Saturday assorted links

1. Review of the new Richard Posner biography.

2. How to read a closed book.

3. The blind astronomer of Nova Scotia.

4. “Patrick describes the success case for Atlas as being visible in global macroeconomic indicators, which is crazy.

And this:

A couple of months ago, Patrick Collison came to me with another crazy idea. He said Stripe wanted to make “simple incorporation as a service”, so that any entrepreneur worldwide could have a corporate entity and a bank account spun up about as easily as they could get an EC2 server.

This idea is crazy. I’ve incorporated four companies and opened business bank accounts for all of them. The most recent required over a hundred pages of documentation and six weeks of negotiation to assuage a risk department’s concerns about foreign tech entrepreneurs. (Thanks, Bitcoin.) You’re not supposed to be able to do this.

Stripe did it. With crazy speed: the project was in beta within 11 weeks of conception. It can take that long to form a single company in much of the world. Stripe solved the problem like an engineer: establishing one company requires an annoying amount of form-filling so instead of buckling down and doing it you just make a company-establishing web application and abstract away form-filling for all time.

And they’re crazily ambitious about where it ends up: not simply incorporating companies, but eating all of the crufty back office work which distracts Internet businesses from getting more real products into the hands of real customers. Payments, contracts, invoices, bookkeeping, incorporation, taxes, etc etc, all things you have to do even if what you’re actually doing is selling bingo cards to elementary schoolteachers.

Crazy!  But stay tuned…

5. Meanwhile, the surf wars are growing more violent.


4. When machines do all the work on both sides of these essentially inane and useless stuff, when will consensus arrive that we should just unplug the things to see if they are missed?

When my boss retired and I took over the customers, I applied for a contractor license under the Safety Authority in BC. It took them 13 months to arrange a one hour interview where the salient issue was whether I had paid $275 for a book about as thick as a dime.

4. Okay, so there are skimmers who take their pound of flesh for every internet sales transaction, in many case two skimmers (the credit card company and the processor). Skimming can be a successful business and has made some billionaires. I won't name names but one famous skimmer supports Trump. Is Stripe just another skimmer, adding a third skimmer to internet sales transactions? Or is it something else? One would have thought that the internet would have reduced transaction costs, reduced them to near zero. But there's no money in that.

Sounds to me like they're trying to take a pound of flesh out of lawyers and administrative fees.

I wouldn't refer to Paypal or Stripe as skimmers. They definitely provide a necessary service. (Although I'm glad to not be using Paypal as I detested working with that API and company.)

For many online businesses, these fees are effectively zero. What we need is for someone to figure out all the complexities and give us a simple API so we can focus on our business, without needing to understand the details of payment processing. The first online payment processing I implemented was in 1999 and back in those days, it was mind bendingly difficult compared to today. Today, you can be taking payments (and subscriptions) online with Stripe in an afternoon. Time is worth money for us folks.

These payment services are similar to Twilio. Twilio (and others) figured out all the SMS/phone complexities and exposed a simple API for developers to use. At $.01/text, that's an awesome service. Not skimming.

Atlas is interesting in that for a place like Wisconsin (where I created the online LLC filing) this startup process is not burdensome. Perhaps Atlas is focused on other jurisdictions?

This is not going to be a successful company. It isn't that hard to incorporate. You can do it in like 10 minutes on most state websites. The reason forming a company takes forever is when you have multiple people, you need to figure out your business deal. Who gets what equity, what kind of equity, what about options, what kind of contingencies for decision making authority, liability and indemnity -- the kind of stuff tunnel-vision optimistic businesspeople think doesn't matter until years (or months) down the road when oops it matters because now we don't all agree anymore and the initial optimism has faded and there's real money or liability on the table. Single member LLC takes 10 minutes to form. Literally 10 minutes, or not even. I just can't believe there's a market for this other than perhaps by people who don't get what is really going on, half-ass it, and then really pay for it later. Ditto on "master service agreements." I have a better idea: just don't do any of yor legal due diligence, and if you never need it you won't know the difference. Because when a court looks at the operating agreement your app cooked up for you, you've basically got the same situation on your hands, because neither you nor the court will have any clue what the hell to do with it.

Regulatory stuff I'm totally sympathetic too. Dumb forms that serve no purpose, fine. That's not what's going on with incorporation documents. If you think it is, you aren't sophisticated enough to be in business.

Not to mention I think legal zoom does incorporation?

It does. But beware, it doesn't really help you do it well.

I made some decisions that were boo-boos and had to hire a real attorney later on to fix them. But when you're just starting a company, its hard to see the problems.

