• June 2018
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Is there a legal problem if I start an online-based company without legal registration initially?

At the onset, there may be no legal issues for not registering your online company. However, as your company grows it would most likely be in your best interest to legally register in order to avoid potential problems down the road.

Your best step would be to contact a lawyer and consult with them about what your best options are. Finding a lawyer that has experience with startups and is business minded can help you determine these legal matters quickly and efficiently and promote the expansion of your company. You should check out our company LawTrades. You can find lawyers with a ton of experience who will do the job for a lot less than traditional law firms charge.

Aside from contacting a lawyer, there are a number of benefits your company can enjoy by forming a legal entity. Here are a few to consider:

1. Protection/Limiting Liability: Of course it may be difficult to foresee future problems or disputes that your company may face, but that does not mean they will not happen. Creating a legal entity can help you avoid these situations and protect your personal assets as well. For example, if you started this company with another individual, you may want to form an LLC or a Corporation to help avoid personal liability for the other person’s actions.

2. Fundraising/Generating Capital: Most likely you will eventually be ready to secure investors to help your company grow. Any investor, whether an Angel or VC, will almost always require a company be registered before they dole out the cash you will be seeking. It provides investors certainty and confidence in the strength of your company. Legally registering your company will give it an identity and will show investors that your services are legit and that you take it very seriously.

3. Tax Purposes: There are many advantages companies can have from legally registering as certain entities, most notably regarding tax breaks. For instance, forming a corporation can help the company limit overhead by avoiding “double-taxing” that occurs in many common partnerships. So it may be wise to consult with a lawyer and see what the best bet is.

4. Hiring Employees: You may eventually want to hire employees, and people may be weary about joining a company that is not formally recognized/registered. It will be important for your company moving forward to register in order to show its legitimacy and help expand your operations.

As you can see, immediately you may not need to register your company, however practically, it may be in your best interests. I hope this answer is helpful. If you have any other questions or inquiries, please don’t hesitate to reach out. Good Luck!

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