that your documents are great. No problems there.
BUT, as I stated above, once you get into making adjustments, it's better to have the original attorney or one who is intimately familiar with the industry consulted early in the process or there could be trouble if someone feels like they got the shaft.
But yes, to your point - if you are doing anything custom, need tweaks to the forms, or anything else like that - by all means, get an attorney.
Number of horror stories I've heard about people spending shitloads of money to get incorporation done badly by some random attorney: many.
Number of horror stories I've heard about people putting off incorporation because they believed they needed to do it "right" expensively and having that decision later bite them in the ass: many.
Number of horror stories I've heard about people going out of business because they started out with some cheap default incorporation plan: zero.
There is an advantage to running with a simple, cookie-cutter corporate structure. That advantage is compounded when it's the structure that happens to be used by a whole bunch of YC companies, since YC has a lot of experience pounding corporations into a shape that is acceptable for next funding rounds. There is no advantage I know of to spinning a roulette wheel, picking the lawyer it lands on, and having them draft a bespoke operating agreement.
Incidentally (having just read a bunch of your earlier comments): there are definitely LLCs that elect to file as S-Corporations. We're one of them. Filing as an S allows the principals to take W2 wages instead of distributions; the entirety of your distribution is, as I understand it, subject to self-employment tax, while an S-Corp W2 is FICA-taxed the same way a normal employee's is. We didn't freelance this decision; quite a lot of money flows through our company and we have good accountants.
I have no problem with using a standard structure and replicating that across many many companies. That's smart. I be surprised if it wasn't done already.
BUT: once you stray from the One True Path to C-Corp, you're asking for trouble if you don't really dig in with a knowledgeable attorney who knows your industry, your goals, and how to keep you out of court. The Law is not something you can really hack.
IMHO, most people are better served by a simple LLC to get started. I'd agree that using a C-corp is a good idea if you're building a company specifically to seek investment from VCs, but if you're looking to just insulate yourself from the downside aspects of starting a business, it's hard to beat a LLC for simplicity.
First, as a partner in a business that has Fortune 500 company paper reviewed approximately once a week (a typical MSA is ~10-15 pages long and includes insurance requirements, liability, indemnification, and IP ownership), I'm not sure I understand this idea that lawyers aren't good at reviewing other lawyers documents. In my experience, reviewing other lawyers documents is 99% of the job of a lawyer.
Second, we are commenting on a startup that purports to have taken the ideal DE C corp structure from Y Combinator and put a web interface on applying it to new companies. That strikes me as remarkably close to the "one true path" you refer to. They're lawyers. They did YC. What else are you asking for? I'm 1000x more likely to want to use them than a random BigFirm lawyer who will --- again --- charge me $15,000 to get a worse structure.
I'm with you on LLC all the way.
Everything you said is 100% correct. It all makes complete sense. But I'll repeat my initial point just so we're clear about what my problem here is:
A website is not going to ask you questions about the special nature of your desired business structure. If you need something special, you're better off asking a lawyer to help you with that. A good one. Maybe the ones who did this.
That's my point. I was commenting on someone who was ready to have his lawyer "review" the document; which in my experience is one step away from "I'll make some adjustments myself and see what my lawyer says" which is one step away from "I'll make some adjustments myself" and FILE.
And once you've locked in a structure, it's way more troublesome and expensive to fix it after the fact. That's my point.
But we'll leave it there.
You sound like an expensive lawyer - or somebody who pays a lot of money to one. This simply isn't true for most people. However I grant you a lot of people feel the same way - and I'm sure their expensive lawyers love it.
But I have paid good money to lawyers and it was worth every cent.
Ask anyone who has ever had to fight a lawsuit (and won) if they thought they overpaid for legal advice. If you think the worst thing that can happen to you is you lose all of your money, BOY do I have news for you.
What I've learned about lawyers in the past 15 years is that about 49% of them are terrible. So processes that begin with "find a good lawyer" are a lot scarier to me than process that begin with "adopt this proven set of documents".
What about these documents makes you think they are "proven" by any measure?
Exactly what metric are you using to make that determination?
These documents were created by a collaboration of attorneys from Orrick, YC, and a few other places. They are as proven as any forms you're going to get from any reputable startup lawyer.
When I say "proven", I'm thinking "has been tested in court" or "has withstood challenges by shareholder lawsuits".
That may very well be the case with these documents. I'm just not qualified to make that determination and neither is my esteemed colleague.
