Legal, Tax, & Accounting February 16, 2020

I don't plan to make any money with a project, so do I need to create a company for it?

KongSharp

Hi guys,

I don't plan to make any money with a project I am working on - so do I need to create a company for it?

What legal documents would I require?

The project I am working on is a website to help a niche community that I am a part of - it will be a completely free service. It will have Authorised CRUD functionality.

I am assuming I'll need to add a ToS and Privacy Policy so users know how I use their personal details, but beyond that I am not sure what else I 'need' to add.

Btw, I am based in the UK.

Thank you in advance for any advice :).

  1. 1

    No, you don’t need to form a company, as you’re not charging money. A company should, at minimum, be trying to generate revenue.

    Second, forming a company will require you to:

    • pay fees for the legal formation of the company
    • file corporate tax forms every year, and possibly have to pay a “minimum corporate tax”, depending on your jurisdiction.

    These are time and money expenses that you won’t be able to offset, unless you have revenue.

    Finally, consider the actual risk of being named in a lawsuit:

    • Greedy people are less likely to sue when there’s little to no money to gain, so unless you’re personally wealthy, your zero-revenue project won’t be a very tempting target
    • Users who somehow suffered a loss due to your service are probably more interested in fixing the problem than they are in spending time in court. Offers to help to make things right go a long way here.
    • People with an irrational personal vendetta will sue you no matter what you do, even if you have no money.

    These are just some examples. Weigh your own risks based on your personal circumstances, and do whatever lets you sleep soundly at night.

    1. 1

      What about GDPR and privacy? You still have to handle user data with care, and if there's not a company behind the site I don't know how that works.

  2. 1

    One reason you might want a company (in the US), even if you're not making money, is to protect yourself from personal liability. So people sue your company instead of you, basically. I have no idea about the UK, though. Sorry!

    1. 1

      Same in UK, although could operate as Sole Trader with liability insurance - depends on circumstances. Look into whether you can dismiss all liability in terms & conditions (look for existing examples - i.e. what do other free services do). If you end up creating a company consider running as dormant so you only file once a year.