

Ask HN: When to incorporate a SaaS startup (with partners) - rpug

Hi,<p>I am working on a project that would be a web-based service (a mission critical service which gives me concerns about liability if we, unfortunately, have an outage.)<p>It is likely that I will be offering a percentage of the 'company' to two people in exchange for their work.<p>This service will be taking payments from customers (through some sort of credit card processor i.e. Braintree) and it will also talk to partners which I will need to pay for use of their API.<p>Does it make sense to incorporate up front?  If so, S-corp, C-corp, or LLC?  Delaware, Nevada?  Or Massachusetts (where I live)?<p>I plan on consulting a lawyer but I'd like to go into that meeting with some knowledge and preparation.  I'm hoping for some advice from people who have been there and done that (especially if they were offering a service.)<p>Thanks.
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1123581321
My rule is that if you have trouble getting things done, make the software and
then worry about incorporation so you aren't tempted to waste time obsessing
with paperwork. In other words, don't incorporate if when you incorporate
that's the only thing you end up doing. If that's not the case, then you
should incorporate right away. If you believe at all the project is to be
successful, or that it might have liability issues, then you really need to
properly take care of the things that will be much harder or impossible to do
when more money is at stake, or there is a threat of a lawsuit or an actual
lawsuit pending.

Also, a corporation won't entirely save you from liability. If you think you
have a liability issue, you will want to get business insurance that covers
errors & omissions and covers the actions of board and officers. And, you will
want a personal liability/umbrella policy as well.

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dynabros
Incorporate before you take a single dollar from a customer. It's not
expensive if you don't use a filing service, only a couple hundred bucks.
Regarding an entity type, investors will like to invest in a Corporation as
opposed to an LLC. You could create an LLC and change it to a Corp, but it
might be easier to file for a Corp straight away.

Regarding the filing state, best to consult a lawyer. Many companies file in
DE solely for liability purposes, a lawyer will be able to gauge your risk for
lawsuits.

I'll personally file all the paperwork myself, it takes under 10 minutes to
write everything out. I don't get why people pay a company to do it?

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codegeek
"Does it make sense to incorporate up front? "

If you will be taking money from anyone up front, then incorporate up front.
If you start as a free service in beta etc, may be you don't need to
incorporate right away. But the moment money is involved, things get
different. You want to protect yourself personally from liabilities etc.

Personally in my opinion, I would advise doing a corporation and not LLC. One
reason is that it is much easier to convert b/w S-Corp to C-Corp if you ever
get in the big leagues. The question would then be which one for now ?

I would say call up at least 2-3 lawyers or CPAs and talk to them. There are
no one size fits all kind of answer here and even the lawyers/CPAs will give
you different answers based on what _they_ think.

My 2 cents and IANAL.

