Startup escape path

I think as developers we try to put our experiences in to patterns that we can repeat or at least have the illusion of repeating (to ourselves, or others).

Ultimately, you can do all these things but still not have a successful startup. There are varying definitions of what success is depending on who you talk to, 500, 37sig, PG, other VC. In fact the word startup means different things to those folks.

The only sure thing you can do, for your own good; learn about everything you come across with. People, products, companies, emotions... I say this because at the end of the day/year/startup, you'll have something to show... to yourself. You will be more defined, confident, passionate.

Sometimes it's not the goal, but the journey that defines who we are and what we do next. Those experiences, however infinite in choices and patterns is what sets you up _passionately_ for greatness.

Predicting the future is impossible.

Step 1, "Register a Business" (LLC or LTD) is not something I'd advise on a lark. It costs real money (hundreds if not thousands of dollars), will require an administrative burden (filing of annual reports, filing of additional tax forms, etc, out of state tax forms if you register out of state or move.)

I think a more realistic approach is to review and understand all of the requirements for registering a business: What papers to file, who to file them with, what the deadlines are, and what the costs are. Once you understand that, you'll know when your business generates enough income to at least cover these costs, or the business is risky enough to warrant the liability protection. (Most software is sold "as-is" and is not that risky.)

Agreed. This post comes at this in a way that's indicative of the broader mentality about startups these days. The word startup no longer defines a small but rapidly growing business. Instead it now means a website or some sort of technology with "app" appended to the end with young founders and millions of dollars worth of funding plus hype. The stack you use is now a way to judge your product. If Facebook were to be up and coming today they may very well be laughed out of the valley for using lame ass PHP and old stale MySQL to start instead of some über cool nodejs, Rails, MongoDB, plus Scala and CoffeeScript for some reason. I think it's nuts that the tech stack you use is somehow more important than the actual product. If I cured cancer with HTML4 I'd be laughed at. But if I did it using nodejs I'd be immortalized as the greatest man ever.

Granted, it does vary by state (and country I suppose, if you're not US based), but here in North Carolina the overhead of an LLC is minimal. And there is something about registering a legal entity that makes things feel more "real" somehow.

I did my own LLC papers and paid the filing fee, which was a whopping 200 dollars or so, and the annual report stuff can be done online and requires a yearly fee of around 125 dollars, IIRC. Tax paperwork is also relatively minimal during the "pre revenue" days.

So is it worth it? Hard to say, but on balance I'm happy that I did it. Even though we'll have to do some extra paperwork later to transition to a traditional corporation when the issue of taking outside funding comes up.

YMMV, of course.

Disagree. As a Canadian entrepreneur and someone who has previously worked as a sole proprietor for many years you should absolutely consider incorporation.

If you are a sole entrepreneur looking to go with a Canadan Controlled Private Corporation you should NOT pay a lawyer to get your business set up. Do your research, choose the jurisdiction that fits you best and get to it. It's dead simple and once you've determined the correct steps you can easily accomplish what need in a matter of days, or less.

Secondly, if you are paying $2k+ for your first fiscal year (let's assume that the company has not broken even) then you are being ripped off, plain and simple. You do not need audited accounts at this time. I paid roughly $450-550 annually for the first couple of years for the services of a very competent firm who I would refer in a heartbeat.

Being a sole proprietor is simple, both from the tax and setup perspectives however it is not without some drawbacks. The tax rate is much higher than that of a corporation and you will be doing business as yourself. This has far reaching legal ramifications if you want to accept money from people you don't know (online sales for your SaaS, for example) and many things that you will need to get to this stage are going to require a registered business at the very least. There are also some avenues that will be inaccessible to you because of your sole proprietor status (certain grants, tax credits, etc.) and you will constantly be fighting the little guy image.

The moral of the story is, if you ever want your business to move "beyond yourself", you should seriously consider incorporating.