tmarman

Yes, I think you're right on that distinction, and I guess I sort of internalized that. As Seth discusses to in the linked article, things don't become "iconic" without at least being "good enough" in that category - so if you're saying you're the "next" something, they're probably at least good enough.

I think you were both saying the same thing. C-corp is taxed on its profits, and then employees are taxed on their wages. S-Corps and LLCs are pass-through entities where the profits are "passed along" to the individual owners, so you only pay once. Obviously, there are some benefits with a pass-through entity but also some real concerns for outside investors.

The problem that I mentioned in my comment with this is that Nevada's body of precedent is not nearly as well-established as Delaware's, so you're going to pay to litigate otherwise settled issues in Delaware. Often, even if the other state is more founder-friendly, it's often better to use Delaware because you'll save on legal costs across the board (more lawyers able to do DE work, less cost litigating, less question marks and uncertainty).

Of course, that varies from state to state and certainly depends on the kind of business and cap structure, where you're doing business, etc.

Some excellent discussion above.

There are really two decisions to be made here - the choice of entity and the choice of state.

Delaware is the choice for two big reasons: it is generally considered one of the most "founder/board friendly" venues, and it has one of the well-established bodies of law so you don't pay to litigate issues. Another important side effect is that any lawyer in any state is qualified to validate coprorate structure, whereas in another state you need to find a local lawyer. I wrote a little about this in the past: http://bit.ly/31lbT2.

As for choice of entity, well, that's complicated which I went into a little more depth with here: http://bit.ly/cIpSL.

S-Corp and LLC are both known as "pass-through" entities which as mentioned by cch don't pay tax directly - the members/owners do. This also means that the members/owners can't file their personal taxes until the corporation files its own. This is generally best for closely held companies where you don't want to bring a lot of people on, give options, and you're operating with tax losses (to take advantage of the write-offs on your personal tax). Plus, unlike a C-Corp, you're not double taxed.

On the other hand, VCs can't and won't invest in anything but C-Corps (http://bit.ly/mKx08) - so if you're thinking about going this route, it may be better to just do c-corp right away and minimize your legal expenses.

My summary in that first article:

"If you're actively seeking VC funding (VCs will only invest in C-Corps) and don't anticipate significant tax losses (which is probably the case with many technical startups), then C-Corp is usually a good choice. If you want to take advantage of the pass-through taxation, Imke has a good discussion on choosing between an LLC and an S-Corp. Partnerships are ok initially, but best avoided given the lack of a liability shield."

I live in Brooklyn myself, but Williamsburg isn't terrible convenient. It's equally inconvenient for people coming from UES/UWS and NJ. It would be best if we picked something equally accessible to everyone - in my experience Union Square West Village are usually good middle grounds.

That said, I'm definitely interested. Don't think I'd be able to do it on 7/20, but we should make it a regular thing (and even rotate location). Can we make a Google Group for this or something?

And I should point out the title was maybe a little over the top... the article doesn't really say you shouldn't start a company in SV, i.e., that you should move away... just that there are compelling reasons to consider not moving to SV to start that company.

Maybe that's part of the problem... the echo chamber of people building things that don't have a clear market, or it's "just technology" and not a business by itself.

There are plenty of venture-backed companies based in NYC, including many that weren't funded by the many NYC-based VC firms and many by first-time entrepreneurs. E.g., Meetup.com was backed by DFJ in Menlo.

The consultant/contractor would likely be to avoid payroll taxes/withholding/processing fees with TriNet etc - not to avoid giving equity. (And, technically, it's illegal to "pretend" someone is a contractor when they're not - but that's a separate issue :)

Remember, this is all at-will employment - either of you can end the relationship at any time. This is where an equity grant/option with cliff vesting comes in. 4 yrs with a 1yr cliff is fairly standard... In other words, if you get fired or leave before 1 yr, you don't get that equity/option and it reverts to the company.

Good advice from ajross and pg. The fact that they don't have an option plan in place suggests that it's definitely very early stages. What level of funding do they have? Especially if you're that early, you should DEFINITELY be seeking equity.

To put it in perspective, we just made our first non-founder employee - a senior developer - and we gave up 4% to get him. It's on the high side, but as a first hire and someone who we didn't want to lose, we were willing to give that up.

That said, the legal costs with creating an option plan (and registering for business in the state if it's a DE corporation) are not insignificant. Especially if they don't have much money yet, and want to spend that mostly on talent, that can be a factor here.

If they haven't done an equity round yet (i.e., valued the company), then the stock is effectively worthless (par value is probably $0.001 per share or something in that range, and normally you would see something like 5M shares authorized and outstanding). So in this scenario, an option with this strike price is effectively the same as an equity grant.

We were lucky - we're doing our initial stock purchase agreements now (we incorporated awhile back but had to redistribute some equity as involvement with co-founders changed) and we were able to include our first hire in that plan. We all have the same vesting schedule - 4 yrs prorated with a 1yr cliff - but our initial dates are a year or so earlier than his. This saved us at least 5k in legal fees.

My advice would be, like ajross and pg suggested, to negotiate what equity will be granted - even if they don't yet have the means to grant. And, if they wanted, they could also sell you shares under the same original purchase agreement (assuming they have a vesting schedule they're happy with, and they had some authorized but unissued shares).

Basically, if you want the job and like the company, take it - but if you don't negotiate the equity now (even if it can't be executed yet) then don't expect it later.

Yes! We have plenty of events in NYC outside of "Internet Week" as well. Check also check out http://alleyreporter.com or http://nyctechevents.com.

I'm not familiar with Tweetscan's specific implementation, but I would assume they're just grabbing the public XML feed, no?

Remember the Name by Fort Minor. The chorus:

"This is 10% luck, 20% skill, 15% concentrated power of will, 5% pleasure, 50% pain, and 100% reason to remember the name"