It’s Jane on the line, and we’re talking about incorporation today!
We’ve just wrapped up our incorporation process as Userlist, Inc., a Georgia C-corp with three international co-founders. It took us about three months from our first consultation with the lawyer of choice to receiving bank cards in the mail (not counting prep work and research). Today we’re sharing the process — maybe it will make everything less intimidating for you, should you ever need to do this yourself.
Here’s what made our story a little bit more complicated than filling out default forms using services like Clerky. There are three of us, and we wanted to make sure that custom details in our relationship were properly documented. And most importantly, our countries of origin — USA, Germany, and Russia (particularly Russia) — didn’t allow us to use Stripe Atlas which could’ve made the process much easier.
Here’s what we did in terms of prep work and research:
- Long before incorporating, when we got together as founders in October 2017, we signed an “informal” founder collaboration agreement. It was a 10-page compilation of several founder agreement templates that reflected our terms of working together, roles, vesting schedule, and number of shares. We used this method to figure out the fair equity split (ended up being 36% for myself and 32% for both Claire and Benedikt). So we had most of the terms figured out before we even started to think about real paperwork.
- Originally we agreed to work up to $5,000 MRR before incorporating formally. But it quickly became obvious that having proper business setup is essential to starting out.
- We talked to multiple friends, accountants, and lawyers. First, we wanted to figure out our entity type, which ended up a C-corp in the United States — as the most convenient in terms of taxes. Second, we wanted to understand how taxes will work for Benedikt and myself, being based in other countries. It ended up easier than we thought: after purchasing our shares, we had to inform our local tax authorities of “controlled foreign companies” status, and then file annual reports about it. We could pay ourselves as consultants first (which would mean no payroll), and withdraw dividends later if necessary.
- We also had to figure out what state to incorporate in. A lot of companies choose Delaware as a default for startups, but you should keep in mind that being a Delaware corporation “screams offshore” to many foreign tax authorities. So we decided to incorporate in Georgia, Claire’s current state of residence.
- Oh, and somehow we missed an important detail! We forgot to settle on the actual company name before we went to the lawyer. Don’t make the same mistake ?
Equipped with these decisions, we got the ball rolling in May. To start operating as a company, we needed to have a lawyer, an accountant, and a bank account in place.
We hired our lawyer via LawTrades and are happy with the choice so far. We wanted to strike a balance between quality and price (hiring a law firm would’ve been much more expensive). For an affordable retainer fee ($420/year), we get assigned to our own lawyer at a special rate — having one gives you confidence and the opportunity to ask them questions along the way.
Our lawyer Jon registered Userlist, Inc. with the state of Georgia, filed for our EIN, and prepared post-incorporation documents for us to sign. We also had him review the original founder collaboration agreement for an extra fee, to make sure our intentions were carried over to legal documents correctly.
Signing post-incorporation documents turned out a challenge by itself: there’s a huge pile of them, and we wanted to make sure we read and understand everything we sign. For signing itself, I generated a bunch of PDFs and we all took turns signing them using Apple’s signature feature in Preview (thanks Benedikt for pointing it out).
Accounting can be split into actual accounting (CPA advice and filing taxes) and bookkeeping (keeping daily records in place). We decided to hire an accountant first, and then follow their advice to hire a bookkeeper. We ended up going with Startup’s CPA who do both accounting and bookkeeping for a flat monthly fee. So far, they’ve been hugely helpful.
Opening a bank account while being a non-US citizen without visiting the country can be tricky. Luckily, Claire is a US citizen, so she did that in person on behalf of the company. Even with that in mind, not all banks will welcome companies with international shareholders, but ultimately we became proud owners of a checking account in Bank of America.
Once we had that in place, each of us wired their money for shares purchased. We also deposited our pre-order revenue (previously paid out to Claire’s personal bank account) and reconciled the expenses. Before that, each of us had been using our personal cards for expenses (e.g. I was paying for Drip and HelpScout, Benedikt was paying for Heroku, Claire was paying for transcription and legal services, etc). Now we summed up the expenses and figured out the remaining amounts to be deposited — so that total contributions would be proportional to our shares and we’d also have a healthy balance for ongoing expenses.
All of these steps took plenty of time and energy. We’re so relieved that it’s over and we’re all set for doing business! As our friend Ben said, “If you can figure out this crazy situation, then building a successful business will be a piece of cake” ?
None of these things were obvious to us when we got started, so maybe it will help others. We’re all ears for your own incorporation story!
— Regards, Jane.