[ixmatus]

Getting into an accelerator or incubator (even if it's one that's not popular) can really help with the legal stuff since you'll be able to get more advice and they will always have those boilerplate docs for you.

Form a C corp in Delaware and get the ownership figured out ASAP. I also generally think that all of the founders should vest (no cliffs or anything, but a four year vest for everyone will keep the company safe in the event one of you leave, even the CEO).

I agree with cglee's comment that you don't need capital right now, get more traction and build more product. Then in six months revisit the topic and determine if your organic growth is enough to sustain further growth or whether you'll need capital injection.

Raising money, btw, isn't always just about the money - if you pick your investors correctly they can help you and your business tremendously.

[rexreed]

Agree with the above - altho forming a Delaware C Corp at this early stage is not necessary. It's become much easier now to form an LLC in your state of residence and convert at a later stage (if at all) to Delaware C if you end up raising money.

[dkrich]

Thank you- somewhere it became lore that filing in Delaware is a necessary step to running a successful business. Most businesses that are cited as examples didn't start in Delaware, but did so after they had much to lose and on the advice of their highly-paid counsels.

If you have $1k in revenue, congrats, that's a great accomplishment, but with all due respect, nobody is going to file suit against a group of college students with $1k in cash.

[ixmatus]

The advice to just get an LLC going first then convert to a C corp is fine for their stage, I won't argue against it. However, what you're saying in opposition to forming a C corp early doesn't feel very rigorous.

From my limited experience as a founder, forming a C corp early has made some things easier. The time we had to convert a California C corp to a Delaware C corp became messy and I imagine converting a {whatever state} LLC to a Delaware C corp also has the potential for being messy.

The conversion cost us a lot of money to have done right when instead taking boilerplate docs and simply forming in Delaware first would have been much easier.

Angels and incubators will generally want you to be a C corp first or convert ASAP, too (which is a valid option but I feel like there are other more important things to be spending cycles and money on). Raising money without worrying about converting your corporate structure is a pretty big reason to just do it as a C corp from the start.

[dkrich]

If you're going to file in Delaware, do so for a good reason. Just assuming you're better off having your legal entity setup there because anecdotally everyone says you should is no better than randomly picking what kind of corporate structure you'll use. What led you to transfer from California to Delaware?

Delaware is chosen by large corporations because it tends to be very business-friendly in the way its laws are written. However many other states are business-friendly too, and charge much lower filing and renewal fees.

What my advice boils down to is: talk to a respected small business attorney in your state and find out what your options are and what advice they offer.

[late2part]

Worry about the lawyers and corp and tax stuff later, when you have some success behind you. Put together a clear written agreement among founders, but don't throw money at the lawyers until you have the money to throw.

[Im_Talking]

Very poor advice. The business is always the product.