When to Incorporate?

Having registered many different businesses in the past, I have made many mistakes in registering them.  I’m sitting on some companies that have been idle after we failed to acquire enough funding to finance the initial prototype, while for other companies I have been in unenviable position of not having the corporate structure in place before needing to pay expenses or accept payments.

There is a sweet spot during the ideation stage where it makes sense to get the incorporation process started.

This is something you can obviously do yourself, but I recommend finding an accountant or lawyer to help structure things properly.  It feels more official and legitimate when an accountant steps you through the initial voting of terms, and issues the first shares.  A solid and well written agreement will help solidify what might have been unspoken between the co-founders – and a healthy open communication about these things sets everyone’s expectations at the outset.

So when should you kick things off?  Obviously every venture is slightly different but here are some keys:

  • incorporate as late as possible but…
  • before significant creation of intellectual property
  • before accepting payments
  • before signing contracts
  • before purchasing too many assets

If you are bootstrapping an idea, I would suggest waiting almost until you are ready to launch. Many ideas fail to gain enough momentum as a side project and don’t make it to launch.  incorporating too early costs money and leaves you on the hook for more paperwork should you need to fold the company.