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corporation. So the corporation continues on as a legal entity regardless of any shareholder s withdrawal or death. Finally, and perhaps most importantly, the corporation provides you as a shareholder with limited liability. That is, your personal assets cannot be used to satisfy any debt or judgment against a corporation in which you own shares. And you re not liable as a shareholder for the criminal acts of the corporation. For tax purposes, you can choose to be a C corporation or an S corporation. C corporations pay federal corporate taxes, which currently range in the U.S. between 15 percent and 35 percent of net income. S corporations do not pay federal taxes. The profits (and losses) of the corporations flow directly into the personal tax returns of the shareholders. A full discussion of the advantages and disadvantages of incorporating is beyond the scope of this book. Only a qualified tax accountant and an attorney can tell you if it is the most advantageous business form for you and your partners, if any. A corporation is more expensive to set up initially and to maintain. In addition to annual filing fees, there is a separate corporate tax return that has to be prepared by your accountant. There are also annual corporate formalities that must be done to keep your corporation street-legal. Check the Web, and you ll find lots of sites for do-it-yourself incorporating, usually under $100. The same advice about do-it-yourself LLCs applies to corporations. Don t do it. A lawyer will charge you on the order of $1,000 to $1,500 for a simple incorporation. Given what you will have invested in your product in time and money, and that you ve planned for success and intend to get rich and famous with your software, this is chump change.

Brady: It was. I was never part of those conversations. I was obviously nervous, and I asked, and Jerry and Dave said, No, it s taken care of. Don t worry about it. And it was. Stanford is very progressive in that. Yahoo is far from the first startup that originated there and will be far from the last one. It was new enough, and it wasn t a specific technology; it was a brand. It wasn t really an invention; it wasn t a piece of technology. They were smart enough to know that anything they would do to stifle it would kill it, so their best hope was to just let it go and hope that Jerry and Dave gave money back later, which they did. They optimized their outcome, trust me. Livingston: Was Stanford concerned that Yahoo was going to crash their

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Brady: Yes. That s why they told them to get off. That s what forced the issue. It became so big that it was starting to bog down Stanford s pipes, so they said, You guys need to leave. Livingston: I heard that you guys used Netscape s offices at one point. Brady: We did. Mark Andreessen loved what Jerry and Dave were doing and

heard that Stanford was kicking us off at a certain point and offered to host it for 30 or 60 days.

than anything, the business education gave me the confidence to know what I knew and what I didn t know. I knew my zone of operation and things that I was good at and things where I knew I should go ask because I didn t know what I was doing.

More things to worry about. Insurance. I ll make this brief. You re not unfamiliar with insurance, having at various times bought auto, home, and medical insurance policies. So, if you ve rented some office space, you absolutely need a general liability policy that protects you from someone who walks in, falls down, and breaks their arm, not to mention fire, theft, and vandalism. But the bigger issue for software developers is the question of product and professional liability and whether you should seek this kind of coverage. What you need to know and perhaps more than you want to know about software product liability is clearly spelled out in a document titled Software Product Liability by Jody Armour of the University of Pittsburgh School of Law. It is available online at www.sei.cmu.edu/pub/documents/93.reports/pdf/tr13.93. pdf, and if product or professional liability is a concern for you, I recommend reading it. If the success of your business and hence your family and/or partners families economic well-being depends on both or all of you being present

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