Can we release our application to public without being incorporated?


2

We are about to release a public beta for our website. I'm curious if it is safe to release to the general public without being incorporated? Do you see any downfalls of this move or should we wait until we get incorporated?

Thanks.

Incorporation Release

asked Jan 12 '12 at 10:19
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Gagan
150 points
  • release when it is ready to get feedback. Incorporate when you can. – Tim J 7 years ago

3 Answers


1

You should have incorporated a long time ago. Personal liability is the least of the troubles when you aren't a company.

First, all intellectual property belongs to creators until it's properly re-assigned to the company. Distribution of software to end users is legally a license grant. So if you aren't incorporated then the license needs to be granted by all of the owners. In other words, there needs to be as many EULA as there are developers & designers on the team.

Second, until you're incorporated & share ownership agreements aren't written to include vesting schedules, all of the partners own as much shares as you've decided earlier. If any of the current participants leaves the team, they are very likely to be entitled to a sizable amount of the company's shares. When there's a vesting schedule in place, they can take only whatever has trickled into their account.

Third, the scary personal liability is upon you no matter what. @Paul Cezanne cites a situation where a hiker wanders off trail & you're responsible for bad data. That situation is arguable. However, if you have a business app that solves an urgent problem, a customer signs up for your beta, puts faith & critical business data into your app, and then your database is damaged. Guess what! You've just incurred damage to that business's operations, and all of you are personally liable for the losses.

answered Jan 12 '12 at 12:56
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Dnbrv
1,963 points

0

There is no "WE" if you didn't create a we. I think you are saying you are putting your website online, correct? Not necessarily much risk in that. Who signed up for the website - under his own name? Who's eating the expenses? Is this a website to do business? Will you be selling something?

You have a risk if you "do business" (ie: attempt to sell something) under any name other than your own, without some kind of filing - at least a DBA. If something does happen they will consider you all a partnership - I think. All legally responsible for ALL the actions of all the others. You can't incorporate later and make it retroactive. So even before you create a company you have a partnership. Complicated right? That's why they created LLCs.

If it were just you there is nothing illegal about putting something up and even doing business - and assuming any risk - then report it all at the end of the year. But "WE" complicates it. (And you may have to register with sale tax people before you sell anything).

answered Jan 13 '12 at 08:52
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Patrick Ny
300 points

-1

Does your application have any risks? Say, for example, that you had an application that published hiking trails. Some hikers goes hiking, falls, breaks a leg, and then sues you. Do you want that risk? You could just get some liability insurance to cover it, might be cheaper.

(I'm going through the same thought processes myself BTW, but, we're not close to release yet, we have the luxury of time.)

answered Jan 12 '12 at 10:24
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Paul Cezanne
649 points

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