
Ask HN: Starting Your Own LLC? - pullo
I want to start my firm in the USA to channelize my  creative endeavors. What are the nuts and bolts of starting your own firm? I can register an LLC online, but what else should I know? e.g Filing taxes, choosing between different corporations etc.
What did you wish you knew , when you started yours? What are some good resources ?
======
mdorazio
1) Doing taxes correctly as anything other than a sole proprietorship is a
huge pain in the ass, especially if you're selling things across state
borders, and doubly so if you're in California. I recommend finding a tax
professional to handle that for you (the time it takes to do it yourself is
generally not worth it). Also don't forget that if you're actually making
money you'll need to pay estimated taxes quarterly.

2) Either learn basic accounting (if you don't already) and keep excellent
records of all revenue and expenses business-related (ideally categorized into
standard business categories) or find a CPA to keep your records straight
monthly. A huge number of people get burned simply because they didn't keep
proper records and then ran into tax or regulatory trouble later.

3) Definitely keep your business finances as separate from your personal funds
as possible. Different checking account, different credit card, etc.

4) Think really hard before you hire anyone for anything, and if you do, make
sure you're either doing 1099 correctly or get a professional to help with W2
stuff. Again, this is something that often comes back to bite people.

And lastly, remember that most businesses fail and that failing at business is
not something to be ashamed of. If it's not working out, don't make yourself
miserable and mortgage your future to try and save it indefinitely - walk away
and try again with the lessons you learned.

~~~
gshdg
Note that a single-person LLC can file taxes as a pass-thru entity, which is
essentially the same as a sole proprietorship. You do still need to separate
your finances/accounts/etc tho.

~~~
busterarm
Being a single-person LLC usually doesn't give you any of the legal advantages
of having an LLC in case you get sued.

~~~
ahnick
I talked to a lawyer about this and the feedback I received was while
technically they might be able to sue to try and receive compensation even
from your personal assets if you are a single-member LLC as long as you can
show you were acting in good faith and as an agent of the company (i.e. you
didn't personally guarantee the work and sign your name instead of the
company's and you maintain distinct records and finances for the business),
then it is unlikely to get approved in a court of law.

So an example here might be that you were working for a client and work wasn't
fully completed on time. You made a good faith effort to get the work done, so
while the company you were working for might be entitled to compensation from
your LLC they can't come after your house.

Finally, let me caveat all this by saying that the standards for "piercing the
corporate veil" vary by state and as always you should consult with a lawyer
before making a final determination. Also, another work around is to form a
multi-member LLC and hold formal annual meetings. This is normally enough for
most states to consider the LLC as a separate distinct entity and prevent
piercing of the corporate veil.

~~~
busterarm
I also discussed this with the SBA and multiple attorneys (attorneys make up
most of my clients, btw).

Here in NY, piercing the corporate veil is a bit easier than in other states.
More importantly, if someone attempts to go down that road, you have to spend
the time and resources ($$$) to defend your position. In general you're best
off just starting in the strongest possible position to start with, and
usually that means splitting the decision making responsibility. If you want
to avoid all that hassle, just go the SP route.

In my original comment I made the mistake of saying "any" instead of "all"

------
patio11
I wrote answers for a number of these questions for Stripe Atlas; c.f.
[https://stripe.com/atlas/guides/incorporation](https://stripe.com/atlas/guides/incorporation)
, [https://stripe.com/atlas/guides/business-
taxes](https://stripe.com/atlas/guides/business-taxes), and the
[https://stripe.com/atlas/guides](https://stripe.com/atlas/guides) more
generally.

