Questions about incorporating

[CardMinger]

Hey guys,

Lately I have been thinking about incorporating and selling shares of my corporation to investors. (I would start some kind of business or invest etc...doesnt matter for this question) I was wondering if anyone could recommend a good book on how to do this, with tax laws, legal etc.

I was thinking of reading "Inc. Yourself" but am not really sure if it covers what I want to do specifically. I am not nearly as concerned about saving on taxes as learning the proper way to incorporate and issue shares of stock to private investors, and all the accounting issues that go along with this. Even online resources would be great.

Thanks,
Kevin

[MrMon]

Incorporating is one thing, selling shares to investors in a corporation is something else entirely. Anyone can fill out the forms to create a corporation, knock yourself out.

Once you start issuing shares, state regulation starts big time and I wouldn't recommend it without some legal advice. Screw up, piss off an investor, and you get to experience the part of the law known as "securities fraud".

In short, if you want to sell shares in your corporation, don't do it yourself. You can pay the lawyers now, or you can pay them later. You have been warned.

[CardMinger]

What about starting the corporation with a large number of partners? Theo nly problem I see right off the bat is in some instances you might have to have every partner present or have them all sign off on something.

Let me know what you think...and thanks for the help. I appreciate it even though it isnt exactly what I was hoping to hear.

Thanks,
kevin

[MrMon]

Again, lawyers. You avoid the securities question and can form an LLP, but you need a partnership agreement. One that allows for governance and doesn't require unanimous consent.

Also remember that partnerships are usually structed so that the partners are pretty equal. Doesn't have to be that way, but it's pretty unusual for one partner to hold 50% and 20 other people to hold the other 50%.

You probably want an LLC, with a limited number of stockholders. But you need to talk with someone who can structure the company to meet your goals. Something that can protect you if the company fails, something that allows you to operate it if it succeeds, and something that is ironclad in the case of immense success, in which case people will be all over you claiming they own a piece of it. Be able to prove they don't.

If you don't think hiring experts is worth it, your idea probably isn't worth pursuing.

[midas]

Card:

If you're going to start a Company - find a reputable lawyer and try to get some cheap advice (pay in stock) to help you out, especially if you are going to sell stock. If you're just going to sell shares to friends and family you do not need to register.

The next important thing is to decide your tax situation because there are many types of corporations.

S-Corps - mom and pop business, corporate income flows into owners tax statements. I think S-corps need to be 100% owned by the operator.

LLC - Limited Liability Company - can have many investors and taxable income flows to each shareholder (member). This structure is similar to a legal partnership.

C-Corp - most companies are c-corps. The Company pays taxes not the shareholder. Shareholders get dividends and capital appreciation.

BTW, if you're just investing, you will want to form a partnership not a Company.

[Sniper]

[ QUOTE ]
Lately I have been thinking about incorporating and selling shares of my corporation to investors. (I would start some kind of business or invest etc...doesnt matter for this question) I was wondering if anyone could recommend a good book on how to do this, with tax laws, legal etc.

[/ QUOTE ]

If you do a search on amazon for "incorporate", you will a good list of books to start with.

If you plan to sell shares, you should definately get legal and accounting advice from local professionals.

You can also check out the following sites for more resources and to actually handle the incorporation process for you:
http://www.mycorporation.com/
http://www.corporate.com/