Previously on our Taking the Scary Out of Startup series, we discussed how ideas are just the start. Once you decide to move forward with that idea, you must start form your company. This should be one of the first stems, and is not just "nice to have." Operating without a business entity can put your personal wealth and assets at risk. When I was in law school (remember I have a law degree but I am not a practicing attorney), our business law professor loved to say that any attorney who recommends a sole proprietorship to run a business sets themself up for malpractice.
Always seek professional advice to decide which business entity is better for you – for example a LLC versus a C or S corporation. This is something that needs to be done and then followed up with proper information to allow you to operate. For example to open a bank account, you need an Employer Identification Number (EIN).
The new HBO show, Silicon Valley, had a funny clip illustrating why this is definitely a first step. The founder of the fictional startup Pied Piper raises $200K from an angel investor then tries to deposit the check. The check is not made out to him personally rather is payable to the yet formed Pied Piper Inc. and of course the bank teller refuses to deposit it. The founder leans in and asks the teller if incorporation is something that she can help him with!
So before you go out raising money or promoting your company, make sure you have a business entity and seek some professional help (not from your bank!). And it almost goes without saying to identify and protect your intellectual property (IP) when you are forming that entity.
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