
Ask HN: I want to create a software business, where do I start? - bobblywobbles
I&#x27;m sure a lot of us feel the same way, I know I do. We have great ideas for software but when we actually start thinking about creating a business, there are many legal hurtles we have to jump over in order to make everything &quot;official.&quot;<p>To those who have done it, can you share advice with us? Is it possible starting a one-man business? Are there companies that help startups get their feet off the ground with the necessary resources?
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mattmanser
Not sure of your country but it's extremely simple in the UK.

Here's what I did in the UK.

1\. Create company for £15 on government website

2\. Get bank account in company name, applied online, took 20 minutes. I had
card and everything within a week.

3\. Enrol for tax on government website (optional in UK if your company
turnover is less than £80k). Bit confusing, but accountant can help and only
takes 1/2 hour at most

4\. Start selling subs to my app, stripe integration

There are some admin tasks I have to do regularly:

1\. Monthly, keep on top of accounts. I use an app, QuickBooks online. But
I've previously used a spreadsheet for my consultancy company as there were
only a handful of invoices and expenses each month

2\. Every 3 months. Submit VAT returns and pay government tax. Takes 1/2 hour

5\. File accounts yearly. Accountant will do this for £400 per year or you can
do it yourself (half days work, but confusing)

6\. File confirmation statement yearly (UK company thing, confirms who the
shareholders are and the share composition). Costs £18, takes 10 mins

To break it down:

\- Incorporate company

\- Get bank account

\- Register for taxes

\- Make sure you do your admin

You might find you need to get certain things certified when providing ID, our
Post Office does that. There's other little things I'm skipping over, like
some people prefer not to use their home address and setup a virtual office,
etc, but generally it's pretty simple.

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bobblywobbles
Incredibly helpful. In the US here, some of these are definitely things I'll
need to do, but I don't know the places I need to go yet. Something tells me
that registering is easier in the UK, but I'll find out.

How do you keep on top of your accounts for your business?

~~~
mattmanser
In the new one it's mostly all automated, with the app it imports your bank
statements and you just need to match the payments to invoices and classify
the expenses. Upload pictures of any receipts for expenses, etc.

In my consultancy business I have a spreadsheet tab for invoices and one for
expenses, and try and update it every month. And then a template for
calculating the p&l accounts and tax I need to submit each year. I would use
an app, but never get round to sorting it out.

I really would recommend just getting an accountant and accountancy app unless
your turnover is very low.

It is worth getting your ledger codes right if you get to the sort of size
where you employ people (codes are how you classify your income and spending),
and I would recommend the less ledger codes the better, you can always create
more later.

To be honest, you should be able to find a 'dummies guide' to setting up a
business in the US, I would just buy that. Read it and then come back and ask
more specific starting a web app business questions. People will recommend you
the right US state to incorporate in and corp structure.

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claviska
I started Surreal CMS 10 years ago. By far, my biggest fear was how to setup a
business, taxes, etc.

It’s actually quite easy.

I’m in the US, but from what I’ve read below, it’s very similar to the UK. I
think people get confused about the types of businesses and how they’re taxed.
For a one-man show (and even some larger businesses) an LLC is probably the
easiest way to go.

With an LLC, your business taxes are passed through to you. Instead of filing
taxes for yourself AND your business, you’ll just file once and include a
Schedule C for the business. Makes things a lot easier.

It’s a bit different in each state, but setting up the business is a matter of
searching for a name (usually done online) and submitting a couple of forms.
Once you’re “approved”, you’ll receive Articles of Organization.

You’ll also need to get an EIN number from the IRS. You can do this online in
minutes and print it out. Take all this to bank and you’ll be able to setup an
account. Now you’re in business.

After that, the only really complicated thing is taxes. You’ll need to pay
quarterlies, and the amount is estimated from what you’ve made and what you
expect to make. Once you have revenue, I 100% recommend hiring a CPA to help
with this. They’re not as expensive as you think. (I was doing my own taxes
with software for a couple years. Then I hired a CPA and she saves me more
money than I pay her each year.)

That said, until you actually have something earning revenue, you probably
don’t need to start the business yet. Here in the US, you can operate as a
sole proprietor. The big drawback here is your personal assets aren’t
protected, but until you have customers you probably aren’t worried about
that.

I probably just made it sound more complicated than it really is, but I
promise, once you get through the intial setup you’ll think, “what was I ever
worried about?” Just keep in mind that this is my experience as a one-man
show. More complex business structures should probably consult with an
attorney.

My takeaway is this: starting a business is easy. Running it can be tough
sometimes, but it’s one of the best decisisions I’ve ever made and it’s
extremely rewarding.

Best of luck!

Edit: fixed typos

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bobblywobbles
We've talked before- I really enjoyed your earlier HN posts on Surreal CMS and
the experiences/challenges you've faced (and overcame).

My really big questions are when it comes to the taxes. I know I'll need some
provider to take in payments, but then how do I report this properly to the
IRS. Your explanation gives me some insight how it can be done for one-man
shows. So you say the CPA helps you file all of this? Or do you do the
quarterlies by yourself and go to the CPA with this?

What about all the legal? As a one-person business, I imagine it's too much to
understand all the legal rules w/o consulting with an expert.

~~~
claviska
> So you say the CPA helps you file all of this? Or do you do the quarterlies
> by yourself and go to the CPA with this?

