Should I establish a parent company instead of forming my business entirely around one website?


6

My entrepreneurial dream was not to run just one web site. It's to make web-based services and desktop software for the Academic market.

It just happens that the first product I was able to release is a website. I don't have a company formed yet and so the question is, do I create a company out of the website, or, create a company for which the website is just one product/project/service, etc. ?

Incorporation Business Plan

asked Oct 22 '09 at 02:21
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Rob Allen
631 points

4 Answers


7

it sounds like it would be better to have 1 company for it all, and have the website one product you offer. This way you don't need another company for each product you make that would be crazy.

answered Oct 22 '09 at 02:39
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Cory Mathews
326 points
  • +1 Easier ... and cheaper – John Mac Intyre 10 years ago
  • exactly. Keep it simple. What's wrong with one company, and one web site for now? Later on, your company can do all the things you are dreaming of, no need for another company (unless the founders dramatically change). – Alain Raynaud 10 years ago
  • This is where I was leaning (I even registered the "parent" company's url) but I wanted confirmation that I wasn't setting myself up for disaster. Thanks. – Rob Allen 10 years ago
  • Rememeber that unless you get seen by a LOT of people, the company name itself doesn't matter. So go with simplest. If anything becomes really popular, change later. That won't make you less popular! – Jason 9 years ago
  • @Jason - The business name might show up in some very important places, like on a charge receipt. You don't want people disputing charges because they don't make the connection between your parent company and your website. – Micah 9 years ago

6

Be careful about the "parent company" strategy as it can be difficult from a branding perspective. I would suggest you make a company with the same (or close to) name as your website in order to keep the branding consistent.

Just look at Google. Almost everything they have is named "Google X". You know who is behind it and you recognize it instantly.

Leverage the branding you already have with your website and keep your parent company closely aligned name-wise.

Lance Weatherby does a good job explaining it. I'll give 2 examples from my own experience:

Business Cards What will your business cards say? If you give one with mywebsite, people will know who you are when they dig out your card 2 weeks later. If it says myparentcompany they'll say "Who?"

Bank Accounts What will it say on your invoices? What will it say on peoples' credit card receipts? Good luck collecting payment if people don't know what they're paying for.

answered Oct 22 '09 at 04:32
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Micah
880 points
  • Thanks Micah, that is a perspective I had not considered. – Rob Allen 10 years ago
  • The credit card receipts thing can become a huge nuisance if your parent company sounds nothing like your flagship product. – Chetan 8 years ago

2

If you can stay within one market such that your various websites or products make sense as a whole to your Customers, start one company.

However, if you cannot bring those products/websites together without creating an incongruency in the mind of your Customer, I would opt initially for a DBA (Doing Business As) and second website.

**Update in response to your comment** Your DBA is not getting funded, your idea is. The DBA is simply "attached" to your existing business entity (your corp or llc) to minimize confusion in the minds of your prospective Customers.

For example, with a DBA you can go to your bank and add that DBA on to your bank account (some banks allow only one, some more than one).

Then you can set up Merchant Processing under the DBA name such that when a Customer orders from your DBA (say, www.mygreatacademiclearningwebsite.com), that DBA is what appears on their monthly credit card statement (or online when they check their account online).

That has nothing to do with risk or funding.

Keep in mind that while minimizing chargebacks, you will increase accounting tasks and monthly expenses with every new merchant account you create.

Another option (instead of creating multiple DBA's and multiple merchant accounts) is to make the statement, "Your credit card statement will reflect a charge from Great Academic Instruction, Inc. (or whatever your corporate name is).

Then put that statement here:

(1) On the "Welcome page" and in the "Welcome" email when ppl sign up for an account on your site.
(2) On the "Thank You" page and "Thank You" email when they purchase.
(3) On the Paid Invoice you send them after they purchase.

Also, give thought to adding something like this at the bottom of emails:
www.XXXXXXX.com is a Great Academic Instruction website. (Or whatever the name of your business is).

When you do set up your Merchant account, make sure your telephone number appears on your Customer's statement next to your business name or dba. People forget. Or, the folks who purchased aren't the folks paying the credit card charge and they cannot make the connection between some new service and your charge. Give them a telephone number they can call and you will save yourself time and money!

Finally, consider that there is a limit to the number of characters available on a Customer's credit card statement - so if you want your entire business name and telephone number to appear, think small!

answered Oct 22 '09 at 09:39
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Val Lynn
483 points
  • DBA seems risky, especially since I'm going to have to take loans for initial funding. Academic leaning web sites aren't exactly the hottest thing going so there is little if any angel/vc funding floating around. – Rob Allen 9 years ago

0

Based on my personal experience do not bother with a company website, it just means more work and branding hell.

answered Oct 25 '09 at 04:45
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The Dictator
2,305 points

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