I wouldn't set up a corporation until you have either a reasonable amount of cash coming in or someone ready to give you a check. After that, I'd start with an LLC in your home state, unless you think there's a chance you'll take outside investment. If you do, conversion to a Delaware C-corp costs around $10K in legal fees.
I thought that an LLC in California required a yearly fee that was close to a $1000 the last time I looked. Is that no longer true or not true at all? Related - isn't it much cheaper in other states?
Yea, $850 franchise tax minimum. I personally think it's a bit excess even by Californian standards.
Also, you'd need to get an office in Delaware to not mandate a foreign registration in California which still involves the taxes. Getting an office in Delaware is pretty expensive but it's about $400 cheaper than California franchise tax. They assess their own but it still works out lower.
Edit: Nevermind, they still tax you on that. I don't condone tax evasion, but Wyoming doesn't track the owners of a corporation.
+1 to this advice. Don't incorporate until you're already paying yourself a good salary. The wrong structure can easily cost you thousands per year in taxes and fees.
No you simply convert the sole proprietorship to an LLC (or corporation). You "sell" your intellectual property to the newly created corporation in exchange for your founder stock. A sole proprietorship is sort of like the default business structure, you don't really need to do anything to start it, everything just ends up on your personal tax return.
"Piercing the corporate veil" is different. Google will be helpful if you're interested, but basically if you run a company don't do shady shit -- don't commit fraud or gross negligence, and respect the separation between company and personal finances. Otherwise you may lose the protection of the corporation (the "limited liability" part of LLC) and become personally liable if things go bad.
