SE incubator legal options
- We are looking to set up an incubator of sorts where we establish SE
I see two options:
1) Establish multiple corporations
2) Establish one corporation, with multiple subsidiaries
The second option would be more simple... less paperwork with savings on
legal fees. If the subsidiaries become more substantial, maybe we could
then spin off.
- Here are the comments in response to Sam Lam's search for structural options
for an incubator to establish SE ventures. He mentioned two options: (a) Establish multiple corporations, (b) Establish one corporation, with multiple subsidiaries.
(1) From Jim Fruchterman <jim@...>
Since we [Benetech] run a nonprofit SE incubator, I would propose a third
establish a single nonprofit corporation with multiple projects inside
that corporation. This is easier than multiple corporations: single
financials and audit (but where you can zip out the performance of a
venture as a project). It's much easier to go through the IRS process
once for a single nonprofit. Only invest the effort to spin something
out as a separate corporation when it's become successful and needs to
become its own entity for other reasons (better fund raising, risk
If the primary goal is to set up for-profit social enterprises that are
driven by the founding team, those should have their own legal entity
rather than being entangled with the incubator...
(2) From Gerald Solomon <gsolomon@...>
A third is to use a fiscal sponsor and not incur any legal or accounting
or audit costs, and to insulate oneself from all risk and liability.
(3) From Allen Bromberger <allen@...>
First of all, I assume by a "single corporation with multiple
subsidiaries," you mean a holding company, since normally each
subsidiary IS a separate corporation.
Choice of corporate structure involves a lot of factors. You should make that decision only after considering the business model and making basic decisions about how you want your enterprise to operate. In other words, form follows function.
For example, the answer to your question depends on what you mean by an "incubator of sorts." Will you be providing startup capital? If so, is it debt, equity or a combination? Will you provide back-office or management services? Business planning services? Are you renting space to new SE's? Do you expect to have a continuing relationship with the new SE's, or do you push them out of the nest at some point? Will you charge fees? How are you going to be funded or capitalized? Are these all for-profit entities, nonprofits, or a combination? Will the new SE's be doing business with each other or will they be completely separate? Etc., etc., etc.
Not to be rude, but IMHO, anyone who would attempt to answer your
question based on the superficial information you've provided would be doing you a disservice.