App Appropriate

This is a question I received this week from a client: I have an App concept, should I form a corporation or should I just create the App?

Great question, you can always function as a sole proprietorship (SP). There are benefits with SPs, such as simplicity of set up and pass through taxation, but if you are going to Apple you should definitely create a business entity, aka: a legal vehicle for your business.

When deciding which entity to choose, it is best to consult an attorney, they will take your concept and future goals through a legal analysis to find the perfect fit. But if you don't want to see an attorney just bite the bullet and start a C-corp. 

Depending on the state you live in a corporation can be slightly more costly to set up and, and independent of the state your in, it will require more work to keep running. If you set up a corporation you will have to hold meetings, take corporate minutes, draft resolutions, and tackle other formalities. But, if you want capital injection, aka cash money from investors, you should definitely go corporation. A C-corp gives you the ability to issue different classes of stock to investors, where an LLC can not issue stock. A C-corp will set you up for real growth opportunity. 

I had another client recently with no growth plan, he just wanted a simple business vehicle to carry his online business concept. If you're in that situation you might go LLC first and then consider converting it to a corporation later. If you stay small and simple, you're happy. If you grow and want to scale you can convert the LLC to a corporation. 

So the short answer is: a business entity like an LLC or C-Corp can protect you if something goes terribly awry, and sets you up to communicate with real investors. Yes, definitely incorporate.