What are the unavoidable legal costs to get a typical web based startup off the ground and into a beta launch? Guy Kawasaki pointed out Truemors took just under 5k USD, is that typical?
Depends - We had our lawyer draft the incorporation docs (c-corp) and investment term sheets - We spent approximately $7,500 on the aforementioned items
That said, we quickly spent close to $15k to include: Employment contracts that included equity allocations, IP docs and contracts for two of our larger clients (the bonus here is that we can reuse the contracts that have been tailor made to protect us)
In the UK it's worth contacting your local Chamber of Commerce to see if they have a local BusinessLink. Sheffield Enterprise Network Trust Asc. have so far paid all my legal fees for writing the T&C's & other documents.
They can also provide financial help in other areas too, merket research, branding and general business guidence, all the stuff someone with a tech background might struggle with.
There are limitations to what their funding will cover, and they don't require any equity in return.
I'm on my 3rd company (first web startup), and I've never spent more than $1500 to start. If you're willing to get down and dirty with legal docs, you can easily draft everything yourself (this of course takes great attention to detail and enough confidence in your ability to rid yourself of the notion that they're too difficult for common folk to write) and just get a lawyer to review it.
Then, if you're equally willing to throw yourself into the code and server setup, customer interaction, and the networking that goes along with starting a business, again, it doesn't cost much.
I like LLC's personally because they're simple, protective, and structurally transparent. Then again, I don't usually go out and seek investment funding. I like to startup out of pocket, launch early the agile way, and then fund development with revenue.
"It depends". Search the archives - there have been lots of good discussions about this. I went for an LLC myself, and that seems to be working ok so far.
Starting as a C-corp from the beginning makes it much easier for you to take investment. If you aren't planning on doing that, though, then an LLC or S-corp are fine.
That said, we quickly spent close to $15k to include: Employment contracts that included equity allocations, IP docs and contracts for two of our larger clients (the bonus here is that we can reuse the contracts that have been tailor made to protect us)