

Ask HN: When do you need to get incorporated? - bmarny12

I want to sell a virtual product (ebook, templates, etc) or a web service. Is it a bad idea to start out just selling it under my name, or do I have to get incorporated and have an official company first?<p>Also, at what point is it a good idea to pay for lawyers to do whatever necessary things they do (maybe write a terms of service, etc?)
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nroach
Formation of an entity, whether a corporation, partnership, or LLC, is usually
driven by three concerns:

1) liability protection; 2) tax compliance and structuring; and 3)
establishment of ownership.

1 - Whether the first factor is a major concern for you is going to depend on
where you live and work, where your customers reside, and the nature of your
business. Compared to a trucking company, manufacturer, or other brick-n-
mortar business, the need for liability protection is likely to be less if the
primary product is a web service. Of course, if your ebook is titled "how to
build a rail gun in your back yard with toothpicks and electricity" you might
want a little more liability protection :)

2 - Tax advantages are very individualized decisions and you'd probably want
to consult an accounting or tax professional in your area to determine how
this affects you. But in general, if you plan to start out small this will be
a less important consideration.

3 - Establishment of ownership is crucial when you have more than one founder.
But if this is just you, the concern about structuring ownership is reduced.

Ultimately, it's a personal decision as to whether the benefits of having a
formal structure are worth the cost in time and money to have one prepared.
But if any of the factors listed above are important to your business, then
you'll want to at least consult an attorney and weigh your options.

~~~
petercooper
I just want to put in a pre-order for "how to build a rail gun in your back
yard with toothpicks and electricity"!

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walkercorplaw
You may find this post that I wrote helpful -- Choice of Entity for
Entrepreneurs: <http://bit.ly/btQa0F>. Cheers, Scott (@ScottEdWalker)

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deafcheese
I would say, if you're selling a pure product and not a service, you could
wait to incorporate. Liability is more of an issue if you're working directly
with clients or have a product that is intrinsically more risky.

