Chances are that this idea will go absolutely nowhere (as most ideas do), and as you're new to this you're prone to vastly overestimating the probability of success and estimated returns.

My advice is to relax, and focus on learning what you're doing instead of focusing on "monetizing a web service".

If you want immediate practical direction, set yourself up with a Stripe merchant account (and whatever is necessary for that), and start selling. If you can't get past this, everything else is a waste of time.

Are there any protective steps I should take before doing that? I mean stuff like licenses / patents / trademarks / company formation etc.

http://theleanstartup.com/book

This book changed my perspective on these things significantly for the better.

2. Holding off on a trademark would be fine, though finding a unique name _should_ (IMHO) be done at the start, and at that point I'm not seeing a big reason not to trademark.

3. The stuff on patents makes no sense (at least to me) in this context.

That said, I claim no particular expertise on this topic.

On the contrary. If the OP goes into business without any sort of company as a legal shield and anything goes wrong resulting in legal action against them, then typically everything they personally own may be at risk: house, car, savings for the kids when they go to university, the lot.

  > ... and anything goes wrong resulting in legal action 
  > against them...

Without properly weighing the risk of a lawsuit, there's no way that we can conclude whether the risk is reasonable.

So, who might be out to sue you? To summarize an article from nolo.com [1]:

   * An employee
   * A landlord
   * A supplier
   * A customer

   * Don't hire anyone
   * Don't lease an office
   * Don't buy goods on credit. Buy high quality goods when
     you can't afford to have a problem with them.
   * Have an "as is" end-user license agreement. Be very 
     cautious about making service quality guarantees. 
     Don't sell software that can cause damage or personal
     injury.

[1] http://www.nolo.com/legal-encyclopedia/liability-concerns-so... [2] http://startuplawyer.com/incorporation/the-when-to-incorpora...

(edit: And a nice quote from HN favorite patio11:

  > Incorporation?  Incorporate when you have a good 
  > reason to. (I still don’t, but I might do it after I 
  > go full-time, largely for purposes of dealing with 
  > Immigration.)  If you’re selling B2C software, your 
  > number one defense against getting sued is promptly 
  > refunding any customer who complains, and that pretty 
  > decisively moots the LLC’s (oft-exaggerated) ability to
  > limit your personal liability.  You’ll be personally 
  > liable for debts from the business, but since the 
  > business is fundable out of your personal petty cash 
  > that isn’t the worst thing in the world.  If sales 
  > collapsed tomorrow I’d be on the hook for my credit 
  > card bill, which runs about $1,200 a month — not a 
  > financial catastrophe for an employed professional, 
  > particularly when the business generates far more 
  > than that in profits well in advance of the bill 
  > being due.  Sole proprietorship — i.e. merely 
  > declaring “I have a business” — is the most common 
  > form of business organization, by far.
)

That may well be true, but for a trade-off of risking everything I own in this world vs. an hour with an accountant/lawyer who actually knows what they're talking about, it's a pretty easy decision.

Also, there are other reasons to consider setting up a formal business entity besides a possible legal shield. You may not be able to access various financial services as a private individual. It may have tax advantages. Simply keeping your personal and business finances separate from day one may save more time and money when it comes to doing your accounts than it cost to set up.

Again, I'm not saying these would necessarily be the case for the OP here. I'm just saying that based only on what we've been told here, no-one in this forum is likely to be in a position to give reliable advice, while a qualified professional who can ask the right questions in their own field of expertise and in the relevant jurisdiction could.

  > You've changed your position fundamentally, from saying 
  > you have nothing to lose...

  > If I understand you correctly, you currently have very 
  > little capital to protect.

  > ...you have nothing to lose...

Are you telling me that, wherever you're based (I assume the US) you can just wait until you earn $2000 and then start worrying about taxes?

And in the worst case you only risk a small fine, as the amount is small.

Much more probable is that you don't sell anything or have only a small amount of sales that no one cares about, so first check that you have a business and not a dream.

And that dollar amount - you'd just pay ordinary income on it -- because it's not worth the hassle of setting up a business structure. So set aside some money from your sales to pay the taxman.

Talk to an accountant, or at least find the local equivalent of a small business service center in your area. Small businesses are the backbone of the economy and most major cities and states or provinces (depending on country) have folks you can contact to get basic guidance in this area.

Even if the project goes nowhere, you can use this account for other side projects you want to make money.

Accepting any money from anybody to your personal account is just stupid, and will make for a huge nightmare when you want to transition to being a huge business or paying taxes.

Do that and worry about the rest once you have enough money.

Sure, on average a start-up will fail. However, if either it does work out or it fails because you screwed up and someone came after you, and you didn't get a few basics in place up-front, then you are up the creek without a paddle and may not be able to salvage the situation after the fact.

It will probably take no more than a quick chat with an accountant to figure out the minimum you need to do to comply with your local tax laws and whether it's worth setting up some sort of company at this stage. The total spend required to do that in my country, including both the accountant's advice and the legal fees to register a new company and get the proper documents created, is less than a day's salary. This does vary significantly by country, but again a local expert can advise you because they do this all the time.

Likewise, if you're potentially bringing in thousands of bucks per year, spending a couple of hundred to get a real lawyer to look over your terms and answer any general questions about licensing things you really need to know right now is probably money well spent.

None of this is to say that you won't decide to just set up a site and start charging anyway, assuming you can find a payment service available in your location that will let you take payments as a private individual of course. Maybe that really is the right path for you at this stage (though at least if you were in the same position in my country, IMHO that would be unlikely).

But seriously, any accountant and lawyer used to working with small businesses will understand the situation you're in and be able to give you some basic advice about what you really do and don't need to worry about right now, and it will cost you a few hours and a day or two of salary, and even if things don't work out this time you'll still have the useful background knowledge if you decide to do anything else commercial later.

You should concentrate on making what you make and marketing it so you have a business that is worth having in the first place, but part of running a business professionally is knowing how to deal with the administration and keep the overheads in proportion, and it's much easier to do that if you just get something basic but sufficient set up from the start.