Last year, my company SuperFit was selected to Y Combinators’ online startup school program. If you don’t know, Y Combinator is a popular tech incubator in Mountain View, California that, in exchange for 7% of your company for a 130k seed investment~, provides support, mentorship and the most popular platform for showcasing your startup’s purpose to investors and the world.
What I really like about Y Combinator if we look past its venture motives, is their efforts to democratize the science of entrepreneurship, mainly with respect to technology. For one thing, most of their tips and nuggets of wisdom are posted on their youtube channel.
The largest tangible benefit I got out of Startup School’s was their long list of freebies in partnership with many other companies and services like AWS, Digital Ocean, and Stripe Atlas. (Digital Ocean offered 30k in credits to all their services!). Let’s talk about Stripe Atlas.
Okay, my gripe isn’t necessarily with Stripe as it really should be with one piece of advice from one of Y Combinator’s video lectures on business formation.
Should you elect for an LLC or C Corp?
Based on Y Combinator’s suggestion, C Corp was a no brained. My business SuperFit is already incorporated in NY as an LLC— I thought to myself, “gahh, I should have done a C Corp in the first place!”
I did not plan on doing anything about my decision until I found out Stripe launched a program called Stripe Atlas, which aimed at making the filing for C Corps super easy, and if you were accepted into Y Combinator’s startup school program, you were eligible for the Atlas program at half the price the package would normally cost!
So I did it— Stripe is an amazing company, I trusted the advice from Y Combinator in partnership with Stripe Atlas without hesitation.
Annnnnd then the fees came.
I signed up for a C Corp late in the year, October, and now I’ve got to pay about 50+ dollars on Delaware franchise taxes.
Preface: I am not a lawyer. Y Combinator will often preach that start up companies undoubtedly start C-Corp formations. That may be sound advice for companies lined up for YC’s winter and summer pipelines, but for its Startup School program, which is their equivalent of an online MOOC with office hours, that advice does not hold up with as much certainly, especially for my case. If I had to make an educated guess, I would imagine that got to be at least a quarter of companies in Startup School (~1500) that plan on bootstrapping their business long term as indie hackers.
With that said, there is still a resounding case for forming a C-Corp over an LLC.
For me personally, I’ve decided with an accountant that I should hold off on dissolution of my Stripe Atlas C Corp until the end of 2019, in case I decide that it’s worth going that direction over my current LLC.
To give some credit to LLCs, Facebook started as an LLC and became a C Corp years after— Basecamp and Wildbit are very successful companies building software on an LLC formation.
Bootstrapping for now
If I learned anything on this path to the right business formation, it’s that my interests and long term motivation lean closer to the http://www.indiehackers.com community than YC. YC is great— their podcast series is terrific and they are without question a thought leader in startup culture and tech, but I’ve found that people and companies list on Indie Hackers are more relatable to my daily challenges.