The Chicken or the Egg
By Milacron
Published: January 25th, 2010
Published: January 25th, 2010
How important is the liability aspect in starting a company? Should I worry more about the product development aspect first and then concentrate on the filing for status? (llc, corp, etc). Or will it be wise to start the company first? I dont want people to think their buying something (or having something made) from a hobby shop, but since that's basically how its going to start anyways do I not worry about it?
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I'm in Canada so things will
I'm in Canada so things will be slightly different in USA. Get company started as a unincorporated company (a proprietorship). Once you know you will be around for a while, then incorporate. Here banks will make you sign a personal guarantee for any loan so a limited company doesn't help that much. Having an incorporated company does look to customers like you are a professional in business. (that's the main reason I incorporated 22 years ago). As far as liability goes, make sure you have insurance. Note: about 2 years ago a customer said one of his customers was going to sue him for a part that failed. I molded the part. I alerted my insurance company. Turns out the part was installed incorrectly and that is why it failed so I had NO liability here. Next year when I went to get insurance it had gone up by 50% and they mentioned the "claim". I changed insurance companies and still am paying a premium. So
pay special attention to insurance and make sure they are knowledgeable in your/our industry.
Good luck, work hard, succeed.
That helps immensly,, I truly
That helps immensly,, I truly appreciate the advice.
You mention "s-corp" and I just had somebody tell me to go "c-corp" but they mentioned both s and c, and I'm not quite certain which of the two he recommended.
Either way, your advice on the liability aspect is more what I was looking for. I dont want my house, car, etc., on the line for any mishaps that might arise. And even though I'm fully prepared for the risk (and looking forward to it in a way) I still wouldn't want to be denied a new home loan years down the line because my non-existant company (aka me) gets sued or falls flat in sales.
Again, thanks for the advice and I'll keep this updated as to the progress!
-milacron
I have started two companys
I have started two companys in last 5 years and as per my research and personal experience, it is best to start company first and then put all your product development under company's name to have minimum liability on your personal credit. Forming a company does take some time and effort but it is worth it to save your personal property/liability on any law-suit or claims.
Depending upon the nature of business LLC or S-corp can be good to start with and can be changed to any version of company formation as you grow.
Also you might get some loan from the bank on the name of company based on your product development plan and its prospect.
Most state business development centers are very helpful in starting small business.
Good Luck !!
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