4 ms·
That's advice that is applicable only to a limited subset of the startup class, the ones without a product and without cashflow. If you're going to do b2b you'
by tisme 14y ago
That's advice that is applicable only to a limited subset of the startup class, the ones without a product and without cashflow.
If you're going to do b2b you'll never be forced, it's just that nobody will be doing business with you and your circle of friends.
VC's and angels don't like it when you incorporate early because that means that you've probably done a whole bunch of homework already and thus are a tougher negotiator.
Not incorporating when running a company is a great way to get into a lot of trouble. Fixing a bad incorporation at a later state is costly (but it can be done).
As soon as you start dealing with money and responsibilities to outsiders you should incorporate.
- notJim 14y agoThe author is the founder of Buffer, which has both a product, and cash flow, and in fact had both quite early on. I also suspect that many of their customers are businesses (but I'm not sure.) So his experience would seem contradict what you're saying. Why do you think it's necessary to incorporate early if you're taking money for a service/product?
- tptacek 14y agoIt's painful to do corp-corp business without a corporation. Many large corporations will, when dealing with sole proprietorships, do crazy things like withhold taxes. Some companies may refuse to work with you altogether and instead demand that you work through a subcontracting arrangement with an existing vendor. Other companies will require you to maintain different liability insurance coverage, or have insurance requirements that are not easily available to new sole proprietorships. (I've seen friends deal with this nonsense even after they got LLCs; I've also seen this nonsense resolved with LLCs). Since early '05, I've been a principal at a business that bills large contracts year-round to companies of all sizes --- more on the 1000+ employees level, but lots of startups and small tech companies too. The idea that incorporation helps deal with corp-corp business is not a myth, and no appeal to "that guy's company must be doing business with corporations and he deferred incorporation" changes that.
- jdh 14y agoJust FYI us VCs aren't sitting around just hoping some rube will come by who is not incorporated so we know we can take advantage of him in a negotiation. Our model isn't leveraged around finding naive people to take advantage of. No price is cheap enough for a bad team or deal...
- tisme 14y agoNot all VCs are equal, and I apologise for lumping in the good with the bad. But there are plenty of examples of venture capitalists (and angels too) taking advantage of inexperienced entrepreneurs. And in that case it helps a lot if you get to write the contract.