Ask YC: Founders, at what point do you incorporate / form an LLC?

1 pointdeepsea2 comments

My guess is that most web-based entrepreneurs start off just by putting their site online and seeing what interest there is. That is, any income from the site just goes directly to the founder.

At what point do you take the next step and form a real business entity like an LLC or corp?

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Most common events that trigger incorporation: 1. if you are taking outside investment 2. if you and your cofounders need more than each other's spoken agreement regarding % ownership and vesting schedule 4. Offering service/product for which you might want a limitation of liability 3. need to take advantage of deductions for business expenses to offset any other income you may have coming in (thought you could do this through DBA filing as well)

spoke to a "in the know" silicon valley lawyer about this a few days ago. two of the three triggers he mentioned are similar to the one posted by tandaraho: 1) when you need to limit exposure to liabilities (e.g., from customers/clients/users); 2) when you've developed intellectual property that needs to be assigned to an entity; 3) when your business partner(s) need firm clarity on where everyone stand.

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