When should I incorporate?

Friday, October 19, 2007

Fred Greguras, Fenwick & West, http://www.fenwick.com/

The first step in starting a business is to test the business concept with prospective customers and to look carefully at potential market size to see if there really is a business opportunity. Timing of incorporation will be driven by the need to document the founders’ ownership of the business, to secure ownership of pre-existing intellectual property, to enter into contracts with customers, to grant stock options and to accept investment. You usually don’t want to delay incorporating until just before a Series A financing round because such timing could cause tax problems for founders who want to buy their shares at a nominal price as compared to the valuation of the corporation at the time of the financing.

Return to Library of Business Information