Should I start marketing and selling before getting incorporated?
Shared by bukunmiadewumi · 27d ago · 21 comments

I have been thinking about this for some time now. When do you start selling, given that you got your MVP launched?

I am fully aware that company formation is not the only cost to maintaining a company, there are other things like state fees, annual reports and so on. So essentially, a company has to have at least a decent MRR to maintain itself.

Do I need to wait to get incorporated first before I start to market and sell my service or product? What about the trust factor, do potential users care about that?

AndyDent-Touchgram · 27d ago

Don't incorporate any earlier than you need to - at some point you will be asked how long has your company existed? and you don't want to appear slow. Sometimes, your access to government funding schemes or tax breaks may depend on this date.

The Founder Institute requires, as a proof of seriousness, that you incorporate whilst you are going through their program.

As a result, Touchgram Pty Ltd came into existence in July 2014.

I had a co-founder split and mothballed the company in 2015, resuming work 2 years later and taking until 2019 to get a product on the app store.

If I'd incorporated in 2019, Touchgram would be eligible for some schemes which are only open to startups less than 6 years old.

We have an Early-Stage Startup Tax Exemption on capital gains tax, in Australia. a 10 year exemption on capital gains tax for investments held as shares in an ESIC for at least 12 months, provided that the shares held do not constitute more than a 30 per cent interest in the ESIC.

We're no longer eligible for it.

https://treasury.gov.au/national-innovation-and-science-agenda/tax-incentives-for-early-stage-investors

michaeljelly · 22d ago

Why didn't you just close down the company and start again after the 2 year hiatus? Wouldn't that have been simpler?

AndyDent-Touchgram · 21d ago

Touchgram Pty Ltd is the equivalent of a US C Corp.
We had gone through all the Dun & Bradstreet verification & it was registered as a developer and the account holder for the app with Apple.
So the product would have needed renaming, or transferring to the new entity. We would have incurred several thousand $ expenses.

The tax legislation came in after this & is the only possible motivation there would have been for all that hassle.

bukunmiadewumi · 27d ago

Thanks for your input Andy

manojranaweera · 27d ago

If you don't incorporate, usually, you will be personally liable for anything that goes wrong. Once incorporated, you have certain protections, as the liability rest with the company.

It's questionable whether you can trade without a company unless you have registered as a sole trader in your local jurisdiction. Worth taking country-specific legal advice.

In the UK, it costs nothing to register.

Personally, I would be reluctant to buy from an entity that is not legal. Your potential customers might feel the dame.

bukunmiadewumi · 27d ago

Thanks for sharing your views.

petartodorovski · 25d ago

If you need access to payment processors and good banking, you can incorporate as soon as you need to receive money.
If you don't need that, you don't have to incorporate it until there are clear indications that the project will likely succeed and could turn into a business.

bukunmiadewumi · 24d ago

Good points to consider. Thanks

macOS · 25d ago

You can actually access to payment processing without incorporating your business. For example, Paddle https://paddle.com accepts sole proprietors as minimum into their platform (unlike Stripe, they are open to the residents of many jurisdictions across the globe). For banking there is Payoneer https://payoneer.com, they offer an excellent service.

bukunmiadewumi · 25d ago

This is right but Paddle has its own limitations as per the kind of service or product you are allowed to sell. Paddle is perfect for most SaaS but wouldn't accept my kind of finance business model (crowdfunding). See https://paddle.com/support/aup/

I will keep my heads up looking for alternatives to Paddle that actually would support my business model. I haven't really found any that doesn't require incorporation just yet.

woutdispa · 26d ago

As a few have said, don't incorporate until you have to. What I don't agree with is what some folks are saying is the threshold of "when you have to." It isn't just about what an investor thinks, or your MRR... it is also about having legal protection for example.

AndyDent-Touchgram · 21d ago

Legal protection is a very good point. I didn't clarify that my when you have to is certainly before you can put a product on the app store.

macOS · 27d ago

... do potential users care about that?

My answer would be: Yes, they do. And they do not/or may not.

It really depends on the nature of your service/product and the jurisdiction you are trying to promote/market it.

What are you trying to bring to the market? For example, you can do decently in a SAAS business (non-heavily regulated) while being a sole proprietor now.

Cheers!

bukunmiadewumi · 27d ago

Helpful input, thank you JB. What do you think about a Crowdfunding business model? I have commitments to that specifically.

macOS · 27d ago

You are welcome! Thank you! However, I do not know much about crowdfunding to be honest. But I recently ​saw WeFunder, and they seem​ed​ interesting​ to me​. https://wefunder.com/raise I guess you need a decent fan base in order to succeed with the crowdfunding model.

bukunmiadewumi · 27d ago

Absolutely right about Wefunder. Now that kind of huge fan base means selling from day #1 and investing a lot into marketing.

Unafraid. We have a unique business model in our offering. So it looks like I should be selling already with my little bootstrapping efforts while I work on fundraising.

macOS · 27d ago

Yes, that's great! Good luck!

kendsouza · 27d ago

You should start selling now...but wait until you have a decent MRR or a investment is coming along to incorporate.
If you are in the US, you have the additional hassle of filing a seperate tax return for your corporation. But you could save on taxes if you have substantial revenue by incorporating.

bukunmiadewumi · 27d ago

I'm from Africa. Thanks for your input.

sandeephegde · 27d ago

I second Andy.

Do not incorporate unless you have an investor or a decent MRR.

bukunmiadewumi · 27d ago

Thanks. That makes sense to me.