The average smartphone user has twenty-six apps on his or her device.
The average smartphone user has twenty-six apps on his device. He uses these apps for an average of twenty-three hours per month—that’s almost a whole day every month spent just in app-land. What does this mean? It means that apps, whether for-purchase or supported by ad revenue, are big business. It’s quickly becoming one of the most profitable sectors of the technology industry, with more than five billion apps downloaded every month from the App Store and Google Play.
Having an idea or many ideas for an app is only half the battle. Getting those apps made by the right people with the right expertise is the rest of the battle. It’s a challenge, but one that you can face when you know how to create an app company. Here’s what you need to know to get started:
How to choose the right kind of business entity
Do you want to be an LLC or a corporation? Do you want own the business yourself or co-own it with someone else? What kind of entity your company is will dictate liability and tax concerns. Here are some of the pros and cons of each type of entity:
1. Sole proprietor – You own the business.
a. On the positive side, there are no fees in forming your business and you have total ownership of the app.
b. On the negative side, you are also personally liable for the app and raising capital is difficult.
2. Partnership – A for-profit business with two or more owners.
a. This entity, like a sole proprietorship, has pass-through taxation and has no formation fees.
b. Again, the negatives include personal liability and the inability to raise very much capital.
3. LLC – A limited liability corporation is a mix of a partnership and a standard corporation
a. As far as positives go, liability is reduced and there is a choice of taxation regulations
b. There is an annual fee for LLCs and you have to file paperwork to form one.
4. Corporation – This entity is completely separate from owners
a. On the positive side, the owners have more options for raising funds and very limited liability.
How to draft your business agreement
Once you’ve chosen what kind of entity is right for your app company, it’s time to write the document that states how you want your business to run. This agreement ensures that if legal issues were ever to arise, the courts will not simply default to standard rules, but rather follow the rules set out in this doc. Most will cover, among other things:
· The name and owner(s) of the company
· How profits will be allocated
· How losses will be allocated
· How contributions will be handled
· How disputes or disagreements will be settled
· Who has voting powers
· What each owner, manager, and employee’s roles and rights are
How to hire your developer
One of the best ways to both make sure that the companies/individuals you work with are held accountable for any sharing or theft is to have contracts and non-disclosure agreements in place before any real work begins. Contracts are beneficial for both parties, as most also protect the intellectual property and work done by the developer, writer, designer, etc.
Unless you are an app developer, you will want to hire one to bring your ideas to fruition. This process means dealing with issues like intellectual property, non-disclosure agreements, and contracts. Your goal should be to both hire a talented developer and to protect your app idea from theft. An NDA is a great start, but it will only be effective if you’re working with an honest developer. Research and an air-tight contract will help you protect your idea.
When you take these steps, you will have a strong foundation, on top of which, you can build a successful app company.