When is a great time to form a legal entity?
Maxim Melnik
5 replies
I have asked this question to numerous amounts of people and I get different answers. So I would like to ask the PH community and startups who went through this process.
I know that during beta testing, users might or will enter information that your company is responsible for any potential damages that may be done if a hack were to occur. Unless obviously you have something in the Terms of Service and other agreements. So when is the best time to create a legal entity? Immediately, right before beta testing, during beta testing, or right before launching?
Replies
Konrad S.@konrad_sx
I'd form the legal entity before beta testing. I'm not an expert, but I suppose this may protect you from being responsible for possible damages personally. Also, this will make a better impression to the beta testers. Let me know if you're interested in my experience with forming a US LLC from abroad.
Share
Take all the advice you get with a grain of salt. Always seek legal advice from a professional lawyer. Im sure this question is easy enough to get a free response.
Maxim, forming a legal entity early on, ideally before beta testing, can provide essential liability protection and establish credibility when users are entrusting you with their data. It's a strategic move that not only secures your business but also signals to your users that you're serious about their security and privacy.
If going by logic then completely agree with @rafael_krueger. If you are passionate about your startup then as soon as possible. That acts like a signal to you that you are serious about this. Things eventually sort out.
Maxim, it's generally wise to form a legal entity before you start beta testing to protect both you and your users, especially when handling sensitive information. This also sets a professional tone for your business dealings as you move towards launch.