Assaf Ben-David answered:
Hi
First of all, well done for the initiative. Sounds great.
When to incorporate is one of the most common questions I get when working with startups. The answer is not too early, in order to save the fees (mainly yearly reports and accountants), but before you have clients (who can potentially sue you) and before you have created anything of value (because then, when you transfer the intellectual property - IP) to the company, you will incur a tax event.
In this case, and based on the information you provided, you should definitely incorporate because:
1. You have paying clients (which means legal liability) and if they sue (I hope not, but IF), you want them suing the company, and not you personally.
2. You have "staff" - which again, comes with legal liabilities (by the way, best to 'employ' them as freelancers and not employees. Paying freelancers is much less of a headache.
3. You've created intellectual property which should be transferred to the company, and if you do it now, you may still be able to avoid a tax event (the website is worth money, and you're giving to the company - and whenever someone, or a legal entity, gets something of value, the tax authorities ask for a % - like when you get paid your monthly salary). In this case, there is now reporting to the tax authorities, but if you ever sell your business (have an 'exit' event) then the issue might come up.
Bottom line: you should incorporate.
p.s.: don't forget to add a terms of service/terms of use + a privacy policy (and no, copying it from another website - even if you made changes, won't work - this is still copyright infringement). Also, if you're targeting kids under 13 in the US, don't forget to include the sections regarding COPPA (children's privacy act).
Good luck!
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