The Startup Checklist

9Incorporate Your Company for Protection and Investment

As we've seen in the first part, there is a lot that you can do (and possibly should do) before your startup IS a startup, including coming up with a name, developing a website, coding a prototype, running market tests, and putting a profile on Gust or other platforms for investors and potential partners to see. You can even begin the process of pulling together cofounders for your venture and establishing the basics of the relationship through a Founders' Compact, such as who will get how much equity. So, if you can do all that, why not just keep on going?

The answer is that while you can do it legally, the effect would be to treat the “startup” exactly as you would be treated as a person.

• You would be personally responsible for all of the business's debts and losses, and, if the company fails, its creditors could come after your personal possessions, including your home.
• Since you can't divide a person, the business also can't be divided. You couldn't have investors or partners, nor could you provide options to any employees.
• As a nonentity, there are a host of other things your business could not do, from getting commercial ...