
Ask HN: What do I need to know before registering a 2 person LLC on Legal Zoom? - si2
What do I need to know before registering a 2 person LLC on Legal Zoom?
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charlesju
That the LLC form is really 1 page and 1 follow-up form. This will cost < $100
in total if you spend 10 minutes googling how to do it. (I'm not a lawyer, but
this is what I know)

1\. LLC FAQ <http://www.sos.ca.gov/business/llc/llc_faq.htm>

2\. LLC Form (1 pg) <http://www.sos.ca.gov/business/bpd_forms.htm> (search for
LLC-1) — $70

When you get approved, you will need to submit a Statement of Information
which costs $20.

3\. If you don't make money you can waive the first year's min. franchise tax
of $800.

4\. Lawyers will usually help you for free if you are starting a legit
business, but it will be costly (we just got a bill for $10k for starting up
our s-corp).

5\. Good luck!

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rdouble
I've heard that the approval process is sped up if you actually go to
Sacramento and file in person. Is this true?

~~~
pz
I don't believe so. If you file in person you have to pay an extra handling
fee. If you want expedited filing i think it costs an extra few hundred
dollars.

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pz
First, I'll echo other people's advice: just file the forms yourself. Yes, its
annoying having to handle physical paper and envelopes.

However, since you have a partner in this LLC, the really important thing is
to set up your "operating agreement". This will decide how the company is
controlled, revenue shared, what happens when someone leaves... etc. Don't
wait until someone wants to leave or you're making decent $ before trying to
figure this out. You can file the agreement with the state, too.

If I were you I would write down in your own words what you want in the
operating agreement and then take the money you saved from NOT using legalzoom
and have a lawyer codify what you have into legalese.

~~~
pz
For more info check out "Business Law for Entrepreneurs"

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dennykmiu
One thing to keep in mind of a LLC is that the annual franchise fee is not
limited to $800. If you start to make money, you will need to pay a fee
calculated based on the "gross" revenue, not "net" revenue (which is sales
minus expenses). Also, you will need to pay self-employment tax on any money
leftover.

I summarize some of the tradeoffs in the following ...

<http://www.lovemytool.com/blog/2008/01/bootstrapping.html>

~~~
rksprst
This $800 minimum franchise tax is only in California. Other states have other
tax requirements.

FYI: You can defer that $800 payment if its your first operating year.

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rms
It's really easy to register an LLC in Pennsylvania, you can actually mostly
do it online.

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gojomo
Splitting ownership exactly 50-50 risks deadlock in worst case scenarios. Give
someone 50+1 or give a mutually respected third party a tiny share to break
ties if all else fails. You probably won't need it, but it's there just in
case.

~~~
tricky
You can always put Felix Dennis' "Mexican Shoot-out" clause in place. If the
owners are in a deadlock, one can chose to execute the clause. When that
happens, each owner places a sealed bid to buy the entire business. Whomever
has the highest offer, wins... Brutal, but fair.

~~~
gojomo
Something like that is another good option. I hadn't heard exactly that
variant; the one I've heard the most about has one partner offer a price, the
other has to either take it for their half or pay that same amount for the
other half.

Within the last year I read some research suggesting a further refinement that
better ensures the partner who valued the business highest winds up with it...
but can't find the reference right now.

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phn1x
Legal zoom charges you on top of state fee's. Your state will normally charge
you 4-500 bucks. Legal zoom will charge you 100-300 + state fee's.

The forms are easy enough to fill out yourself.

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reasonattlm
That if you're looking to raise funding, being an LLC will be a continued
point of annoyance that will become worse as the level of funding rises.
You'll be forced to convert to an S corp as soon as any experienced angels or
VCs become involved beause they simply won't do deals with you otherwise -
which can be a big headache, legal expense, and drain on time.

~~~
fatdog789
An S-Corp is actually worse from the VC standpoint than an LLC, b/c S-Corps
don't require incorporation (DBA's can apply for and receive S-Corp status).
This means it's easier to take the money and run.

Some VCs prefer LLCs because it gives them the risk-minimizing benefits of a
corporation, while at the same time giving them a hand in managing the
business (a la partnership form). HOWEVER, many VCs, especially the smaller
ones, are unfamiliar with LLC law, and avoid it b/c they don't know about it.
Some VCs prefer S-Corp because it ideally gives them access to the founders'
personal assets, but in practice, a bankruptcy court will try very hard to
deny this benefit.

