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I plan to start a new venture, but I don’t want to waste money on legal fees if this start-up dies on the vine. When is the right time to incorporate or set up a limited liability company (LLC)?
The main reason for setting up a corporation, S Corporation or limited liability company (LLC) is to protect investors from the company’s liabilities. So, when you are close to accepting investments or entering into contracts on behalf of the company, it is time to establish the company as a legal entity (corporation, S corp. or LLC). Another reason to establish a corporate structure (or limited liability company) is to make the rights of founders and employees clear and to establish a tax basis in founder’s stock.