united-states, corporation, bootstrappingWe have developed an initial product for our next company in the tech sector, but I am unsure of when to incorporate.
I already own a company in the tech sector and am using this company to bootstrap the new one.
Some details:
I am waiting primarily because of the money and risk. The existing company can fund the expenses of the new company while in an early phase. If I were to move a big chunk of cash (EBIT) from one company to the other, I would have to pay tax on it as an investment, reducing cash flow everywhere.
What have other people done in regards to bootstrapping like this?
I’ve been down this road. I personally would wait to incorporate the new company until it’s clear it’s got momentum. That’s what I did, however, the newer startup didn’t work out so it did save the costs of an incorporation and there were tax benefits.
IMHO, forget the overhead- just create momentum first.
My view, (and I think it’s shared with most people who have been in business for a while) is that, at the startup phase, the whole world and a sock puppet are not out to get you or steal your idea. Clearly worded written agreements are enough to protect you at this point.
The exception might be if you accept investment or need to make partners happy, but still, if the amounts are small, and it was me, I’d even just use a personal name for the first little while.
Side note: If you have a side business then, at the time of this writing, Aug 2014, most incubators will give you a hard time. They are highly suspicious of people who have a side business due to divided commitments.
As soon as possible. Generally, getting your company set up legaly is one of the best ways to start safely. Also, it isn’t that expensive to incorporate a company.
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