If there are holes after reading them, we'd love to hear about them.

~~~
winter_blue
patio11, I have a bunch of questions about Stripe Atlas (sorry that this is
long):

\- _Should a subsidiary of a foreign company be an LLC or C Corp?_ I've read
[https://stripe.com/atlas/guides/llc-vs-c-
corp](https://stripe.com/atlas/guides/llc-vs-c-corp) and if I were to own the
company directly, I certainly would go for a C Corp to avoid having to report
the company's taxes on my personal U.S. tax returns. But it's not clear to me
whether it's better for a subsidiary to be an LLC or C Corp. (I'm leaning
towards C Corp, but don't want to miss out on any benefits of having the
subsidiary be an LLC.)

\- _Can I transfer 100% of my U.S. subsidiary 's revenue to the foreign parent
company, and write off the entirety of that amount as a business expense?_ So,
my U.S. subsidiary's income would be zero, with everything that was
repatriated to the parent company subtracted as a fully deductible business
expense. Is this okay under U.S. tax law? Or would this be considered tax
evasion? (Would the U.S. company even have to file a state or federal income
tax return, since its income after business expense deductions is zero?)

(Note: The sole reason I want a U.S. company via Stripe Atlas is because
Stripe is the best payment gateway out there. It makes receiving money from
customers a lot easier, which is to put lightly, _quite important_.)

\- If I directly own a C Corp, _will I ever have to report anything connected
to it_ on my personal U.S. tax returns? (I assume with a subsidiary I never
would have to.) Also, will Stripe ask me to disclose my U.S. Social Security
number, or would a foreign passport be sufficient? And, does Stripe Atlas
transmit any data on company ownership to the federal government? Since
temporary work/other visa holders are prohibited from running a startup on the
side, there can't be anything (that's discoverable by the Dept of Homeland
Security) tying me to the U.S. company. (It's just that people have been
deported for selling apps, receiving ad revenue, among other things:
[https://www.murthy.com/2014/01/28/home-based-businesses-
inad...](https://www.murthy.com/2014/01/28/home-based-businesses-inadvertent-
unauthorized-employment/))

\- _How does succession for intellectual property work for companies?_ If the
company is shut down, can I designate myself as the "inheritor"/beneficiary of
all the property that the company held prior to its dissolution?

\- _Can I convert a subsidiary into a normal company that is directly owned by
me?_ There is a high probability that I will dissolve the foreign parent
company once I get U.S. permanent residency (but that could take a few years).

\- _Do I need to use the Delaware registered agent that Stripe Atlas offers_
its customers for $100/year? (I want to use the one offered by VirtualPostMail
instead: [https://www.virtualpostmail.com/services/registered-
agent](https://www.virtualpostmail.com/services/registered-agent))

Finally, patio11, is the email address _info at stripe dot com_ the best email
to reach out for further questions such as these?

~~~
techsupporter
At the risk of seeming unduly negative, I'd like to take a swing at this last
question of yours:

> is the email address info at stripe dot com the best email to reach out for
> further questions such as these?

I do not work for Stripe, never have, but I can state with near-certainty that
the answer to this question is "absolutely not."

Stripe are not going to give you advice on how to violate U.S. immigration law
and not get caught. If you are living in the U.S. on a visa that does not
allow employment beyond the terms of your visa, you are asking Stripe to give
you advice on how to break the law and there's zero chance that any business--
especially one so deep into financial services like Stripe are--will be OK
with doing that.

If you have to ask questions with a caveat like this:

> there can't be anything (that's discoverable by the Dept of Homeland
> Security) tying me to the U.S. company.

then you are playing with fire, _particularly_ under this administration,
running the risk of being deported and receiving a 10-year ban on reentry at
all (to say nothing of destroying your chances at ever getting a work permit
again) and I strongly suggest you reconsider what it is you are considering
doing.

------
dctoedt
For more nuts and bolts: I'm a part-time law professor and do a fair amount of
(pro bono) mentoring and lecturing for local academic institutions about
"Startup Law 101." In lieu of handing out the slides, I maintain a Web page
with summaries and links to further reading. [0]

(The page includes links to lots of HN discussions in this area; depending on
how this discussion goes, I might add it as well.)

[0] [https://www.oncontracts.com/startup-
law/](https://www.oncontracts.com/startup-law/)

------
kjksf
It's also worth noting that you don't need an LLC to "channelize your creative
endeavors".

You can take money from other people for goods and services you provide
without any legal structure behind it. IRS has forms to report such income
(and related business expenses).

