Ask HN: What formation should I use for my business | Hacker News Reader

Ask HN: What formation should I use for my business

3 pointsrickharrison1 comment

I need some advice in how to set up my business. Right now I have some side projects I am developing, which require no investment and would all be owned by one business.

Then I have another idea, which is one that I would pursue for possible angel or VC funding. Now I would only want to give away equity in that application because everything else doesn't require investment. However, I want all of these projects to be tied to one brand.

Do I create an umbrella company, which operates all the side projects and then create another company for the main project. Then does the umbrella company own the share in the project company?

I apologize if this was confusing. Just looking for some insight so here are the main points.

- A few side projects that we want to keep ALL equity

- One main project, which we will look for investment

- Everything tied to one brand.

Thanks

I'm no expert, but I'll chime in with my thoughts. I'd look into doing something like the following, which is largely what you've already thought of:

- umbrella corp

-- project corp #1

-- project corp #2

I'd be working on new ideas (incubating, so to speak) within "umbrella corp" itself, and then spin off a "project corp #" when you're ready to start looking for/making money.

I think there are some disadvantages to this, depending on how your local state/provincial and federal grant systems work. For example, here in Canada, we have SR&ED (Scientific Research and Experimental Development) which helps companies that do R&D by offsetting expenses. I believe that any R&D you did in "umbrella corp" applies only to expenses made within that same company - NOT after you had spun the idea off into a "project corp #".

Regardless of what country you live in, if you're looking to protect your other ideas/IP, you are certainly well advised to isolate the investment-worthy idea in its own corporation, and likely with ownership of the "project corp #" held by "umbrella corp"...

... unless you're looking to give out dividends to yourself from "project corp #" in the future. If you yourself don't own shares, I don't think you could get dividends - only a salary.

Ok, obviously I'm digressing. Final advice - don't listen to me. You'd do well to discuss these particular topics with both an accountant and lawyer. ;)

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