Should I start marketing and selling before getting incorporated?
Shared by bukunmi · 321d ago · 16 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 · 321d 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 · 315d 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 · 315d 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.

bukunmi · 321d ago

Thanks for your input Andy

petartodorovski · 319d 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.

bukunmi · 318d ago

Good points to consider. Thanks

manojranaweera · 320d 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.

bukunmi · 320d ago

Thanks for sharing your views.

woutdispa · 320d 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 · 315d 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.

sandeephegde · 321d ago

I second Andy.

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

bukunmi · 321d ago

Thanks. That makes sense to me.