The reading level for this article is Novice
April 15, 2003…
I had been wearing a suit for thirteen hours. I came in, unbuckled my belt, and let out a sigh of relief. I walked to the balcony and leaned, fending off my drunk suitemate. Finally, the day was over. I had a splitting headache, but it was worth it.
A First Trip to the Lawyer
I woke up that morning at 8:45am, rather early considering I had gone to bed at 4am. I put on my new suit, brushed my teeth, and went down to the ground floor to meet my friend and business partner Aaron. I jumped in his car and we headed to Raleigh. Thirty minutes later we ended up at the entrance to my law firm. We waited in the board room for ten minutes before being greeted by Merrill, our attorney.
We told Merrill that we wanted to start a company. Both Aaron and I had incorporated companies before, so we knew the basics. But we had some questions on the proper vesting schedule, profit sharing agreements, and some terms in the shareholders agreement, so Merrill helped us with them. During the meeting we agreed to vest our stock over two years, which means that we would receive the stock gradually over time as it vested to the full amount. We also decided to incorporate the company as a Deleware C corporation due to the advantages in case law, added ease in raising investment funding, and advantage in the case of an exit event (selling the company).
To close the meeting, Merrill told us what we needed to get to him to get the company going. He needed the name of the company, the state of incorporation, the breakdown of ownership, the vesting schedule, salaries, the bonus schedule, the number of shares to create, the address of the company, and what we would define employment as for each person’s employment agreement. We agreed to have the ‘who gets what and what should we call this company’ discussion later on in the week and send everything to him then.
After the meeting Aaron and I drove back to Chapel Hill. I had already missed my History Recitation on Cardinal Richelieu and was not about to show up to my 12:30 psychology class in a suit. So I had Aaron drop me off at my dorm on south campus and then walked down to the Kenan Center where I work at the Center for Entrepreneurship and Technology Venturing (CETV). I had some prep work to get done for the next big event in my day.
The Start-up Clinic
In five hours the CETV Start-up Clinic would commence. I had been planning this event for a month and was excited that the day was finally there. Before then, I had a brochure and survey to create and a presentation to prepare. I finished these, and then went to the room to check that the A/V equipment was working properly.
At the clinic, six businesses run by UNC students would be presented to a panel of experienced coaches including two successful entrepreneurs, a venture capitalist, and two business professors. Each business would have five minutes to make a presentation and then ten minutes for feedback and advice from the coaches. At 5:20, I went down to the McColl 2575 where the event was to commence in forty minutes. I met with the presenters and then welcomed the coaches. By 6:00pm about sixty audience members had arrived. We began at 6:05. A team representing MainBrain School, a company selling school administration software began their presentation at 6:15, followed by Alpha V, Inc., IntelliContact Corporation, UNM Solutions, LLC, VenturePresentation, and GMA Entertainment, Inc. I moderated the event and also presented IntelliContact, the email list management software company I am co-founding with Aaron. After the clinic we held a reception at which the presenters, coaches, and attendees were able to network and exchange advice and contacts.
Following the reception I cleaned up and then got a ride back to Ehringhaus Dorm. I had been wearing a suit for thirteen hours. I came in, unbuckled my belt, and let out a sigh of relief. I walked to the balcony and leaned, fending off my drunk suitemate. Finally, the day was over. I had a splitting headache, but it was worth it.
A note on incorporating
In general, when incorporating a company, one does not need to go to law firm. If incorporating a company in the U.S., one can do it online for about $220. One simply needs to know the name of the company, the number of shares they wish to create, and which state they wish to incorporate it in. Once incorporated, one will receive their Articles of Incorporation from the State Attorney’s Office and a set of by-laws and stock certificates. Once this occurs, you contact the IRS to get an Employee Identification Number (so you can open a bank account and hire employees) and choose whether to continue as a C corporation or file form 2553 to elect to be an S corporation.
It can be a good idea, however, to incorporate through your law firm however. Especially if it is your first time incorporating or if you have more than one founder. In our case, we wanted help because we had never incorporated a company with more than one founder and wanted access to the good connections of our lawyer. Incorporating through a lawyer can cost anywhere between $500 and $2000 depending in the services you need.