When should a startup set up a company?

When should a startup set up a company? This is perhaps one of the most frequently asked questions among founders. First of all, of course, you need to think about the advantages of your business idea and the income: will the startup be profitable and cost-effective? Accordingly, once you have answered these questions positively, you will need to think about setting up a company, because the tax authorities may take an interest if you receive large incomes. Accordingly, we will need to look at a number of aspects that will be important when setting up a startup.

And this question is quite complex. One of the first aspects to pay attention to is the separation of personal and business liability. It should be noted that when you set up a company, you are liable only to the extent of your contribution. Accordingly, depending on the legal form, you will not bear liability for certain obligations of the company. The second aspect to pay attention to is whether you will be raising investors' money, because many investors will naturally prefer to work with a company rather than with a sole proprietor or an individual.

Another question, no less important from the standpoint of the legal basis for setting up a startup, is obtaining licenses. Some types of activity require licenses, and accordingly you will have to set up a legal entity so that this legal entity obtains the appropriate permit to conduct a particular business, which may be regulated in one jurisdiction or another. Another important point to pay attention to is intellectual property. For example, a trademark or a patent.

It would, of course, be better to set up a legal entity and transfer this intellectual property to the company's name. That will be better both for you and for investors, who will prefer to work with a startup where all legal issues related to intellectual property have been handled properly. It should also be noted that some jurisdictions may offer special tax relief, or there are jurisdictions where certain tax or other incentives apply. Accordingly, it will be more advantageous for you to set up a legal entity in such jurisdictions and apply a special tax regime.

For example, in Kazakhstan there are Astana Hub and the Astana International Financial Centre (AIFC). In addition, you will also need to put the relationship between the co-founders in order. That way you can divide the respective responsibilities and shares, as well as settle other relevant issues that may arise in running the business later on.