Folks who have been there before will tell you not to waste a single cent on incorporating until you absolutely have to.
Wait until at least one of the following is true:
1. You have investors who are ready to go.
2. You hire an employee.
3. You have actual customers and actual revenue.
4. You have any significant exposure to liability.
Don't bother with any of the paperwork B.S. of setting up a business until you actually are a business. Once you go down that road, not only are you spending a bundle on getting papers filed, but you now have recurring expenses for annual report fees, state minimum taxes, business licenses, accountants, attorneys, etc.
I'll go even further and say don't even bother spending time or money on a name, logo, domain name, website, or business cards until you've talked to enough potential customers to be sure you've understood their problem and are building the right product.
If you bring on a co-founder later, you can draw up a simple agreement (find a template online, or get an attorney to help you) that spells out the understanding between the founders in terms of ownership and control of the company once it is incorporated, who owns the leftover IP if the company fails before you get to that point, what happens if one founder leaves, etc.
I know it's exciting to finally "be a real business" and print business cards naming yourself "CEO". But that's all just vanity. Hiring a lawyer and filing some forms doesn't make you a real business; creating a product and selling it to people does.
I couldn't agree more with this post. Don't pay the money just to stroke your ego.
The cofounders at my current project were antsy about having the credibility that comes with becoming "official", so we incorporated very early. Currently, we're working R&D and looking for money -- not a single investor has asked if we're incorporated or been impressed by our business cards. They do, however, want to learn about the progress we've made with our product and the projected size of our market. Use the money for marketing and product development.
Another thing to keep in mind: we went the LLC route, and its likely that if/when investment comes, we'll have to amend the hell out of our Operating Agreement.
I absolutely agree with this comment as well. Regarding having a hard discussion with a co-founder and incorporation being a forcing function for this (from a comment below in this thread)... not the best reasoning. You can and should have this discussion regardless of whether you incorporate.
Wait until at least one of the following is true:
Don't bother with any of the paperwork B.S. of setting up a business until you actually are a business. Once you go down that road, not only are you spending a bundle on getting papers filed, but you now have recurring expenses for annual report fees, state minimum taxes, business licenses, accountants, attorneys, etc.I'll go even further and say don't even bother spending time or money on a name, logo, domain name, website, or business cards until you've talked to enough potential customers to be sure you've understood their problem and are building the right product.
If you bring on a co-founder later, you can draw up a simple agreement (find a template online, or get an attorney to help you) that spells out the understanding between the founders in terms of ownership and control of the company once it is incorporated, who owns the leftover IP if the company fails before you get to that point, what happens if one founder leaves, etc.
I know it's exciting to finally "be a real business" and print business cards naming yourself "CEO". But that's all just vanity. Hiring a lawyer and filing some forms doesn't make you a real business; creating a product and selling it to people does.