Hi, I'm starting a new idea with my business partner. My concern is about if we should incorporate the business or not. In order to make everything clear and transparent and to not have problems in the future if the idea works. We also need to accept payments and configure a merchant account. There is a company already incorporated where my partner is the owner. Should we use that company as an umbrella until we can afford the incorporation costs for the new company?.
You do not need to incorporate, and you may use the other company for now. Of course, it is always better to incorporate so that you have a legal entity by which you operate, collect fees, pay taxes, and so on.
If you choose not to incorporate at this point, then you should at least have a written agreement with your partner. It should say that you both intend to start a company and are using the other corporation only temporarily and only for the purposes of the merchant account, and that as soon as you have enough money, you will incorporate properly.
Your agreement should also spell out the different roles you both will play, and who owns what. I would assume you stipulate that you each own 50% of the new company, and therefore each of you are entitled to 50% of any profits after all expenses and taxes are paid, and you are both equally responsible for any debts that are incurred
You should also stipulate that for the terms of the agreement, all decisions must be unanimous, but that either of you may withdraw from this agreement at any time and end the relationship.
If you need help drafting the agreement I can help. I'm an attorney as well.