Any specific form is extremely unlikely to have been tested in court. Especially with startups and VCs. Law suits are incredibly rare because people like to fix things quietly. There have been a few though - and every good startup lawyer makes sure their forms account for those outcomes. But if you define "proven" to mean tested in court - there are probably no current forms out there that meet this definition (although on occasion, specific provisions may have been tested as part of a predecessor form that made it to litigation). The lawsuits are so far and few in between that it's hard to imagine there'd be a form out there that has not been updated since it was litigated.
I guess what I was trying to say is that the forms on our system are as proven as any forms you'd find elsewhere. And we're constantly getting feedback from lawyers to ensure that we always have the current best practices and market-standard terms in the forms.
And I mentioned Eduardo earlier in the thread only to highlight a point: for most orgs, these forms will be fine. There won't ever be enough money on the table to make an expensive lawsuit worthwhile. But once there is real money at stake, you had better be sure that you have everything buttoned up in your formation documents or someone will find an enterprising attorney to point out your mistake.
Zuckerberg had great attorneys. Maybe the best. He still had to settle with two different parties who felt they had a case.
And I completely agree that if you need something custom or need advice, you should definitely talk with an experienced startup attorney. We refer customers to attorneys all the time!
Just to be clear though - it's definitely not an either-or proposition. A lot of our customers will go to their attorney, explain their situation, and ask "so, are the standard forms YC uses ok for us?" And because these documents are very standard (plain vanilla, as we lawyers like to say), startup attorneys are often either already familiar with them (especially so if they already represent YC companies) or it takes them very little time to review. Best of both worlds :)
Do we have a deal?
Cookie cutter plea bargain. YIKES!
Just plead guilty. It's cheaper!
Being falsely accused of a crime and incorporating are not analogous. I agree that for some things paying an expensive lawyer is worth it. Incorporating is not one of them.
So maybe not all tangles with the law are equivalent in their need for specialized outside expertise, eh? Maybe it makes sense to think about it and maybe discuss with an actual attorney before you leap, eh? Maybe more than a few.
Never ask a barber if you need a haircut.
That's a pointless response to an on-point comment.
'Yes' usually followed by the amount of the retainer they'll need.
Your lawyer seems to have done great work selling you and I admire that. And you've now done a wonderful job of destroying your credibility, so others are unlikely to take your opinion seriously. My work here is done. Have a nice day!
SO... get some time on the pond before you go planting a flag and declaring victory.
Q.E.D.
I'm not sure why you keep saying this. I had my new lawyer review the botched up work done by the previous lawyer to determine what part to fix and what to throw away (part of the paperwork was already filed, so it had to be reviewed), and it wasn't a big deal at all. Sure it would be cheaper to use the paperwork from the new lawyer - he wouldn't have to read it, but your point of it being hard to do is not supported by my experience.
Clerky has advantage of scale - if everyone knows them except for your lawyer, you will pay your lawyer more to get acquainted with Clerky terms, but your partners/investors will end up moving quicker because they already know what it is. Time==money. Eventually, you will be able to shop for lawyer who already knows Clerky package, that's when it will be an even bigger win.
There is nothing on clerky website that seems to indicate this "good for YC" so the issue I see is that they are selling the same package to anyone (YC company and a guy in Alabama wanting to do a startup who may or may not get funded or get funded differently).
As an aside I'm not seeing on the "about" page at Clerky exactly how long the 2 principles worked at Orrick either just that they were startup attorney's there.
Lastly I question how "in to the law" [1] someone who worked as a lawyer and then decided they would rather do a startup "clerky" is. I like to deal with people who really like what they do and are devoted to it (practically) 24/7 and don't have their mind elsewhere. I'm guessing you spend quite a bit of your time on security because you enjoy it any and all hours, right? That's why you are good at it.
[1] I'm reminded of a few Doctors that I know that work hard during the day but never pick up a journal and pick medical conferences based on the nice location they are held in. On the other hand I've met academic physicians who live and breathe what they do and are up on all the latest happenings.
Nobody is arguing that startups like Clerky are going to put lawyers out of business. They're just taking something you don't need bespoke counsel for and making it simple to do.
The fact is, you're likely to end up in a better state having used Clerky than you are if you try to find your own lawyers and get them to do something customized. A huge number of lawyers suck at this. Different people specialize in different things, and the ones who specialize in company formation are just as likely to be expert in e.g. capitalizing and running a local restaurant as they are in setting up vesting schedules for a tech startup.
