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Comment by tptacek | Hacker News Reader

In the US, how is "adopting the wrong corporate form" a terrible mistake? Your realistic choices are LLC, S, and C corporation, and the only thing you're likely to do wrong here is spend the extra time, money, and heartache setting up a C.

You should engage a lawyer for transactional work like contract review, of course. But I don't read this article as an argument for not having contracts reviewed. Rather, it's an argument for keeping your legal overhead transactional, rather than integrating a lawyer into the early planning stages of your business.

I think your comment is a bit hyperbolic.

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Maybe it is hyperbolic; it's probably obvious that the OP has me pretty agitated.

I won't go into detail unless it's requested, but choosing the wrong corporate form cost my business a multiple of the $9K sum the OP mentions in taxes and legal fees arising from the lack of protection afforded by the right form (which was for us an S corp). If we'd done it right in the first place by shelling out the money to a good attorney, we've have saved some scratch and more importantly, time.

Bottom line, this advice is just really dangerous. The pennies saved by not consulting an attorney or by self-researching can end up being very costly, and the worst part is that you don't know what that cost is until you find yourself with a big tax bill or a liability you didn't forsee when you were trying to play lawyer.

I may be committing the sin of taking my own experience and making a rule out of it. Having been through some nastiness that could have been avoided by paying for good legal counsel makes me twitchy about this issue.

Protection from what? Liability to customers, business partners, and people affected by your business? Or liability to company members with equity claims?

I'd like to know more about what kind of legal threat an S corp is specifically better at protecting you against. Were you a C corp before, and had a company officer problem?

You mentioned taxes. Taxes are a huge difference between company structures. But you don't need a lawyer to sort that out; you need an accountant. And you probably don't need the accountant until you have significant or prolonged revenue. Either way, the tax problem with company structures is one that every freelancer has to deal with, and most of them don't spend $9k on legal fees to work it out.

[Edit]: Part of this conversation has gone offline into email, and without putting it on HN, I'll reiterate: get client/customer/partner contracts reviewed. Nobody should argue that you should skimp on contract review.

What tptacek said: get everything you sign reviewed.

I re-read the OP; the overall point there was to be financially prudent, e.g. don't waste money. Don't pay an attorney for work he/she doesn't need to be doing.

The counterpoint is to pay them for the work that they _need_ to be doing; but without legal knowledge it's hard to know what that threshold is. I'd encourage people to err on the side of caution and if there's any doubt at all, engage legal counsel.

So again....how was your business hit financially by filing incorrectly?

Glad you have an opinion on erring on the side of caution- you've stated it - perhaps now you can answer our questions and share your story.

His story involves contract review. You should get contracts reviewed.

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