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When to Incorporate Your Startup

your-logo-hereDeciding when to incorporate your startup is not always an easy call to make. Incorporating your startup requires the investment of time and energy, but most of all money, for which reason many startup founders often delay the process of incorporation. But, despite your concerns, if you are contemplating when to incorporate your startup, the best answer is not to wait any longer – do it now.

If you are thinking about putting off incorporating for various reasons including the cost and time, you may be setting yourself and your company up for failure.  For one thing, a company with more than one founder risks major problems if it begins operating but has not yet been incorporated. Consider the following issues:

  • How should the equity be divided?
  • What if one of the founders decides to leave the company before incorporation?
  • How do you assign intellectual property rights to the multiple founders if the company has not yet been incorporate?
  • And worst of all, what if a dispute arises? How will it be handled?

Having an incorporated entity in place, along with all the appropriate agreements, will resolve all of these issues. Don’t just assume a word of mouth agreement between founders is enough, no matter how much you trust each other.

However, perhaps an even bigger concern is your personal liability. Shielding yourself from personal liability in the event of a lawsuit or inability to pay off company debt is the number one reason why you should not wait to incorporate. The more developed your business becomes, the more interactions it will experience for which you could be held personally liable if you are not incorporated.

What does personal liability mean?  For a cash-strapped startup, personal liability is a huge risk because a creditor can come after your personal assets to satisfy a debt or settle a lawsuit – including your house, your car, and your personal bank account.

So, the tricky part is not deciding when to incorporate, but understanding different business structures and incorporating properly. This is where a qualified lawyer comes into the equation.

There are a number of important business and tax considerations depending on your unique situation.  If you decide to use online legal services to incorporate your startup, you could cause large-scale problems down the road.  When you choose to incorporate, a qualified attorney will be your best friend.

These are just a few of the reasons for incorporating your startup sooner rather than later. The person who can help you most throughout the process is a capable, experienced startup lawyer.  Online legal services will not be able to handle the nuances of your startup like a flesh-and-blood attorney can, plain and simple.

Once you have a startup lawyer, he or she can properly advise you on which entity to incorporate under and what the benefits and detriments of each choice are and why. Incorporation is a major step for your company, so you want to make sure you handle it correctly and responsibly; in other words, you should hire a qualified attorney to guide you through this complicated process.

Visit us at LawKick.com to learn more about how we can help your business grow by helping you find a lawyer that’s right for you at a rate you can afford.