Or, more likely, your opinions. I have an internet start-up planned, and was wondering on opinions based on personal experience, or of fellow businessmen.
Right now me and one other guy are working on this, and as far as I know, it is going to be a longer process. Both him and myself are grad students, and have a good portion of our time caught up in school and work. We are also still in the planning stages. I just recently proposed a partnership with him, and are getting ready to draw up the necessary paperwork such as contracts and the like to protect one another from leaving and starting up a similar business.
My first question is what is the opinion on the type of business we should go for. Right now money is tight, and getting licensed and incorporating right away seems a bit out of reach. Getting licensed as a General Partnership seems cheaper, and as far as I know it is possible to incorporate at a later date, is this right?
Writing up the contracts for the business. More of a protection thing, but is a lawyer necessary? Notary public? Witness of some sort?
Since we are still both going to be in school for the next 18+ months, and working, we will have to go slow, and hope somebody doesn’t beat us to the punch. No 90 days of 14 hour coding sessions. This limits us on when we can search for possible angel investors, but soon before we graduate we would like to start the process, would this be a potential problem?
Guess I am just looking for some feedback. My degree is in Computer Science, not business administration. Opinions or suggestions for a newbie entrepreneur?
I’m a self-taught entrepreneur, so take everything with a grain of salt:
Partnerships are generally for doctors and lawyers. At my CPA’s recommendation, I created my company as a Limited Liability Company (LLC), and that has worked out really well. But you have to remember that LLC laws vary from state-to-state.
I’ve had some contracts with large companies, and they’ve been more than happy to draft the contract by themselves. I’d say that if the contract is > $10k, hire a lawyer for a few hours. Otherwise, you can get by on just remembering the basic requirements of a contract, which I’ve, alas, forgotten.
Business plans. No angel investor worth their salt is going to pay attention to you unless you have a sharp plan. It’s also a good idea for you because it solidifies what you intend to accomplish and how. Get some examples and get to work.
Apparently professional entrepreneur here at this point. Just started my fourth a few months ago.
If the contract is between the other guy and you it’s best to have it drawn up by a lawyer before things get too serious (i.e. there’s real money involved). While you’re just stumbling along you might not want to bother. But when it looks like the idea might actually launch? Get it done. NOTE: this advice does NOT apply to mature (i.e. not two guys still in school) start ups.
Go meet with an accountant and let that person advise you about the best forms of firm to form. There are many options with some subtle distinctions depending on what the product is, the personalities of the players are, and what you anticipate the revenue to me. Of the two I own now one is an S-Corp and the other is a C-Corp for differing reasons.
You need a realistic business plan if you hope to attract any real investment money. You’ll need both cost and revenue projections. There are VERY good places to get assistance for this probably on your campus. Otherwise you can ask around for a Small Business Development Council. Angel Investors are nice for their larger risk tolerance but they’re going to want to take controlling interest in your idea (in my experience).
So you definitely recommend jumping right into incorporation, or going the LLC route?
As for the partner thing: I have read many places that many investors won’t consider investing in a single man start-up. I don’t know how true that is, but I do notice most of the bigger web places seem to have two founders. What is your feelings on this? I chose to do the partnership thing with somebody I found trustworthy and skilled because it not only provides me with motivation to push the site out earlier, it takes some of the work load off myself. Granted I could hire somebody, but right now it isn’t feasible due to finances.
The contract was mostly to keep him from running off and starting his own business with stuff we worked on together.
As for plan, I will have one of those. The first thing me and my partner are going to do is draft up a detailed and sharp business plan.
Johnathan Chance: what do you mean by a controlling interest. I was told to avoid Venture Capitalists because they often like to install their own CEO, do many Angel investors do this as well? I was under the impression the degree of controlling interest (i.e stock I guess) I gave them in return for their money was dependent on what I projected the companies worth to be and how much the investors are willing to lend.
For the most part, coding the page isn’t going to cost much. I guess the only costs come in smaller things- Business suit (don’t have one yet), incoporation costs, laywer and CPA costs, as well as the initial funds to find an office and install a network and web servers.