Every year, I bring my invoices, receipts, etc. and my CPA figures out what I
owe and handles all the details and the filing. Then she estimates my
quarterly taxes and sends me "bills" before they're due. I basically write a
check and I'm done.

A good CPA will meet with you when you get started to coach you on what things
to keep track of (e.g. invoices, receipts, mileage, etc.).

> What about all the legal? As a one-person business, I imagine it's too much
> to understand all the legal rules w/o consulting with an expert.

For more complex businesses, maybe. I've never had an issue. If you're really
worried, consider getting a prepaid legal service as cheap insurance.

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BGthaOG
Hello!

I have not started a business yet but have kept track of three resources folks
have found useful (I think I saved them off of HN, not entirely sure):

Book:

Acceleration: What All Entrepreneurs Must Know about Startup Law
[https://www.amazon.com/dp/B07NLK5GZM/ref=cm_sw_r_cp_apa_i_Xv...](https://www.amazon.com/dp/B07NLK5GZM/ref=cm_sw_r_cp_apa_i_XvKaDbNHNK7GQ)

Blog (26 min read):

HOW TO REGISTER A COMPANY IN THE USA: COMPREHENSIVE GUIDE FOR FOUNDERS
[http://aynuriev.com/how-to-register-company-usa/](http://aynuriev.com/how-to-
register-company-usa/)

Free document generator (a YC company):

[https://business.axdraft.com](https://business.axdraft.com)

~~~
bobblywobbles
I'll look at all of these resources, thank you for sharing!

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saluki
Checkout StartUpsForTheRestOfUs.com podcast, it has a lot of great info, start
with greatest hits and then the archives.

You can start out as a sole proprietorship. Get an EIN number from the IRS
website so you don't use your SSN.

Use stripe for your payments, you could create a separate business checking
account but not 100% necessary till you start making sales.

If your software takes off, then think about an LLC or other structure.

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icedchai
You're better off thinking about your idea, implementation, marketing
strategy, etc. first. The "paperwork" is the easy part.

~~~
bobblywobbles
I have all that done, the "paperwork" part is the step I'm at now. It's the
"paperwork" part that's a mystery for me, as unless I imagine you are in
business or have been exposed to it, there's a lot of area you've never
covered before (this is the way it is for me).

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wjossey
The folks over at Knowable ( knowable.fyi ) are launching an audio series on
this topic that is really great. I got a chance to hear an early cut, and the
content is top notch. I’d recommend adding yourself to get notified when it
launches, as I learned new things even as someone who has launched a VC backed
startup.

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cweagans
Build the software first (or at least a proof of concept). Don't get caught up
in paperwork, because that ultimately won't matter if you don't have anything
to sell.

~~~
bobblywobbles
Thanks for your suggestion! I do have software that's ready, just need to
start working in the "legal how-to's."

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madamelic
If you are in the US, don't bother with paper work or any of that garbage for
now.

You can run sole proprietor and not bother with unnecessary paperwork for now.

I saw you said "software is ready." How many have you sold? What's your
validation?

A business is about the cash, not the paperwork. I paid $500+ to register a
startup that never got off the ground or even had a customer. Dumb, dumb past
me.

~~~
bobblywobbles
Aren't taxes going to be an issue if I run as a "sole proprietor"?

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madamelic
Not really. 1040 Schedule C and 1040 Schedule SE.

Between an LLC and sole proprietorship, my understanding is that an LLC
creates a legal barrier between yourself and the business. The tax
implications are the same. LLCs, from what I understand, especially a one-
member LLC will just be pass-through (I believe you can elect differently)
tax-wise but an LLC protects your personal assets from the business.

No one should really mess with C-corps or S-corps until they have someone
telling them to. It's expensive and cumbersome to maintain one. Stripe Atlas
is misleading a lot of young startups into believing they need a Delaware
C-Corp immediately, when really it just benefits VCs not having to make
businesses convert to those structures. If you aren't going VC, don't bother.

For instance, a C-Corp costs about $700 / year before doing taxes. An LLC
costs about $30 / year.

A C-corp requires you to file monthly (or is it yearly?) minutes... which
costs money to do... and you'll be the president, secretary and treasurer of.
Then you have to fill out forms and junk (Stripe Atlas makes this easy but
costs $).

An LLC on the other hand, you file a yearly report basically just saying "Hi,
we are still around." and pay your yearly dues to your state.

Sole proprietorship is even easier. You just declare yourself as one. Like,
just say "I am a sole proprietor" and boom, you are one. No filing required
(Check the state, I am sure some are different). You can file a DBA (Doing
business as) with your state treasurer and still be a sole proprietorship.

To be honest, an LLC is probably the safest thing to do in the long-term but
short-term sole proprietorship is fastest.

The thing that I do is have an all encompassing LLC that I run all of my
projects under, rather than having a new structure for every business.

~~~
bobblywobbles
This is an incredibly helpful explanation of everything, thank you!

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brodouevencode
Stripe Atlas provides a pretty good service for the nuts and bolts stuff.
Getting going from the business side is best left to reading PG, SA, et. Al.

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bobblywobbles
What do those acronyms stand for, PG, SA, etc?

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brodouevencode
Paul Graham, Sam Altman

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bobblywobbles
Thanks!

