Bootstrapping · Incorporation

How Would You Incorporate if You Were Me?

Amber Pollard Founder

Last updated on March 30th, 2018

I'm bootstrapping a tech project and want to incorporate.
Right now I regularly spend personal funds on cloud hosting and I'll be using contract workers (e.g., Upwork, Fiverr) to build-out features and design.
By end-of-year I'll have subscribing customers for analytic reporting.
I have a college student helping me for free (for a couple of months) as part of her senior project, but I don't plan to have employees for at least a few years.
I'm creating my tool product by adding features to an open-source software with a 2-clause BSD license--(this tool is free to use for commercial use).
I'd like to incorporate so I can:

  • accept subscription revenues
  • issue stock
  • write off personal money I spend
  • limit risk associated with above activities

I live in California. I'm not sure if there's any advantage to incorporating in another state before I have any employees.

Yes, it's up to me and YANML but if you were me:

  • HOW would you incorporate (what type of corporate and in what state) and
  • WHY would you choose that?

Thank you!

John Wallace Co-founder of, software architect, and former CEO of an Inc 500 company

March 30th, 2018

I would, yes. It's an easy process to incorporate as either an LLC or an S-corp. You can buy the forms online and then file them in your state. Will cost you a couple of hours and a couple hundred bucks.

Incorporating allows you to create a protectable business structure and limit your liability.

I would be extremely careful about issuing stock to anyone other than yourself or a partner who provides substantial value. Stock links you to that person forever. Giving out stock as payment for services creates a lot of problems.

As far as writing off personal money, you will be contributing after-tax money to your company. You can deduct expenses from revenues generated by your company, but you'll need revenues first.

Terry di Paolo AgentLabs

Last updated on April 3rd, 2018

Definitely get an accountant and a lawyer first - you are going to need them if you are going to get where you want to go so make those relationships now. I wouldn't even think of making a move without either -

I had to be an in-state LLC for my business, but my lawyer suggested several strategies that cut the cost of registering and publishing. We also took a look at several ventures I am building to see where the liabilities lie and he offered some structural ideas that he felt would work best the way I am planning on growing. My accountant took care of the reimbursements I made into my business and recently had me make some other adjustments due to the new tax environment we are now in. When it comes to money and the legalities of things, I always defer to an expert and find their services worth every penny.

Mohammad Farhatullah CEO

April 3rd, 2018

Do a C-Corp incorporation in Delaware - easiest and very cheap or closer to California , do C-corp in Nevada.

Once you incorporate, you can get merchant account which will allow you to accept subscriptions and do all other that you have mentioned above.

Steven Fried Founder, CEO, and General Counsel

April 4th, 2018

If you live in Cali, incorporate there. There is no benefit to incorporating in another jurisdiction, except that some investors prefer Delaware C-corps and you can also move the company easily and inexpensively if an investor requests it. If you have an office, employees, or any other business presence in CA, you'll have to register there anyway. Otherwise you just pay taxes in another states for no reason. And Nevada is making it more difficult for out of state companies to incorporate, so if you want an option out west you'd use either Wyoming or South Dakota.

I would start as an s-Corp. You can always drop the designation (a quick letter to the IRS) if you need to be a c-Corp for investors. I would not do an LLC. Investors don't like them and as a practical matter I don't think they provide as much protection as corps even though legally they are supposed to.

I work exclusively with entrepreneurs and startups and will be happy to give you the whole 'spiel' if you want to talk.