2) If you have an existing company entity (from another failed startup attempt) that didn't have a lot of entanglements, is it better to change the name of that company to your new startup (after passing #1 test) or better to shutdown and restart? Just trying to understand if there are any (longterm) downside to a simple rename.

Your products and your business do not need to have the same name. Ever seen a shop called Yum Brands? You can just trademark your new brand and continue.

If it didn't completely fail then you have the benefits of trading history for getting credit terms with suppliers. That's the only reason we kept the company entity when totally changing direction and it was worth it.

WRT when you start the company - I only have experience from the UK market, but here you're doing a tradeoff; on the one hand there are a lot of programs and benefits for startups (like SEIS tax relief), so it's beneficial to be 'young' for as long as possible, but on the other hand, some big companies have purchasing requirements that, to protect them from immature, risky startups, only permit them to purchase from a company that has been around for a certain period of time, often years.

As a caveat to that, however, most people tend not to use incorporation date to decide whether you're a startup - start of trading, or fundraising rounds are the most common alternatives, so if you've not done either of those things your previous startup would be, for most purposes, a clean start.

I personally would set up a new one just for cleanliness, but then that's a very cheap, easy process in the UK, I don't know if that's also the case in the US.

My local incubator's advice was "incorporate as soon as you can afford it, maybe slightly sooner than that".

Incorporating limits your liability. If your businesses screws up before you're incorporated, then you are a sole proprietor, then you can lose everything (say, your house, if you own one).

Granted, it was a college incubator, so they gave that advice knowing that a bunch of students were at an exploratory stage that doesn't warrant the overhead (fees, taxes) of a company.

There are a couple of distinctions to make here, both practical and probable.

First, forming an LLC does not protect you from liability in and of itself. The idea of creating an LLC is to create a legal entity that is separate from yourself. However you still must act as if you are separate from the business by creating a separate bank account and using it for all business purchases, for example. If you form an LLC but then buy all your supplies and hosting with your personal credit card, in the eyes of the law you are a sole proprietorship.

Ideally this would be done early on, as there isn't much downside. However there is some. First, there are filing fees and a lot of times you must pay a representative for your business (especially if you are filing in a different state). Then if you want to dissolve your LLC, this can cost hundreds of dollars.

Practically speaking you won't get sued unless you're already successful. The reason is quite simple. If you don't have anything worth going after (assets, an insurance policy, etc.), no lawyer is going to take the case without charging sizable fees. For most people, paying an attorney out of principle isn't going to be a realistic option. Therefore, I would say it really depends on your business and the potential liability. If you are starting a company that catalogs baby pictures, your potential liability is probably pretty low. I wouldn't worry about filing for an LLC before I had a decent set of customers. If you are starting a company storing sensitive financial data, I'd definitely file for an LLC and probably take out a large insurance policy to boot (see how those are correlated?).

I've talked to a couple lawyers about this and their advice, somewhat surprisingly, was that you don't need to incorporate until you're past the "project" stage. Specifically:

1.) You're handling money. As soon as money's involved your liability goes up significantly - plus, the corporation needs its own bank account.

2.) You have investors. They need an entity to be able to invest.

3.) You need the business to continue if one of the people involved backs out. If you're a few guys in a garage, your startup is probably screwed if any of you back out, and so having a formal shareholder agreement and property owned by the corporation doesn't really gain you anything. If you're an operating unincorporated business with something of value and your tech cofounder backs out, he holds the business hostage, because he owns the IP.

4.) You're doing anything that's risky and may piss people off, eg. spammy marketing campaigns, crashing peoples' conventions, abusing another company's API, scraping data where the ownership is unclear. You can get a lot of protection from lawsuits simply by not pissing people off; people who aren't mad at you and don't think you've wronged them don't sue you. But if you're doing something that's a grey area, you really really don't want your personal assets at risk.

The main downside of incorporating is that then you have to deal with all the administrative details of being a corporation. You have to pay yourself minimum wage, or else you're in violation of minimum wage laws. You're taxed on the income you receive as wages (even though it's just a transfer from yourself to yourself), so the IRS is taking 15% or so of your runway off the top. You have to file both corporate and individual taxes, which is a big distraction when you want to be working on your product. You need to have at least nominal board meetings (in the beginning, this can be just you and your cofounder sitting down at the table), where minutes are kept. It also costs a few hundred in fees, which is money you don't get back if the startup never finds any customers (as most don't).

Basically - you can and should be "just a person working on a project" when you're building. When you release it to the world and let people who you don't personally know use it, it's probably time to incorporate.

Just to clarify- if you are incorporating as an S-Corp or C-Corp you do pay taxes off the top, but if you file as an LLC you have pass-through taxation, meaning that you only pay tax on your income, the business doesn't have to pay taxes on top of that.

Further clarification: that depends on your election as an LLC. You can elect to be taxed as a corporation as an LLC, in which case the taxation will not be pass-through as a disregarded entity or partnership, and you'll need to file the normal 1120 corporate return.

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employ...

Thanks. Just a point of clarification on (1). Is that just for taking IN money as opposed to just paying out for things like purchasing computers, software, freelance to design your website, etc?

Yes, but you probably also want to incorporate if you're paying out money. The business relationship a third-party supplier has is with the entity that pays them. If you buy something from a supplier on your personal credit card, they're unhappy with the transaction, and they sue, they sue you and not the corporation.

You're probably fine if you're buying commodity products like, say, web-hosting. You might get into trouble if you do it with negotiated purchases like contractors. YMMV; again, "not pissing people off" is a pretty good legal defense, and I certainly know folks that have hired artists or app developers before incorporation without anything bad happening.

http://hired.com already does this, and they seem to be doing it pretty well. I don't want to dissuade you, as they have not upended the industry yet, but check them out.

Oh that's the other thing. There are lots of players in this space! But, that's not a bad thing... Someone just pointed me to nsphire (tinder for recruiting?) which seemed interesting too.

Here was what I was trying to do: http://www.palere.com/blog

I also tried to crowdsource the interview process...

Point (2) in the article:

Someone's always already working on the same idea and that's not a bad thing

How does this work? I guess a lot of people are rejected for not being easy to place?