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One Good Outline of Legal Matters for Start Ups

Ignoring the high tech and California bias of Ten Questions with Fred Greguras of Fenwick and West and there is a very good post on the issues facing start up companies.

I particularly like coverage of trade secrets and non-disclosure agreements (NDA's) and this passage about limited liability companies makes a great point:

Question: Why don?t I use a Limited Liability Company (?LLC?) since it is cheaper to start?

Answer: An LLC is often used for consulting and smaller businesses, but not often for an operating business that will seek venture capital. You can decide whether to be taxed as a corporation or partnership when your business organization is an LLC. Losses and gains of the business flow through to the shareholders individual 1040 tax return when taxed as a partnership. Venture capitalists won?t invest in an LLC, you can?t grant stock options to employees and other service providers in an LLC, and an LLC can?t be acquired tax-free in a stock acquisition exit

I would add that the cheapness of an LLC is illusory. Most law offices can provide incorporation services less expensively than an LLC due to the LLC's operating agreement being more of a retail rather than a wholesale process.

Summing up the downsides as the California laws do not apply to Indiana businesses and there appear some serious differences, there is a high tech bent to the type of business discussed and they are looking to go from small to very big.

That the post discusses other legal matters that do apply to Indiana start ups.

Full post as published by Indiana Civil & Business Lawyer on November 18, 2008 (boomark / email).