Ask HN: Bootstrapping with 2 founders

[MuEta]

Hi HN. My partner and I have a Delaware C Corp all formed and are getting ready to do our initial investment. We want to maintain a 50/50 equity split, but I want to put in $1k in a lump sum and he wants to put in $8k in 4 installments over the next three months. What is the best way to arrange all of this investment to lower complication and tax burden? Thanks!

[smt88]

Hire an experienced startup lawyer. I can't stress that enough. I actually think a C Corp is a huge problem related to taxes and that you need to switch to LLC, but I'm not a lawyer or accountant.

Also decide who makes final decisions, since you have equal votes. Decisions should never be made by committee, even if the committee is only 2 people.

[popey456963]

Why do you oppose decisions by committee?

[smt88]

"A camel is a horse designed by committee" is a popular cliche, and it's true. Committees are a mixture of visions, and you often get the worst of both worlds.

For a startup, losing time is death. You're often choosing between option A and option B, and neither will kill the company, but you end up arguing about it forever. If one single person doesn't have the authority to say, "We've argued enough, and now we're doing A," then you'll lose valuable time and die.

[boniface316]

I agree with the above statement. In the startup world, one person is doing at least 5 people's job. In my startup, I acted as COO, CTO, product manager, contract manager, team lead and more. If someone arrives 5 mins late to a meeting he/she is technically wasted 5 people's time. So that 5 mins wasted gets translated into 25 mins. This is why it is important to have delegation of authority and boundaries. I am now mentoring a startup of 7 students, its been 4 weeks since they came to a conclusion on their marketing campaign.

Committee gives you a perspective from different people. Which is valuable! Have the meetings if and only if you or them have to go outside the delegated authority to find a solution.

[saluki]

Definitely get a lawyer . . .

y agree with smt88, C corp is prob. overkill and could introduce tax issues go LLC first.

I would just have each of you track what you invest as expenses for the LLC, then get reimbursed once you are profitable and keep your 50/50 ownership split.

The two of you should be able to make decisions together, I expect one of you are handling marketing and one technical anyway so you can probably defer decisions in those areas to each other.

Good luck.