This document discusses various business formation options and legal structures for companies operating both domestically and internationally. It provides an overview of sole proprietorships, LLCs, LLPs, S-corps and C-corps as legal structures in the US. It also discusses considerations for incorporating in Delaware and outlines requirements for certificates of incorporation and bylaws. The document gives guidance on establishing operations in other countries and addresses international incorporation options.

1. Company Formation
This presentation is made possible by the support of the American People through the United States
Agency for International Development (USAID). The contents of this presentation are the sole responsibility
of Rick Rasmussen and do not necessarily reflect the views of USAID or the United States Government.

2. Business Formation Alternatives

3. Sustainable
Income
Lifestyle Startups
Startup or
family
business
Pass along to
kids or moderate
exit
• Real estate
• Law firms
• Agriculture
• Provide a needed product or
service
• Share the wealth

4. Search Sell
Hot Idea
Startup
$2 to $50M
Acquisition
Buyable Startup
Social
Mobile
Gaming
Metrics
- Find a hot market
- Fill an immediate need
- Make a quick exit
- Move on to the next
Raise some
seed funds
Hype and
early
traction

5. Scalable Startup
Search
Goal is to solve for:
unknown customer
and unknown features
Exit Criteria
- Business model found
- Total Available Market > $500m
- Can grow to >$100m/year
- Exactly what Venture Capital is looking for

6. US Legal structure options
• Sole Proprietorship
• Limited Liability Corporation (LLC)
• Limited Liability Partnership (LLP)
• Forms of Incorporation
– S-corp
– C-corp

7. Sole Proprietor
• One person acting on their own
– Consulting, coding, recruiting, etc.
– No legal distinction between the
owner and the business.
– The owner is legally accountable
• Easy to hire, easy to fire

8. Why should you be a sole proprietor?
• Can write off all work-related expenses
– Travel
– Meals
– Lower marginal tax rates
• Disadvanages
– No health or benefits plan

9. Limited Liability Corporation
Limited Liability Partnership
• A partnership where all participants share in profits and
losses
• Each partner is liable for their own actions
One partner is not responsible for liability of other partners
• Very common for law firms, VCs and others
• A disbursement of profits among partners as a percentage
basis

10. Structuring a scalable business
• Incorporation
– Protects you
– Defines investor and
shareholder rights
• Register with state
– Set it up properly
• Get a great attorney

11. Benefits of Incorporation
• The corporate wall, the corporate veil
– Personal asset protection
– Against claims for loans, accounts payable and legal
judgments
• Flexible ownership
– Ability to sell stock
– Ability to transfer ownership (M&A)
• Corporate taxation rates

12. Basic Incorporation Requirements
• Corporate Name
• Articles of Incorporation
– Purpose
– Principal place of business
– Number and type of shares of stock.
• Corporate Bylaws
– When annual shareholder meetings will be held
– Who can vote
– Manner in which shareholders will be notified if there is need for an
additional "special" meeting
• All filed with the state of incorporation and a registration fee

13. US – Delaware Corporations
• Considered to be the “normal” place to
incorporate in the US
• Allows one person to be the sole
director, officer and stockholder
• File key corporate decisions
– Borrowing money or buying real
estate
– Corporate minutes and minute book
• Must hold an annual meeting, can be
done remotely

14. Essentials for Certificate of Incorporation and Bylaws
• Non-conflicting name
• Registered agent name
and address within the
state of Delaware
• Purpose for which
corporation is organized
• Number and par value of
initial shares of stock
• Name and street address
of organizing incorporator
• Signature of incorporator
• Location of Office
• Meeting of Shareholders
• Board of Directors
• Officers
• Shares of Stock
• Dividends
• Amendments
• Waiver of Notice
• Interested Directors
• Indemnification and Advance
of Expenses
• Miscellaneous

15. International options
• Where to incorporate?
– Taxation consideration
– IP and patent laws
– Labor laws
– Legal system and ability to enforce
judgments
– Speed and cost of incorporation
– Ability to declare bankruptcy
• Normal choices:
– Home Country
– Country where investment occurred (or
desired investment)
– Stay away from Tax havens (Cayman
Islands, etc.)

16. Going Global – Step 1
• Properly establish your local
corporate HQ within your own
country
• Grow to the point where you’re
ready to do business overseas
– Incorporate in every territory where
you have employees
– Treat these as subsidiaries

17. Going Global – Step 2
• Grow to the point where you’re
doing business overseas
• When to establish a US
Corporation?
– Optional: Have some revenues here
– Required: You’re paying employees
here

18. Business Development
• Setting up an office often makes
sense
• Gain access to the resources of
Silicon Valley for..
– Customers
– Partnerships
• Launch your company world wide as
there are so many scouting posts
from around the globe
• Watch for:
– Visa issues for those coming in from
your country
– Trust issues with local reps as they are
often not “top notch”

19. Going Global – Step 3
• If you’re raising money anywhere
– VC will want local control
– Typically you will need to “Flip”
corporate HQ to source of funding
– Local HQ becomes subsidiary
– No change in stock ownership for
employees.
• Where does IP reside?
– Best protection
– Best taxation situation
Funding
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