

Three Things To Put Off As Long As Possible For Your Startup - sachinag
http://blog.meatinthesky.com/three-things-to-put-off-as-long-as-possible-f

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grellas
Nice piece and my only quibble would be with the idea of automatically
deferring incorporation until you get outside funding.

On this point, the advice given is great is you are a sole founder but even
then may create tax risks if you time your entity setup to match the time of
your first funding (e.g., Founder A gets 90% for IP assignment + Investor X
gets 10% for $100K = Risk of $900K taxable income to Founder). This tax risk
is normally manageable but it also is most easily avoided or minimized if even
a sole founder sets up an early shell (even an online instacorp) to give
himself a buffer between first founder grant and first investment.

With a founding team, it is normally a mistake, in my judgment, to defer
entity setup too long as people invest time and effort and develop IP for the
project. It _can_ and often does all work fine as long as the co-founders in
such a case continue to cooperate right up to the point where they chose to
document their relationship but they are at risk of, e.g., "I was promised 25%
of the company" type of claims or "I developed key IP that belongs to me" type
assertions if they have not defined stock grants with strings on them
(restricted stock) and have not entered into work-for-hire contracts should
they have a bust-up or serious disagreement of some kind prior to documenting
things.

The practical risks of a disagreement may be low but my point is that, when
you have a founding team especially, it is a mistake to have an axiomatic rule
along the lines of "don't incorporate until you are working with Other
People's Money." The issue should be consciously thought through by any
founding team and the cost/benefit considered before deciding this one way or
the other.

A more detailed analysis is found here: "When should I set up an entity for my
startup business" (<http://grellas.com/faq_business_startup_007.html>).

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megaduck
There's another good reason to incorporate early: It permits you to set up
your financial infrastructure. In order to set up corporate bank accounts and
merchant accounts, you'll need to be incorporated. This is critical if you're
planning on charging from day one.

If you're not incorporated, you can hack together something using your
personal accounts, but this is usually a Very Bad Idea. It's far better to
keep things clean by separating out your business and personal finances.

The piece seems to be targeted at startups that are both venture-backed and
deferring revenue. Delaying incorporation is probably good advice for those
folks. For those of us that are bootstrapping and charging money from the
outset, it's far easier to incorporate as soon as is practical.

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charlesju
This is also the main I'd go with incorporating first.

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mattmaroon
"Don't do any paid user acquisition until you can calculate your CAC and LTV.

It's very, very tempting to "experiment" and "test" various paid customer
acquisition channels. You start with AdWords, then do some cheapo banner ads
on a couple of ad networks, and soon you're hooked on some hard affiliate
stuff and paying thousands of dollars a month to an Outsourced Program
Manager"

Humorously worded, but I can tell you from loads of experience, this is flat
wrong. Your LTV for customers you acquire from ads can be vastly different (in
either direction) from ones you gain organically. I've had apps where it
started out 3x CPA, then ended up 1/3x as the law of big numbers came into
play and we had reached everyone we could target well.

Experimentation is how you grow and find your place in the market. From the
start you should be throwing small chunks in different places, testing the
signup flows of the people who come through them, looking for your highest ROI
and most scalable method of customer acquisition.

If you don't have the self-discipline to wait until you're showing sustainable
profits to throw the big budget in, and carefully monitor it throughout, then
you shouldn't be running a startup. You should be waiting tables at
Applebee's.

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dasil003
Right because the only two types of people are brilliant business visionaries
and talentless chain-restaurant-working schlubs.

Other than that last comment you are pretty much right on though.

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mattmaroon
It was a joke. Forgot what site I was on.

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dasil003
Nope, don't blame the site, it wasn't funny.

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mattmaroon
It was funny, but that's beside the point. On any other site you wouldn't have
to explain that it was tongue in cheek, and nobody would point it out.

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dasil003
You're assuming that I'm some humourless hacker news minion, however that is
false, please see my previous comment before this exchange.

~~~
mattmaroon
Not so much that you are one, just that there always is one.

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epi0Bauqu
You should incorporate immediately if only to start the clock on your stock.
If you sell within a year (for stock), you'll get hit with short term capital
gains instead of long term (at least in the US). And if you can hold on for
five years, you often get another host of tax benefits when you sell.

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Mc_Big_G
How does anyone even find your site if you don't do at least _some_
advertising? You could spend the rest of your life trying to get traffic from
twitter and the like. It's obviously significantly easier if you have a
network of people willing to broadcast it, which a lot of introverted dev
types, or family types or whatever, don't have.

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petercooper
4\. Hiring people. It costs a ton of money, takes a lot of management, and
there's plenty of red tape/employment laws/unemployment insurance/etc.

~~~
fnid2
I second this, everyone should be contractors and you should structure it so
that they are all, including yourself, are paid on 1099. This requires some
special configuration. They should only be in an office a certain percentage
of the week and they have to be competent enough to be their own boss, you
can't tell them what to do and when, only what you want them to deliver and by
when. It's up to them to figure out how to complete all the steps in between.

There are other issues as well, consult an accountant or tax attorney if you
want to go this path, because the IRS wants everyone who works with you to be
an employee and they could fight you so make sure you have all your ducks in a
row.

