Validating a Startup? Don’t Form a Company Do This Instead

A question that recently came up in our startup community:

When should I create a company?

It’s a great question. Something a lot of people wonder about.

The answer is DON’T… until you have proven your business is actually going to work.

I’ve learnt this lesson many times over. Specifically, 4 times. Each time it cost anywhere from $500-$2000 in legal fees. And it’s a terrible feeling to have to dissolve a legal entity that once held so much hope.

So, how can you validate your business and capture funds without incorporating?

Here’s a good trick.

Create a new Stripe account as a solo entity, or using your existing consulting business entity. When you setup your account make sure you set the “auto transfer” feature off.

Then, start validating your business and collecting money using Stripe’s regular tools.

At the point you have enough revenue to prove your idea is good you can incorporate, setup a bank account and such. After that is all complete you can plug-in your new company details to stripe — and switch auto transfers back to on.

However, in the event your project is not working, this gives you a great back-out clause. Simply refund everyone that you captured money from and close the Stripe account or use it for your next test project.

Use this process to save a lot of heartache and take a more scientific, less emotional approach to validating your new ventures.

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P.P.S. Are you an entrepreneur? You should check out Nugget, the startup incubator & community. We’ll even send a new SaaS startup idea to your inbox every single day.