What are the pitfalls of incorporating *after* launching a new website with partner(s)?


3

A friend and I are working on a website which we hope to launch before the end of the year. We would like to put off the actual incorporation for as long as possible (legal, accounting, & other misc. expenses).

What are the pitfalls of incorporating after launching a new website?

Incorporation Legal Timing Partnerships

asked Dec 6 '09 at 07:47
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John Mac Intyre
1,086 points
  • Update - Thanks guys, I just wanted to let you know that we've decided to take your advice and incorporate before launch. – John Mac Intyre 9 years ago

3 Answers


4

Incorporating after you go live will not reduce your expenses - it only postpones them. You'll end up spending the same amount whether you incorporate now or whether you wait a few months.

The downside of waiting has to do with liability. If your web site were to infringe on a trademark or patent that you didn't know about. If you go live without being incorporated, you and your partners would be personally liable in a law suit.

I recommend you go ahead and incorporate as soon as possible.

answered Dec 6 '09 at 13:27
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Michael Trafton
3,141 points
  • Great point on the liability thing. That's freaking scary! Thanks. +1 – John Mac Intyre 9 years ago

2

There is also the issue of what may happen if after you go live (or even before) you do not have an agreement about who owns the IP. A break-up of the team leaves that in limbo and potentially contentious. Having that defined in advance if a good thing.

answered Dec 7 '09 at 06:47
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Tim J
8,346 points

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The only downside that I can see is who owns what when you incorporate. It would probably make sense to have some sort of Founders Agreement between your partners just so there is no issues once things get incorporated.

answered Dec 6 '09 at 10:49
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Jarie Bolander
11,421 points
  • We do have an agreement, but I have to wonder how much teeth it really has. Thanks. +1 – John Mac Intyre 9 years ago
  • It does have teeth if you both sign it and get a witness. Timing on this stuff is important too. Tim has an excellent point about once you go live. I think it would be worth it, at that point, to form a company. – Jarie Bolander 9 years ago

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Incorporation Legal Timing Partnerships