
What is the point of startup formalities (e.g., incorporating your company, having official job titles, etc.) before you have significant traffic? - amichail

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jward
Incorporation was really easy and fairly cheap. My corporation has one
shareholder, just me, and no real rules outside the formal ones needed to
exist.

I did this for three main reasons. First, I wanted to experience the paperwork
and hassles when I wasn't on a deadline. Second, it gives me a limited legal
shield. It's easy to say 'Oh yeah, that was done by the company!' if I ever
get sued. Finally, it's a good springboard if any of my ideas and
implementations actually take off.

The structure is there _if_ I need it. The cost to get everything formalized
was a few hundred bucks and about a hundred bucks a year to keep going. Easy
investment. It will save me one more headache when things take off.

Also, it's nice to have business cards that say CEO on them.

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amichail
It is a bit strange that while it is so easy for anyone to get a web 2.0
startup going, there is still this expectation of having founders go through
formalities such as incorporating their startup, assigning official job
titles, etc.

Bloggers for example expect this and it is less likely that they would write
about your startup without such formalities.

Can anyone shed light on this situation?

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zaidf
For some, it's personal liability. After you incorporate, your personal
liability becomes lower than before incorporation--from what I know.

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cyu
These formalities are ways to show your commitment to doing a startup.
Granted, there are other ways to show commitment, but there's nothing like
putting a little money down on it. For most of us, writing code is not a good
way to show commitment because we do this all the time, and sometimes for
little or no profit.

If you're considering whether or not to incorporate, you should definitely be
asking yourself if the reason you don't want to do it is really because of
fear of failure. When you fail and you haven't incorporated, it just means
your side project failed. If you failed and you incorporated, it means your
startup failed, and you failed. You can't run a startup with fear.

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cwilbur
Incorporating protects your personal liability somewhat, in the event that
your startup tanks. It can be a paperwork- and lawyer-intensive process, and
if you wait until you're seeing significant traffic, you'll be converting from
a sole proprietorship, which will make for even more paperwork and lawyering,
at a time when you'd rather be focusing on technology.

In short, if your company fails, you want to be incorporated because it
protects your personal assets. If your company succeeds, you want to be
incorporated because it makes hiring and taxes and office leasing much
simpler. Venture capitalists won't fund a sole proprietorship, and they
certainly won't buy one.

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amichail
I live in Canada so won't incorporating my company here make it more difficult
to get funding in the US?

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briandon
Yes, I'm looking at incorporating outside the United States as well (HK to be
precise) and would be very interested in hearing this point addressed.

