Incorporation · C-corp

What are the typical costs to file a C-corp?

Murali Sangubhatla Co-founder at 500 Miles

October 2nd, 2014

I am in a pre-funded stage and deferred the formation of an entity until now. Based on the recommendations on FD and other online resources, I would like to setup a C-Corp and have the following questions:

- What are the typical costs of filing a C-Corp in the bay area?

- In one of the discussions, it was mentioned that fees deferral is pretty common in the valley. What are the usual terms for payment deferral until a round of funding?

- What are some of the other contingencies that one should be planning for, in setting up a C-corp (example: tax preparation fees, franchise fees etc.,)

- Does anyone have experience filing C-Corp with S-corp election? (for tax flows in pre-funded stage)

Kevin Lentz

October 3rd, 2014

If you plan on getting investment, make sure you set up the stock correctly - authorize 20M shares, issue 10M, and make sure you include F and FF stock for your own protection. 

Eric Rogness Technical Product Manager

October 2nd, 2014

Just use Clerky and you can avoid all this. You'll get a Delaware C Corp set up just the way YC and any other Bay Area investor wants it to be. Of course, you'll still need to file taxes and pay $100 annually for a registered agent.

Brenton Webster

October 4th, 2014

The online options mentioned in this thread will help you get this done cheaply, but make sure you fully understand the docs you’re creating and filing. Forming your company is not an area where you want to be skimping on cost :)

 

If you want to go with an attorney, you can get a C-corp setup for no more than $2000 + filing fees. Some attorneys offer flat fee structures for creating companies (eg Walker Corporate Law: http://walkercorporatelaw.com/), many firms won’t have this fees structure by default, but you should be able to negotiate either a flat fee or a cap on fees.

 

I ended up going with a major firm and negotiated a flat fee of $1500 + filing fees. You’re going to need an attorney for a lot more than just starting the company and the right attorney you’re looking to build a long term relationship with will realize this as well.

 

Some firms will offer to defer $10-20k or so of fees until you get financing, but remember you’re still going to have to pay this bill later. I don’t really consider this to be a good deal. Another thing I’d be cautious of is if a firm that wants to take some equity (eg 1% or so) in order to do so. Sometimes they’ll offer a reduction in fees as part of this deal (eg 10% off). Their argument will be that it will align their interest with yours, which in a way is true, but even with the 10% discount they’re still charging you $500-600/hr. I don’t think that’s much of a deal either.

 

Bottom line - you can get this done online for a few hundred dollars (just make sure you know what you’re doing), or you can go with a reputable firm and get it done for $2k + fees. You shouldn’t really need to pay any more than that.

 

Cheers,

Brenton

Jallé Dafa Co-Founder, Belaprint

October 2nd, 2014

You should file in DE.

Cooley and Orrick both have online forms. Cooley also has informational videos that are helpful.

Cooley:
http://www.cooleygo.com/info-hub/documents

Orrick:
http://www.orrick.com/practices/corporate/emergingCompanies/startup/forms_index.asp

Cost for filing is around $100. You will also need a registered agent which is $100 or so per yr.
So total ~$200 for incorporation.

Good luck.

PS If you have cofounders you will want to set up founder's agreements shortly after you incorporate.

Murali Sangubhatla Co-founder at 500 Miles

October 7th, 2014

These are very helpful additions and comprehensive answers, thanks for your advice everyone. Cheers!

Anonymous

October 10th, 2014

It depends on details. I have started several C-corps, and costs ranged from about $1,500 to $2,500. I suggest you use the services of a corporate attorney. You can do it without one, but I think their service is generally good value.

Daniel Austin Founder and CEO at GRIN Technologies, Inc.

October 2nd, 2014

For Delaware incorporation, typical costs are around $3000-5000 in Silicon Valley, depending the complications involved in setting things up. Regards, D-

Murali Sangubhatla Co-founder at 500 Miles

October 2nd, 2014

Before posting here, I was confused about the broad spectrum of costs (few hundreds to 5k). Your answers help explain the variations.

Thanks for the pointers and advice everyone, cheers!

Bobbi Goldin CEO at Jazzle Lane, Inc., Freelance Writer, Songwriter

October 7th, 2014

My experience was, if I recall correctly, about $5000 including fees, DE & CA document filings and related matters.  The only reasons to not do it with an online service is that you really do need personal advice on the stock plan you're creating and there are other matters that need to be dealt with that might be left out in a boiler plate agreement, which is what you're likely going to find at an online service. For example, the person who suggested issuing 20M shares--well that may not be appropriate for your company. Mine did not start with 20M and I had a top attorney in Silicon Valley.  The stock plan is very important and there are other matters you'll want expert advice on now, not later when it could be too late.  

I founded an LLC with a partner through Legal Zoom and when the partner  had to leave the LLC, I met with an attorney who showed me what was in our legal documents was bare bones and insufficient in many ways.  There was a lot missing he felt should have been there and which would have helped significantly with the matter we were addressing.  So I don't know enough about any of these online services others are recommending, but I do agree with the person who said you're going to need an attorney for many matters anyway and I think it's better to pay more now for a good attorney who knows  what should be included and can construct the stock plan that makes sense for your needs.

Tim Parks VP of Growth at UpCounsel, Inc.

October 2nd, 2014

Hey Murali-

Full disclosure, I work for UpCounsel, but if you would like to speak with a vetted attorney with startup experience, you can post a free job here:  https://www.upcounsel.com/job/new

If you have experience setting these up on your own, it would be probably be cheaper to use a service like clerky or bizfiling, but UpCounsel will be 50% cheaper than working with a law firm

happy to provide any additional information if you have any other questions.

good luck.