Source
r/startups•
p_mud

Incorporate before or after an MVP? I need help deciding!

I'm trying to decide whether I should worry about incorporating (C Corp) at the phase I'm currently in.

I'm in the process of creating a minimum value product (MVP) and will need to pay a company (probably within two months) to do web development and possibly a proof of concept iPhone app. I will also need to buy equipment at a cost of less than $1500. Is this a good enough reason to incorporate or should I just pay for it myself?

Additional factors for consideration:

  1. I'm the only founder at this point
  2. No need to limit liability at this stage
  3. I won't be approaching a VC for funding until after the MVP is complete
  4. The up front cost of incorporating is not an issue

Posted Jun 3, 2015, 7:21 PM UTC

19
thinglistr•

I'm incorporating before releasing my (actual) MVP just so that I (a) don't have to worry about it for every company I start (assuming that I'll start a few startups before finding the sticky one), and (b) I can easily separate business purchases and deduct them at year-end.

2
p_mudOP•

(b) is what keeps me coming back to thinking I should go ahead and incorporate. I can do a lot of the technical work but the app and front end isn't going to be cheap. I need to talk to a CPA but I'm thinking the writeoff alone would pay the cost of incorporating.

1
thinglistr•

That's my line of thinking too. I had to buy an entirely new computer, some time on Mechanical Turk and (soon) a small ad campaign and really hate the fact that all of these are on personal accounts when they shouldn't be.

2
p_mudOP•

So I guess it's figuring the break even point of the tax writeoffs vs. cost of incorporating. It needs to be weighted towards incorporating b/c I plan to incorporate for liability reasons once my MVP is done and ready to do limited user testing.

I did your survey btw...very nicely done.

1
TestEagleHQ•

will need to pay a company (probably within two months) to do web development and possibly a proof of concept iPhone app. I will also need to buy equipment at a cost of less than $1500

AFAIK, you dont need to incorporate to do any of that.

You can either pay it yourself or register a DBA (Doing Business As) name if you really want.

1
p_mudOP•

I've been going back-and-forth because you're right, I don't need to incorporate for that. I think talking with a CPA first may be a better idea so I can get an idea of the tax benefits/implications.

1
jstandard•

You may want to look into the tax writeoff benefits and get a feeling for what spending level does it make sense for you to have some type of entity in place to reap these rewards.

Hopefully others in this sub can chime in. In addition, I'd talk to an accountant and post in r/smallbusiness for more perspectives.

1
p_mudOP•

A Tax writeoff is one of the 'Pros' for creating a C Corp at this stage given that I will be spending a decent amount of money. It's probably the primary reason along with the perception of having a company. It looks more official and serious with a company name although not absolutely necessary.

1
gobstopper89•

Unless there is huge liability with your business, I'd incorporate after. Your MVP might prove to worthless and then you'll have wasted time/money on incorporation.

1