No matter how broke you are, you should be able to find a lawyer who can help you get set up. You can use the same founding documents, amendments, and appendices for your future bootstrapped ventures, so it's worth doing it right.
Some firms will take equity in exchange for legal work, so that's also something to consider. I've never used a firm like that, so I don't know how that all works.
A dangerous and extremely common side effect of doing your own legal work is in-fighting with co-founders. When you have rock-solid, thorough founding documents, you've already agreed on what to do for an exhaustive list of contingenies: what happens if someone wants to leave, if someone isn't pulling their weight, if someone dies, etc. etc. My founding docs are about 50 pages.
It's extremely important that you set everything up right, and it shouldn't cost you more than $1,500. I've known firms that will give you a boilerplate package for your particular state for about $500, so shop around.
1. http://www.startupcompanylawyer.com/2008/02/15/what-is-an-83...
1. YC is not gospel, and (by definition) none of their companies are bootstrapped. That means their experience and advice aren't necessarily targeted at people like you.
2. Clerky isn't a substitute for a real lawyer. You and your co-founders might have needs/preferences that aren't represented by a "fill-in-the-blank" document.
3. Clerky is YC-backed, so the recommendation to use Clerky should be taken with a grain of salt.
I can't stress this enough: talk to an experienced, real-life startup lawyer. There is no substitute. I know that seems old-fashioned or inefficient to our crowd, but I've learned the hard way on several occasions that you shouldn't do your own legal work. The cost of getting a professional to do it is so low that it's a no-brainer.
Related to the law you mentioned: it doesn't matter what the vesting schedule is. 20% is 20%. Furthermore, the law is similar to the internship law. Someone has to feel wronged and then report you to the govt or sue you in order for it to be a problem.
Basically the law is trying to protect early employees from being exploited. It's not really targeting founders. Of course, you should verify those statements with a lawyer, as I might be wrong.
The legal structure of a company should be tailored to its capital structure and owner's interests. Delaware C corps are a reasonable choice for companies that have passive investors and whose owners are striving toward increasing outside investment to fund rapid growth.
In the side project state or early prototype state, another simpler less costly form may make sense. An LLC can be acquired by a C-corp when and if a C-corp becomes more appropriate to the immediate future capital structure of a company. What matters early on are:
how control is structured
how new founders may be added
what happens ifwhen a founder leaves
what existing assets [intellectual property] are assigned
to the company.
If everything else failed, side-project definitely helps to find a suitable technical job that fits your resume, because you spend a lot of hours on working on technology you liked. When you are not succeeding, don't forget to open source your work. That add credit, too.
No cash to pay salaries for a funded or full-time startup does mean that the startup is dead, though.