This isn't the same as a lawyer saying, "I've read through it, and we can go line-by-line to find all the issues, but you're better off starting from scratch," but based on what I've seen, the Clerky docs are a lot better than that.
Without clerky, I went through several lawyers who charged me hundreds or thousands of dollars to produce fairly boilerplate documents that were often riddled with all kinds of errors -- typographical, grammatical, logical, legal, you name it, I saw it. I soon realized that even if I had one lawyer draft the paperwork, I'd need an independent set of eyes to review it. And every error we found meant more time down the drain.
With Clerky, I got well-written docs that were correctly pre-filled with our information. I reviewed them with a lawyer, found one minor issue which was easily fixed (and presumably was also fixed for everyone who used those docs after me), and then electronically signed everything and got electronic signatures from my cofounders.
I suppose there's the risk that Clerky makes things so easy that people don't feel the need to read what they're signing or to run it by a lawyer. But if reading contracts and getting legal advice are important to you, it certainly won't hinder the process.
I know exactly why I did everything I did and have trouble understanding need for something like this. I am developer, so I assume I am smart enough to understand basic things, I don't want to do law or accounting, but there are things you need to understand when you make decisions and be aware of consequences.
I wish I am as perfect as previous paragraphs describe, but I slip here and there, at least I know what and should be done.
Anyhow, this is my attitude and belief, I wish more people would believe in themselves and at least try to do things themselves.
I could see clerky going far beyond corporate formation; this seems like just the first step. We used it at first to raise our first seed round, but we continue to add new investors and follow-ons through clerky, since the documents are the same. There are plenty of other flows they can help standardize.
For example, if you do not set up any vesting schedule and things turn sour with your cofounder, you will be in for a rude surprise when it's time t divvy up the business. But if you do set up vesting schedule and yet miss out on 83(b) rule you will be in for an even more rude surprise when the IRS demands the tax on money you don't have.
If I had arranged for a firm to do it, I could take action against them with the knowledge that they have a hefty insurance policy.
I appreciate that in the above scenario is highly likely to arise but wondered if you had given any thought to it? Perhaps the whole process is completely automated so forms are populated using user info (actually I suspect this is highly likely!).
I'm not intending to take anything away from this type of service by the way! On the contrary, I think it's great to bring disruption to traditional firms who charge large amounts for relatively simple documentation.
Your suspicion is correct - pretty much the whole process is automated. Errors are frankly much less likely to occur than if you had a human do it.
But to your point, we deal with liability through self-interest and also regulation. In the unlikely event that something went wrong, it'd be just about as harmful to us as it would be to our customer. So we are strongly incentivized to make things right. But if you don't want to rely on that, we have a bond up with San Mateo county for our document preparation license (which I think you can go after). :)
I believe that DE also requires an agent on-site? Do you provide this the registered agent forwarding, etc?
Very neat idea. Good luck!
We have an optional template that will get you registered as a foreign corporation in California, if you need that (and if you need another state, just let us know). I should note that the California Secretary of State does not accept electronic signatures though, so there is some manual process there.
For DE, we do partner with a registered agent service (all that is handled by us so it doesn't add any extra steps for you).
On a more serious note: you're probably out there reading the comments -- what're your thoughts on this 'kristy?
We send you a unique URL that takes you to the page where you sign documents (and record your IP address). From there, you create a unique electronic signature, which you apply to all the documents (much easier than it might sound). We keep track of your IP address and store a checksum of the signed PDF.
If you're looking at implementing this yourself, Docusign has a great whitepaper here: http://www.docusign.com/images/resources/whitepapers/intl-e-...
Delaware corp features are good for those >0.01% with really serious VC investments. You, %startuper%, do not need that, unless you are living in DE.
1. California Corps and LLC
2. Make California's franchise tax disappear :P
Delaware and nearly every other state require that a company designate a person or company resident in that state to receive certain correspondence from the state and to receive service of process if the company is sued. This person is usually called a "registered agent", "statutory agent" or "agent for service of process".
What does this mean?
Default twitter boostrap instantly is a red flag to me that they haven't invested in creating a good image for themselves (read: trust), and that's really important if you hope to have customers, especially with something related to legal.
Just my .02
Great looking service too.
On the other hand, try to get the start of your customer list above the fold.