What are the practical steps for monetizing a web service?

Sorry, but the advice in this thread to just get going without even learning about little things like taxes and record-keeping and incorporation is crazy.

Sure, on average a start-up will fail. However, if either it does work out or it fails because you screwed up and someone came after you, and you didn't get a few basics in place up-front, then you are up the creek without a paddle and may not be able to salvage the situation after the fact.

It will probably take no more than a quick chat with an accountant to figure out the minimum you need to do to comply with your local tax laws and whether it's worth setting up some sort of company at this stage. The total spend required to do that in my country, including both the accountant's advice and the legal fees to register a new company and get the proper documents created, is less than a day's salary. This does vary significantly by country, but again a local expert can advise you because they do this all the time.

Likewise, if you're potentially bringing in thousands of bucks per year, spending a couple of hundred to get a real lawyer to look over your terms and answer any general questions about licensing things you really need to know right now is probably money well spent.

None of this is to say that you won't decide to just set up a site and start charging anyway, assuming you can find a payment service available in your location that will let you take payments as a private individual of course. Maybe that really is the right path for you at this stage (though at least if you were in the same position in my country, IMHO that would be unlikely).

But seriously, any accountant and lawyer used to working with small businesses will understand the situation you're in and be able to give you some basic advice about what you really do and don't need to worry about right now, and it will cost you a few hours and a day or two of salary, and even if things don't work out this time you'll still have the useful background knowledge if you decide to do anything else commercial later.

You should concentrate on making what you make and marketing it so you have a business that is worth having in the first place, but part of running a business professionally is knowing how to deal with the administration and keep the overheads in proportion, and it's much easier to do that if you just get something basic but sufficient set up from the start.

  > ... and anything goes wrong resulting in legal action 
  > against them...

Such as?

Without properly weighing the risk of a lawsuit, there's no way that we can conclude whether the risk is reasonable.

So, who might be out to sue you? To summarize an article from nolo.com [1]:

   * An employee
   * A landlord
   * A supplier
   * A customer

To mitigate these risks:

   * Don't hire anyone
   * Don't lease an office
   * Don't buy goods on credit. Buy high quality goods when
     you can't afford to have a problem with them.
   * Have an "as is" end-user license agreement. Be very 
     cautious about making service quality guarantees. 
     Don't sell software that can cause damage or personal
     injury.

If you have to do any of the above, it's time to incorporate. (For another take on when it's time to incorporate, read "The When to Incorporate Decision-Matrix" by Ryan Roberts, J.D. [2])

[1] http://www.nolo.com/legal-encyclopedia/liability-concerns-so... [2] http://startuplawyer.com/incorporation/the-when-to-incorpora...

(edit: And a nice quote from HN favorite patio11:

  > Incorporation?  Incorporate when you have a good 
  > reason to. (I still don’t, but I might do it after I 
  > go full-time, largely for purposes of dealing with 
  > Immigration.)  If you’re selling B2C software, your 
  > number one defense against getting sued is promptly 
  > refunding any customer who complains, and that pretty 
  > decisively moots the LLC’s (oft-exaggerated) ability to
  > limit your personal liability.  You’ll be personally 
  > liable for debts from the business, but since the 
  > business is fundable out of your personal petty cash 
  > that isn’t the worst thing in the world.  If sales 
  > collapsed tomorrow I’d be on the hook for my credit 
  > card bill, which runs about $1,200 a month — not a 
  > financial catastrophe for an employed professional, 
  > particularly when the business generates far more 
  > than that in profits well in advance of the bill 
  > being due.  Sole proprietorship — i.e. merely 
  > declaring “I have a business” — is the most common 
  > form of business organization, by far.
)

Not seen that before, looks useful, thanks for the heads up - however, no info on pricing anywhere so not something I'd consider using myself as things stand. Who signs up to services without knowing in advance what commitment is going to be required to continue using it? I really don't understand businesses that operate like that.

  > You've changed your position fundamentally, from saying 
  > you have nothing to lose...

I specifically used the words "if I understand you correctly" as an invitation to the author to share more information, and to signal to the reader that I was making an assumption about his financial position, i.e. I assume he has very little capital. My exact words:

  > If I understand you correctly, you currently have very 
  > little capital to protect.

Which you've now twisted into:

  > ...you have nothing to lose...

Notice the change in meaning?