Big News: FounderDating is joining OneVest to build the largest community for entrepreneurs. Details here
Latest Notifications
You have no recent recommendations.
Name
Title
 
MiniBio
FOLLOW
Title
 Followers
FOLLOW TOPIC

Question goes here

1,300 Followers

  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur

Can you have a merchant bank account and setup payments via braintree/recurly prior to incorporation?

We are in super-MVP mode, have a product and want to start charging soon. Is incorporation basically a requirement at this point?

8 Replies

Jessica Alter
0
0
Jessica Alter Entrepreneur • Advisor
Entrepreneur & Advisor
For recurly I'm pretty sure it is. Their provider requires that documentation.
Mike Preuss
1
0
Mike Preuss Entrepreneur • Advisor
Growing Visible & helping other early stage co's
I got only speak to my experience but yes you have to be incorporated as we had to provide that info and Federal Tax ID #
Anita Ortiz
0
0
Anita Ortiz Entrepreneur
Managing Partner at 9Locals Investments LLC
Even if you can, it will save you time and hassle if you do it all now. If you switch entities, you have to reopen new bank accounts, new documentation, etc for both the bank and I assume merchant.
Michael Brill
2
0
Michael Brill Entrepreneur
Technology startup exec focused on AI-driven products
I'd surprised if anyone mandated a business structure. I'm almost certain you can open a merchant account with most banks as a sole proprietor (using your social instead of an EIN)... you can with AmEx.

However, don't do that!!!!! In addition to all of the normal reasons you want to create a limited liability entity, you don't want to assume personal responsibility for chargebacks which banks can unilaterally issue. On that point, avoid signing personal guarantees as well!
Robert Victor
0
0
Robert Victor Entrepreneur
Founder and CTO at PebblePost
It's unlikely that you need a Merchant Account as an early stage startup. Worry about that when payment processing fees and the time for money to arrive in your account becomes unmanageable with a Gateway like Braintree or Stripe. Even Paypal may be sufficient for you.

You need your EIN before you can open a Small Business Bank account as a Corporation. Until that time, you can open an account as a Sole Prop or even a Partnership.

I know you can use Stripe and Paypal as a Sole Prop and EIN will not be required. I assume Braintree is similar (we use Braintree with our C-Corp and really enjoy working with them).

Just because you can do something, does not mean you should. You're taking on a huge amount of risk to save a minimal amount of time and investment. Michael highlighted some specifics above involving chargebacks, but there are other reasons. I'm not going to go through all the reasons to incorporate, assign inventions and price shares before you take in money, but it's important for you to understand.


Cynthia Schames
0
0
Cynthia Schames Entrepreneur
Founder & CEO, AbbeyPost
An individual can set up a merchant account if their credit is good, but it can be messy if you do end up successful and try to transition that to a corporate account.
Matt Mireles
0
0
Matt Mireles Entrepreneur • Advisor
Nope. With Stripe at least, all you need is a bank account. Does not need to be business related.

IMHO the only good reasons to spend $$ on incorporation at this stage are:
  • Limit founders' personal liability in case your product triggers lawsuits & legal claims
  • Nail down the equity split agreement between founders

Toan Do
0
0
Toan Do Entrepreneur
Director, National Security Programs at Red Hat
Best advice is to set up your company first and incorporate or via LLC. Afterall, the IRS is going to want to see where the money is going, and if you open it in your name...well guess who is going to be filing on April 15th. You can also write off the merchant fees as the company. Just keeps everything a lot neater for accounting purposes.


Join FounderDating to participate in the discussion
Nothing gets posted to LinkedIn and your information will not be shared.

Just a few more details please.

DO: Start a discussion, share a resource, or ask a question related to entrepreneurship.
DON'T: Post about prohibited topics such as recruiting, cofounder wanted, check out my product
or feedback on the FD site (you can send this to us directly info@founderdating.com).
See the Community Code of Conduct for more details.

Title

Give your question or discussion topic a great title, make it catchy and succinct.

Details

Make sure what you're about to say is specific and relevant - you'll get better responses.

Topics

Tag your discussion so you get more relevant responses.

Question goes here

1,300 Followers

  • Name
    Details
  • Name
    Details
  • Name
    Details
  • Name
    Details
  • Name
    Details
  • Name
    Details
  • Name
    Details
  • Name
    Details
Know someone who should answer this question? Enter their email below
Stay current and follow these discussion topics?