I am launching my platform soon, do I need to incorporate as a business yet?

#1

Post by ghostmatt » Mon, Aug 02, 2021, 6:04 PM UTC

I am launching a my platform soon. It is a discovery network, that helps you find different workers online (similar to upwork).

It is just a discovery network no transactions at the moment. Users have their individual profiles that describe what they do, thats about it.

I would love to hold off and keep things as "project" for as long as possible while I work through the product more.

Do I need to incorporate as a business at this stage ? Am I at any type of risk if I don't incorporate? Any thoughts?

Re: I am launching my platform soon, do I need to incorporate as a business yet?

#2

Post by PragmaticPulp » Mon, Aug 02, 2021, 6:21 PM UTC

There is a much longer conversation about your eventual goals for the company and plans for monetization and hiring. However, I would keep it simple and form an LLC.

LLCs are relatively easy. You might be able to get everything done (or at least the forms submitted) by this afternoon if you start right now.

Forming a C-corp is much more involved and comes with a lot of hidden extra hurdles that aren't insurmountable, but they can be an extra drag on your time if you already hate dealing with the paperwork and other details. I'd look into a C-corp before you plan on bringing in other co-founders or investors or anything complicated like that, but in my experience they're not necessary at this stage.

And yes, you do want to form some sort of business entity for this venture. The chances of encountering legal trouble are relatively small, but if it does happen then you'll wish you had taken a few hours to at least form an LLC to protect yourself.

Re: I am launching my platform soon, do I need to incorporate as a business yet?

#3

Post by ghostmatt » Mon, Aug 02, 2021, 6:42 PM UTC

PragmaticPulp wrote: post #2

There is a much longer conversation about your eventual goals for the company and plans for monetization and hiring. However, I would keep it simple and form an LLC. LLCs are relatively easy. You might be able to get everything done (or at least the forms submitted) by this afternoon if you start right now. Forming a C-corp is much more involved and comes with a lot of hidden extra hurdles that aren't insurmountable,…

Thanks for your reply I really appreciate the advice. I think I will eventually need to be a C-corp.

Is it a real hurdle to transfer an LLC to a C-corp?

Re: I am launching my platform soon, do I need to incorporate as a business yet?

#4

Post by giantg2 » Mon, Aug 02, 2021, 9:55 PM UTC

I'd say go with an LLC instead of incorporating. I would set it up prior to launch to hibe you some liability protection. Plus, it's best to create the branding around your business from the start. Switching it later might lead to negative impacts, or at least wasted effort from building out the initial branding.

Re: I am launching my platform soon, do I need to incorporate as a business yet?

#5

Post by p0d » Tue, Aug 03, 2021, 8:29 AM UTC

I assume you are in US. I am in UK but many of the same principles apply. I know many small businesses who are not limited companies without issue. I setup a limited company to receive government funding. I also pay for professional indemnity insurance but I note prices have increased a lot with more cyber attacks.

If you have no customers or employees I think the answer to your question is no. You will end up incurring costs, paperwork and probably require an accountant. I imagine your pressing issues are terms of service and copyright. If you want to call yourself CEO the answer is yes. Here in the UK we can look up any companies finances. I imagine it's the same in the US. You can declare yourself King or Queen over a whole load of nothing :-)

Re: I am launching my platform soon, do I need to incorporate as a business yet?

#6

Post by tofukid » Tue, Aug 03, 2021, 11:34 AM UTC

I would not incorporate a business until you have revenue. This is because incorporating, taxes, maintaining registration compliance in your incorporation jurisdiction cost you time and money which should be spent on getting revenue.

For example, if you operate out of a place like California, they charge $900/year even if you have no revenue.

Re: I am launching my platform soon, do I need to incorporate as a business yet?

#7

Post by trcarney » Tue, Aug 03, 2021, 6:41 PM UTC

ghostmatt wrote: post #3

PragmaticPulp wrote: post #2

There is a much longer conversation about your eventual goals for the company and plans for monetization and hiring. However, I would keep it simple and form an LLC. LLCs are relatively easy. You might be able to get everything done (or at least the forms submitted) by this afternoon if you start right now. Forming a C-corp is much more involved and comes with a lot of hidden extra hurdles that aren't insurmountable,…

Thanks for your reply I really appreciate the advice. I think I will eventually need to be a C-corp. Is it a real hurdle to transfer an LLC to a C-corp?

In most states, I think it is pretty straight forward and can be done with a service like legal zoom.

As for the type of business entity, this is the best article have found that explains the different types and when you would need them. https://www.toptal.com/finance/interim-cfos/c-corp-vs-s-corp

Hope this help

Re: I am launching my platform soon, do I need to incorporate as a business yet?

#8

Post by fredstarr » Tue, Aug 03, 2021, 9:10 PM UTC

ghostmatt wrote: post #3

PragmaticPulp wrote: post #2

There is a much longer conversation about your eventual goals for the company and plans for monetization and hiring. However, I would keep it simple and form an LLC. LLCs are relatively easy. You might be able to get everything done (or at least the forms submitted) by this afternoon if you start right now. Forming a C-corp is much more involved and comes with a lot of hidden extra hurdles that aren't insurmountable,…

Thanks for your reply I really appreciate the advice. I think I will eventually need to be a C-corp. Is it a real hurdle to transfer an LLC to a C-corp?

Illinois resident and business owner here.

Our company is an LLC (set up on the Secretary of State website for $150) but we elected to be taxed as an S-Corporation by filling out and submitting the FREE Form 2553 obtained from the IRS website. We had this set up 8 years ago and have not had any problems/issues since. I'm sure you can do the same for a C-Corp.

The link to the IRS Tax-Election section is https://www.irs.gov/businesses/small-businesses-self-employe....

Let me know if you have any additional questions.

Good luck.