Startups · Startup Law

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

Danielle Couvelaere

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    
A great idea is 1% of the work. Execution is the other 99%. In this course, we’ll teach you how to conduct market analysis, create an MVP and pivot (if needed), launch your business, survey customers, iterate your product/service based on feedback, and gain traction quickly.

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.

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.  

Richard Alcott Marketing and Communications

July 7th, 2016

Danielle - this is an interesting question. First, do you anticipate settling back in the USA? If yes then there are States beyond DE and NV to consider as they provide significant startup company incentives especially if you begin to create local employment. Popular examples are TX, MN, PA, NY. DE is highly valued for business incorporation that are located elsewhere in the USA. Some States like CA offer no startup incentives and their tax agency (FTB) closely examines NV incorporation for startups in CA. Also if a college grad, check your alma mater for startup networks, investors etc. Universities are encouraging investment into alum startups because it is an economic win-win. If you are potentially not settling back in the USA for awhile, or remain expat then consider EU. Startup incentives are generally attached to employment (even 1) with potential growth or manufacturing (which doesn't seem to apply here) can be significant. It also opens your investor potential. From personal experience, each country has it's own incentives along with plus & minuses and various trade free zone impact. Hope that helps - R

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

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.

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.

Oscar Eduardo Mary

July 6th, 2016

Read this article before deciding where to incorporate: https://www.entrepreneur.com/article/226549

If you may assist you in setting up your company and afterwards, please let me know. Wish you great success in your venture.

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 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 

David Coleman

July 6th, 2016

I registered my startup as soon as I had the URL. I did it as an LLC, and then did a DBA for the company name, since CA would not let us have it on the LLC. I incorporated in CA because that is where I live and work, I know it is probably better to incorporate in Del, or NV for tax reasons, and I can always do that later. But to get started, I just did the simplest thing.