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Ask HN: When should we bother incorporating?

2 points by ram1024 ↗ HN
despite being turned down for winter session, our group is forging ahead to bring our service to market. at what point does it become necessary/prudent to register your business entity and legalize it with actual documents? we believe we can bootstrap the initial implementation of the service and maybe even start generating revenue fairly soon, so we aren't going to bother with securing seed funding.

how much does registering your business cost, and when is a good time to do so?

5 comments

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run4yourlives
You should really get advice from a local lawyer or someone familiar with your own jurisdiction but I would almost guarantee that regardless of what you do (Incorporate, Partner, etc) you should do it prior to selling a single item. The reason for this, at best, is to stay on the good side of the tax law.

The second question varies based on type of business registered and your location. Google would probably be of good use here.

noodle
once your app/group/whatever is incurring potential liabilities, at least form an LLC. it might not be the best corporate entity for funding, but its cheap and easy, and will prevent you from getting your pants sued off.

if you pursue funding further, you can convert. it isn't the ideal situation, but things rarely are.

ram1024
that's a very good plan. i looked a bit into LLC and apparantly there's an extra tax i have to pay for being in texas O_o

oh well i guess this is one of those things that it's best to get out of the way so you can move on with one less potential bump.

thanks for the input, gents

noodle
i'd suggest forming an LLC in delaware.
cjoh
The cost for registering your business isn't too significant and you can do it online at something like bizfilings.com. Setting up the business isn't particularly the difficult task. When you set up an LLC (which is probably what you want to do), you need to draft an operating agreement that goes alongside your filing that defines how you will work with your members or shareholders. That's the expensive part that you'll need a lawyer for.

Most small companies end up being an LLC or an S-corp. Both have about the same tax advantages (pass through income to the members, so you're basically getting taxed once, not twice).

Before bringing your service to market, it is advisable to incorporate, so you can at least make clear, at the start, the real terms of your relationship with the rest of your group. That's something you really can't do on your own, and you're going to need a lawyer to help you think through, especially if you expect revenue to come soon.