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Comment by Nrsolis | Hacker News Reader

Google "piercing the corporate veil" if you'd like an example of what can go wrong.

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.

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I'm not sure the "corporate veil" stuff has much to do with company formation --- except to the extent that you incorporate and operate in crazy jurisdictions like Minnesota, where salary obligations attach to company directors. Most of the "piercing the veil" stuff I've read comes from directors intermingling their own finances with those of the company.

(This has come up on HN before.)

Here is one example: someone is listed as an incorporator (or "promoter") that can't legally be one. Or, ineligible parties are on board of directors. You name it, it's been done.

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.

I dispute the notion that not having an attorney on retainer and maintaining board meetings and shareholder ledgers is going to result in contacts between your corporation and its vendors binding instead to company directors.

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.

crazy jurisdictions like Minnesota, where salary obligations attach to company directors

Can you re-phrase this in a way that's googleable? Thank you.

Being a DE corp really only affects disputes among members of the corporation, not between the corporation and outsiders.

http://www.calstartuplawfirm.com/business-lawyer-blog/califo...

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