I am building a startup. Right now I am thinking of having a company that is an umbrella around the different attempts I make. Which would you suggest? Should I incorporate or do an LLC? What are the pros and cons? I am planning to do it in Delaware (as a foreign entity). Is this the way you would go? I am very new to all this stuff as I more on the technical side of things right now
LLC is equally another form of incorporation. It is a legal entity.
A striking advantage with LLC is your ability to control the life span of the business. What do I mean? if you are not so sure of the success of your business and you want to ditch it without much legal obligation, then LLC is the way to go. You can do LLC for just 5 years and dissolved the company thereafter without legal obligations that comes with dissolving a corporation.
I've done both types of formations. I incorporated in the State of Delaware, did my LLC in my home State of Connecticut.
I'd suggest you do LLC first. Give yourself some legal cover, take good advantages that business ownership offers you.
Why do it in Delaware? I recommend doing it wherever it is the least hassle. Until you're making money, taxation is a secondary issue (it's worth paying attention to, but I wouldn't trade anything off operationally for tax structuring until you're making enough money for it to be worth it).
That said, the main advantage of incorporating anywhere is limited liability. Do it somewhere, anywhere.
I would pay careful attention to the laws of the state you're incorporating in, as well as the laws of the states you want to do business in. I know in New York, at least, it's cheaper to create an INC, since LLCs formed in New York have to publish noticies of formation in local newspapers, and depending on where you incorporate, this can cost over $600. Furthermore, to hire people in New York State as an LLC registered outside the state, you have to register as a foreign corporation.
But, the advantage of an LLC compared to an INC is a that you'll avoid double-taxation.
I have formed both LLC and S-corps (INCs) in multiple states, and the biggest factors on my mind are:
The DIY part, for me, is important, since it allows me to learn how business operate in the particular state, gives me a good base of knowledge from which to draw questions when hiring management and lawyers for the corporation, and lets me know that if the business goes bust, I'll be able to dissolve it all by myself.
Having an umbrella company around your different attempts may make a lot of sense. The traditional red flag that is experienced by consultants such as myself when I hear that is -- divided energy. Start-ups are extraordinarily difficult. Focus is essential Focus on one effort -- don't divide your energy among many. Once that is successful and growing you can branch out. You will then have the resources engage a lawyer to properly set up the appropriate structure to "umbrella" your endeavors.