Startups · Startup Law

At what point in the start-up process should we legally register our company?

Danielle Couvelaere Looking for a Co-founder! www.lemonade.international, a profile matching network for expats

July 6th, 2016

Hi, I have a detailed concept and strategy as well as a domain name but am still in the process of developing the website; at which stage is it recommended to actually register my company and have a legal entity (with regards to 3rd party services or even VC fundraising for eg.)? For info I am bootstrapping this project and currently have limited financial guaranty that the project will go live (expecting to raise capital). Thanks    

Eric Stone Founder at Telesocial, Inc.

July 6th, 2016

It's always best to incorporate quickly to afford you the personal protection and reduce your own liability.   That said, when you engage in activities where you may become liable -- personally -- then it's time to create the corporation.  For example, hiring people, entering into agreements of any sort with third parties -- you want to have this protection.

If you are the only one involved, you're probably safe not to incorporate until you reach a point of liability or success -- collecting fees and / or personal information from your web site may be a source of liability as well, so when in doubt, incorporate.  

Steven Atneosen Technology Company Growth Operator

July 6th, 2016

I don't believe in reinventing the wheel, so provided that it is appropriate under FounderDating's T&Cs, here's a good discussion in Quora:  https://www.quora.com/When-should-I-incorporate-my-startup
If you're working alone, Eric's advice above is good to follow. But for everything else, it isn't just about limiting your liability, but being able to obtain the commitment of cohorts. Most major law firms have a startup program that defers any billing collections for a year for your startup, so there's no excuse not to seek what will ultimately be advice vital to your success and scal. I personally like WSGR's program (no affiliation), but that's Valley specific. Accelerators can also be a good source of finding a trusted lawyer affiliation. Make no mistake. Not every lawyer is good, let alone great, so get references. It's an important relationship.

Rommel Pravia Business Coach at 12X Strategy Group & CEO of PUSH MEDIA

July 4th, 2018

I believe that the faster you register your company the better. You don´t really need a lawyer to register your business, you can do it yourself and save yourself the lawyer´s fees. Do your research and find out how to open your business in your state or province. As far as the Website is concern, that is one of the things that you need to have, whether it goes before the registration or not is up to you. My recommendation is that you get the website up and running, get business cards, then register your business. This will give you the start up momentum that you need in order to get things going.

Ahmed Hasan Startup Lawyer

July 3rd, 2018

Here's the advice that I give to my clients:


Incorporate when:

  1. you have more than one founder (all relationships are subject to conflict)
  2. you are raising financing or funds (funds need to go to the Company, not you!)
  3. you are hiring employees, consultants or advisors (be careful of IP/equity issues)
  4. you are launching your product or service (protect yourself from liability)


I have written extensively on this particular topic here: When should I incorporate my startup? [Infographic + Audio]


Best,

Ahmed

Andy Zaayenga Laboratory Automation for Biobanking and Drug Discovery | Business Development | Workflow Analysis | Project Management

July 6th, 2016

We had two co-founders. When we added employees we created an LLC which took us through angel investment and then converted to a C-Corp when we grew and were preparing for VC investment. The LLC is much cheaper to set up and still confers reduced liability. The VC may or may not require a C-Corp now - our experience went back about ten years when LLC were less prevalent. 

Richard Giraud President of RGENT Computing Corporation

July 6th, 2016

Recommend incorporating ASAP.  You don't want to sink a bunch of effort into developing a brand (e.g., website, logos, etc.) then lose it all because someone else is using the name or the domain.

Richard Alcott Marketing and Communications

July 6th, 2016

You are at the point of forming a legal entity.  You can pitch without the entity in place (though there are risks), but you can't raise capital without a viable legal entity.  Your Country/State/Provence will dictate available company legal entities and minimum annual fees, and may allow you to file for yourself vs a third party service.  
In Dakar, you may have an equivalent to Doing Business As (DBA).  In the USA a DBA is the least expensive entity to establish that allows you to operate as a sole proprietor, but a DBA leaves you personally exposed to business liabilities.  Limited Liability Company (LLC) is a higher but considered low cost structure preferred by startups which insulate outside liabilities but allows internal exposure to shareholders.  As LLCs grow many convert to Corporations for structure, operations and tax considerations.  Hope that helps. - R 

Annick Fuchs Startup lawyer in the Silicon Valley and Europe, ex Director Legal PayPal

July 6th, 2016

Agree with what people have said: if you are at the point where you incur liabilities and costs (enter into agreements, hire employees/contractors, rent a room etc), incorporating is best as it shields liability. Also you will get tax advantages. And be able to partially give equity to your employees instead of salary. Brand protection is also definitely recommended if you intend to keep running the business under this name. Happy to help, I have a really good deal for startups. My email is annick@annickfuchs.com (not sure it shows but it is essentially my first name at my first and last name together dot com). I am also an entrepreneur. So I know what you are going through and have done it thousand times. So happy to help if you like help.

Martin Omansky Independent Venture Capital & Private Equity Professional

July 6th, 2016

To limit liability and have a record of corporate expenses. I strongly recommend you incorporate now. Sent from my iPhone

Anders Sandell CEO & FOUNDER at TANK & BEAR INC

July 6th, 2016

Create you business structure when you have an investor ready to invest, this will also dictate which business structure you need to create. In most cases this will be an Delaware C-Corp for the simple reason that's what everyone understands and it's a structure that that allows you to issue shares. When you have an investor ready to invest you will also have the capital to engage a reputable law firm to create the structure for you. If you're not raising venture capital and instead is creating a small business entity then an LLC is probably the way go. In that case I would still recommend using a reputable lawyer to help you out.