The Chicken and the Egg--When to incorporate
My partner and I are about to take the next step in starting our business--writing the business plan. However, we are considering forming an LLC beforehand, so that any expenses we might incur during the planning stages can be attributed to the business. But it also feels strange to be incorporating without a solid business plan to back up our idea. So I ask you, what comes first? The business plan or the formal incorporation?Also, along these lines, if we decide to form an LLC before the business plan, how do we divide up ownership if we know that one partner will eventually invest more $ than the other? Do we start out as equal partners and then essentially the partner who invests more will "buy" shares from the other partner? Or do we come up with a division of shares proportional to the max. investment we each think we make, say, in the first year of operation? For instance, let`s say he can invest a max. of $40k in the first year, and I can put in $60k. We split ownership 40%-60%. Then let`s say $10k is needed to cover the initial startup costs. I would put in $6k and he would put in $4k. Is that a sensible arrangement?
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