Do not incorporate too early
We just received our first company stamp, although we started working on Superdocu two years ago ๐
And we waited 9 months before incorporating our company. Hereโs why:
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The idea wasnโt fully fleshed out. When your business is still in the early stages and shows no sign of traction, this is not a company, just a project.
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We didnโt need/want to secure funding. Hence, no need for a legal entity.
๐๐ฎ๐๐ฏ๐๐ง๐ญ๐ข๐จ๐ง๐ฌ
Many subventions are eligible for companies that are less than 2 years old. Postponing incorporation makes sense to gain some time as well.
๐๐จ ๐ซ๐๐ฏ๐๐ง๐ฎ๐
No need to collect cash, no need to pay taxes, no need for an accountant or a bank account.
๐๐จ๐ฅ๐ฅ๐๐๐จ๐ซ๐๐ญ๐ข๐จ๐ง
Working for a few months with your co-founder before committing to creating a company helps get aligned on the core vision, the implication of founders, and understand if youโre made to work together or not. Another important thing is that you will define the terms of the collaboration without the initial excitement of launching a new project.
๐๐๐ฉ๐๐ซ๐ฐ๐จ๐ซ๐ค
Without a company, the need for paperwork equals zero, so you can focus on finding your product-market fit.
๐๐จ๐ฎ ๐๐๐ง ๐๐๐ญ ๐๐ฌ ๐ ๐๐จ๐ฆ๐ฉ๐๐ง๐ฒ, ๐ฐ๐ข๐ญ๐ก๐จ๐ฎ๐ญ ๐ ๐๐จ๐ฆ๐ฉ๐๐ง๐ฒ
In France, you can start working on your company without incorporating it, as long as you respect a few rules. (Just keep in mind that you will be personally liable if you donโt have a moral entity)
Lesson learned: incorporate as late as possible. Youโll save yourself a lot of hassle!
I'm building the MCU of SaaS ๐
๐ฅ Roast My Landing Page
Most companies benefit from incorporating as early as possible (in simple legal forms that are available in a given country).
@antovtok - Traditional companies, maybe, but otherwise, why would they?
When you start earning money your business quickly becomes "traditional" from the point of view of tax law and other regulations. Unless you don't charge at the beginning.
This isn't in contradiction with my post, is it? As long as you don't charge, no need to create a company or pay taxes. Hence, incorporate as late as you can. If you charge from day 1, then late just means on day 1
100% agree. I misunderstood your message at first.
Thank you for sharing this. This helped me answer a lot of questions I had in my head.
Happy it helped :)
Thx for sharing!
When do you think is the right time to incorporate?
My understanding is - as soon as revenue starts coming in it's a good time to start.
Hey @IndyDevDan, the true answer is: it depends on what you're trying to achieve. For example, you might need to incorporate pre-revenue with heavily regulated industries.
Here's when I think you should incorporate pre-revenue:
But in most cases and especially for indie entrepreneurs, I'm not sure it's useful to incorporate before revenue
I relatively agree with the post, but it really depends on what you are doing and where you or your business is from. Mostly, the latter.
Talking bootstrappers and indie devs here: when you are ready to get revenue, the start a company โ did I understood you right?
If so, then, sure. If you want to say that you can get some money then, after a certain amount of cash flow, create a company, you can open a company. However, if youโve meant the letter, than keep in mind the fact that some countries cannot charge uses without setting up a business first.
In my case I can get direct payments from my clients via Wise/PaySend as an individual or crypto. If I want to get automatic payments, then Iโm either out of luck since my passport and country of residence do not give me access to Stripe and services alike, or I need to pay very hefty fees for services like above but work with me aka Cent.app (not sure if it even has an automatic payments feature). Not even talking legal stuff here โ it vastly depends on many factors.
Makes sense indeed. I clarified my thought in other comments, and the answer usually is "it depends" (on your country/legal obligations to receive payments, market, stage, customers, etc.). But the essence of this post is to say that some people will take incorporating as the first step of their project, while it doesn't make sense before you get some form of validation from your market. A project becomes a company if people want it. Otherwise, it should just be a project!
Does anybody have Germany specific advise on this?
Can't help unfortunately, but I think you should explore the "Kleingewerbe" status. It might fit your needs
I also created a company way to early. Afterwards my co-founder wasn't putting the time in anymore pre-launch but still had 50%. We end up with a good agreement since he is my friend and a reasonable guy.
My advice is don't share shares with somebody who isn't doing it fulltime if you are, and make sure if they quit putting the hours the automatically lose all shares.
Right now I am hiring somebody on an hourly basis and if the collaboration goes well he can become a co-founder.
Good luck guys!!
Thanks for the encouragement :)
Yep, if you incorporate, you might need more than a handshake to craft some shareholder agreement ("associate's pact"). But this is why I think it's a good idea to wait. You can get the hang of the way you work with your partner before incorporating.
I made this mistake. Had to pay to shut it down which was expensive.
It can be hard to time since you need EIN to setup stripe and what not (if I remember correctly).
Maybe easier to launch a basic LLC to hold any projects and then spin them out if necessary.
That's exactly my thought process. In France there's a "micro-entrepreneur" status that allows you to do that. I use it for my freelancing gigs and when I start a new project that needs to be invoiced without too much hassle. When I get enough traction only, I'll create a company!
That is very cool!