Did you even skim the article? The whole point of the company is fixing the friction for international customers.

One size doesn't fit all - and that's what these types of services do. On the other hand, I've been amazed at the bad advice professionals give to their clients about business and entity formation. There's a lawyer in my city who specializes in converting professional corporations into LLCs so spouses of the professionals can be added as owners to insulate the assets from claims of creditors. The thing about spouses is that spouses get divorces, really ugly divorces. It's bad enough when the spouse has claims for support, but altogether different when the spouse claims ownership of the practice and the other professionals/owners are drawn into the very ugly dispute. And this lawyer tells his clients that it is malpractice not to put professionals into this potential disaster. Here is the best advice I can give: when forming a new business entity, choose an LLC as the form of business organization (organize it in your state, as it won't make much of a difference at this stage) and elect partnership tax treatment (it takes two to be a partnership) - do not let the accountant file an S election; he will recommend it, but don't do it, and if he insists, he's a moron and fire him. Get a lawyer experienced in this type of thing to prepare an operating agreement that fits the particular situation - as with most contracts, it's intended to avoid litigation, in this case litigation between partners if they have a falling out (i.e., the operating agreement addresses how to resolve disputes, the consequences of death, etc.). There, and my advice is free.

Why would you not want a S election?

I have an LLC, pass through, partnership, but the taxes were killing me because we have a lot of inventory for our business.

Selecting to be taxed as an S corp has solved a lot of those problems.

Now you have me worried that we did something wrong.

Harun, S corporations and partnerships are both pass through entities, it's just that partnerships are much more "tax efficient" (as tax lawyers and tax accountants use the term). Ask your accountant why he chose S corporation over partnership treatment for tax purposes. The reason most accountants do is because they are more familiar with the rules for S corporations than for partnerships. For a little encouragement, if your business goes nowhere, it won't make a difference. On the other hand, if your business becomes the next Facebook, sue him (for all the extra expense you will incur as a result).

You can't tell a book by the cover.

#5 - Surf Nazis / Surf Wars - "In March, a group of plaintiffs, including a local police officer, filed a class action lawsuit against eight alleged members of the Bay Boys (with the intention of adding more defendants later), accusing them of harassing visitors who tried to surf the bay, home to a high quality reef break accessible only by a narrow pass down the bluffs. According to the court filing, the Bay Boys have thrown rocks at surfers trying to scramble down the cliffside trail to the beach, slashed tires, and physically fought outsiders for surfing “their wave.”"

THIS IS OLD NEWS. I remember from ten years ago reading about this in Hawaii and hanging out with a prominent surfer dude (who travels the world looking for waves) here in Greece. Very common. Too common to comment. Surfing is very tribal.

So common it's a tragedy. Coasian solution?

Fairest solution would be to offer off spots in such crowded locations via lotteries.

What's fair about a lottery? Those with strongest desire and willingness to pay are likely to get left on the sand.

Those with the strongest desire will buy more lottery tickets.

I know 40 year old stories of similar, but I guess I am not surprised that it could get worse. Population pressure.

Localism at surf breaks is not getting worse--in fact, by all accounts it's gotten much better, but there are still pockets in places like Lunada Bay. The lawsuit has merely drawn attention to it.

At 4. I applied for their beta and after initially accepting my application and inviting me to join they then did a 180 degree and said my company (educational placements in Africa based in Africa) was outside their "risk" profile. I have a feeling that the types of overseas businesses they will eventually be able to register will be very, very, limited. More hype than anything so far but I wish them luck.

4 I'm not sure what is innovative about Atlas it seems to be another Company Formation Agent which are hardly a new thing, The UK has loads of them
A list of 125 agencies published by companies house (the official registry for all companies in the UK) is at:

#3 a blind professional astronomer

If Posner had only stopped before the GFC we could honor a great man.

But it broke him and turned him into another stilly progressive.

Shame. Fine brain destroyed.

The review (by Paul Horwitz) suggests or implies that Posner's most recent pronouncements are the product of encroaching senility, but I for one am not buying it. After all, Posner is totally right about Scalia and the Supreme Court generally ...

what about 'the economics of justice? his most famous book?

I wonder how FinCEN's new Customer Due Diligence and Beneficial Ownership rules will impact Stripe Atlas business model? At the very least, I would be curious on how they integrate "APPENDIX A TO § 1010.230 Certification Regarding Beneficial Owners Of
Legal Entity Customers" into their online form process.

And more importantly, does Silicon Valley Bank have the risk appetite to keep this arrangement intact?

Comments for this post are closed