Originally Posted by BlastPort
Just curious as to whether there are significant dangers of holding off on incorporating your hosting business? I.e. potential liability issues, tax-related issues, etc? We are trying to hold out until we are purely profitable, which should be within the next few months, but it's something that's been lingering in the back of my mind.
I've started a different business in the past, and we waited to get incorporated until we were pretty much squared away and profitable with clients and regular income. It was a bit of a pain to play catchup and get "proper" with filing taxes once we did, but it wasn't too bad and the waiting didn't really hurt us in any way. However, that was a different kind of business, so I didn't know how the hosting business differed?
My main worry is if we (God-forbid) got sued, then us not being a registered LLC could possibly bleed us, the 2 business co-founders, out to dry. But that may not be accurate.. Thoughts?
Well, first and foremost, you should either incorporate (it doesn't sound like you are) or you should stop calling yourself LLC (in your site footer.)
It sounds like you're not alone in this venture. Because you have a partner or partners you absolutely, positively establish a legal entity with an ownership agreement. It doesn't matter how much you trust the people you're working with. As a prudent business owner you want that document and you want it pronto. You want it even if you don't know that you want it. For your own sake, get it all down in writing. (Source: Winklevoss twins.)
Secondly, you need to start establishing business credit history now. Your future, larger-business-self, will look back and thank you.
The legal and financial liability stuff is important, too. The legal and financial liability limitations alone are reason enough to do it, but I just wanted to hit on the things that don't get said much.