Advice on starting a company where founders are in different countries?

My co-founder and I are reaching a point where we need to make some decisions about where and how to incorporate. One of us is in the US (California) where most of our customers will be for the first several years of business (eventually our customers will be all over the world). The other is in Canada (Ontario) and has no plans of leaving Canada.

Because of the way our skills are split, it's likely we'll run all of the technology portion of our web-based business out of Toronto. The product design and consulting services will be based in California. The California founder is a woman and would like to go after opportunities for women-owned businesses. Also, the consulting services portion of the company would ideally incorporate a not-for-profit division.

Any ideas about where to incorporate and what type of corporate structure might be best? Thank you in advance!

I've lived through a situation like this where I founded a company with a co-founder overseas. We had some similarities to your structure in terms of division of labor: sales in the US and development in Europe. We've made it work, but it isn't easy: there's a lot of legal and accounting complexity (cost), and we have had to expend way more energy (cost) in corporate governance, investor communication and financial reporting to make it work.

But the reason reason we did it this way because by having a presence in Europe, we were able to get funding sources and grants within the EU that were looking to create employment opportunities to produce a technology and have a sales footing already established in the target market: the US. I'm not an incorporation expert, but we are incorporated in both countries, with one company being the wholly-owned subsidiary of the parent. I would expect that if you were to follow this approach, the funding will determine what becomes the parent entity - funding determines a lot.

Also, I saw you say "eventually all over the world" and thought "Whoah!!" One market at a time. Localization is far more than language: it's about the market requirements in each target market and unless your product is something universal you have to know the market well to assess fit and make it work in a particular country.

Say you're funded out of Canada. Canadian interests are going to want to see traction in ways they can trust, and that may steer resources away from your target market, which is in California.

Again, I can only share my experience: If incorporating in two countries make sure you have a really, really compelling reason to do so. I have no experience with not-for-profits, so I have no input for you there.

As another poster said, the key is focus early on. I don't know what stage of product/business-readiness you're at, but focus on what's going to get you traction and have an org structure that suits that first if you want to get off the ground.

I'm not sure this is a good idea the way you're planning to do it.

1. It is very hard to build a company if you can't work together in person. Skype and Google docs seem to solve everything, but I've been doing it that way for 6 months, and the difference was huge when we moved to the same city. It is just not possible to maintain team dynamics and culture, you'll have disagreements you wouldn't have otherwise, and it will be less efficient.
2. Because investors know this, and they also know that not willing to move is a sign of lack of commitment, you will have a hard time when trying to raise funding.
3. You seem to be blinded by long term goals, while in the early days focus is key. I don't know about your background and financial situation, but starting a startup with 2 offices and a not-for-profit attached to it doesn't sound like something I'd like to manage in the infancy of my company.

Think big, but start small. Focus on what's key to your success, and forget everything else.