Corporate law · Accounting

How would you handle corporate issues when you make a major pivot?

Michael Lin Internet Entrepreneur

March 17th, 2016

Let's say you've spent a couple years building a mobile/web service for photos. Then you decide you can't compete with the firepower that Google and Facebook are throwing at the category - so you pivot. You have a lot of platform technology that can be re-mixed to into a social-eating app. 

What would you do with a legacy DE C-corp structure with a single shareholder? What are the comparative advantages to keeping it vs winding down and starting something new? Is it easier just to have a fresh-start?

Steven Wolk Principal, Strategic Investment Consulting

March 17th, 2016

Michael, why would you even consider winding it down? 

First I need to say that I'm not an attorney and can't offer legal advice. For legal issues (and this may be one) you should always consult an attorney.

If you're concerned about brand, then create a new brand. If your entity has debt and you want it to file for bankruptcy, then you'll still have a problem since you can't just convey an asset that you have in the corporation to another entity.

To wind down and then create a new corporation is time consuming and costly. As long as your corporation is sound and you have been following all of the rules that make it a corporation (such as annual meetings and much more) why not keep it?

One possible consideration though is: do you even need a C-corp? Are you planning on making your company into one that VCs will want to invest in and you may want to provide options to employees? If the answer is yes, then it might be a good idea to have it. If the answer is no, consider a much simpler LLC or S- Corp that could provide better tax benefits. Of course as mentioned before, check with legal and accounting experts to find out which type of entity is right for you.

Andrew Oliveras Andrew L. Oliveras, Esq.

March 17th, 2016

Assuming you're up to date with tax filings etc., and there are no major liabilities attributable to the company (long lease, lawsuit, major debts) there really is no reason to go through the expense of creating a new entity and then having to get new bank accounts and any other company specific things you may already have (bus cards stationary etc. If the bylaws or charter are written so specific as to only allow for that one particular business goal and doesn't allow for anything else, first get a new lawyer, then amend the the charter/bylaws to allow for it. Andrew L. Oliveras Sent from my iPhone, please excuse any typos. The Law Office of Andrew L. Oliveras 26 Strangford Ct. Oceanside, NY 11572 p. (516) 449-4001 f. (516) 908-7950 This e-mail may contain legally privileged and/or confidential information. If you are not the intended recipient of this e-mail, you are hereby notified that any dissemination, distribution or copying of this e-mail or its attachment(s) is strictly prohibited. If you receive this e-mail in error, please immediately notify me at the number listed above and permanently delete the original and any copies.