A step-up is a DBA registration in your city hall. It's still just you,
nothing changes from point of view of IRS, you can just use a name for your
business that is different that your own.

An LLC is a significant step-up in terms of complexity and cost and many
people cargo cult it (i.e. they think they need an LLC for reasons they can't
put into words but it's something what other people are doing).

~~~
theturtletalks
LLC stands for limited liability company. What makes it different than a DBA
is that a LLC gives you limited liability. If your LLC is sued, you're
protected personally from losing assets. Regardless, many people don't need it
and a DBA suffices until the liability gets too high.

~~~
bsamuels
You also have to pay $800/year in franchise tax if you run an LLC in
California, regardless of income. If OP is just making an etsy or something,
he does not need an LLC.

------
C00L
I've helped hundreds of creatives figure out their formation + taxes in the
past couple of years. Here're my top learnings:

\- LLC formation is not just filing the article of organization. Make sure to
get an EIN, an operating agreement (Google operating agreement + your state
for templates), get a business license, open a business bank account
([https://www.azlo.com](https://www.azlo.com) is great), make initial
contribution (don't worry, it's your money). This makes sure that your LLC is
set up right (some states won't give you limited liability, if you don't do it
right).

\- In most states, LLCs are pass-through entities, meaning you'll file your
taxes via Schedule C and pay 15.3% self-employment tax. If you plan to make
$60K or more in profit, consider filing for S Corporation (significant tax
benefits)

\- Get a decent bookkeeping software and do your books right from day one (it
pays off). Quickbooks online is great. Connect your business bank account,
categorize your expenses, close your books at least quarterly.

\- Pay your quarterly taxes. Even though the penalty is not huge, you'll avoid
getting a huge tax bill at the end of the year

\- You may be able to manage doing your own taxes for a while, but if you're
serious about this, find a tax preparer to do your taxes. If you pick SCorp
route, definitely get one, as it's a separate tax return and a lot more
involved (i.e running payroll)

\- If you go SCorp route, make sure you get the reasonable compensation right.
Run yourself regular payroll ([https://www.gustom.com](https://www.gustom.com)
is great) and get K1 distribution every now and then. Pass your health
insurance via your S-Corp

\- Invest in Sole 401K. Investing in retirement is always a good idea and
you'll save a lot in taxes.

\- There are a couple of all-in-one services that can help with all. If you're
doing freelancing/contracting [https://www.hyke.me](https://www.hyke.me) is
great. If you're selling apps, doing ecommerce etc
[https://www.stripe.com/atlas](https://www.stripe.com/atlas) is great.

Hope helps.

~~~
m0zg
To add to the point regarding 401k. As a business owner you can set aside
something like 56K a year in 401k pre-tax (not to exceed 25% of gross income
IIRC). Go to Fidelity and Vanguard and search for "Solo 401k" to get started.

~~~
C00L
The new www.guideline.com doing a good job there as well

------
chrisked
The Clerky handbook is worth a read:
[https://handbook.clerky.com/](https://handbook.clerky.com/)

They offer services for incorporation too. Never used them so cannot speak
about their service level. Seems to be a preferred choice for some YC
startups. Then of course there is LegalZoom. They are around since 2001.

~~~
hayksaakian
I've skimmed through it, and it's a fine guide if you're starting a
traditional startup that plans to raise money.

If you're starting any other kind of business it's a little over kill.

Generally registering an LLC, applying for a business license and then
requesting a Tax ID number from the IRS is really all you need for a web based
business of 1 person.

~~~
riku_iki
> applying for a business license

what is it for " a web based business"?

~~~
hayksaakian
I guess I'm not really understanding your question.

In order to legally do business and report on your taxes (in washington state
for example) you need to register your entity as a business with the state --
in the form of a business license.

I only used the phrase "web based business" assuming you have no physical
property (retail) or employees which add additional licensing requirements and
more complexity.

------
sokoloff
Pay attention to the annual filing fees in your state for LLCs. That makes it
prohibitive in some states for small side-project type endeavors. (MA filing
fees are $500 registration and $500/yr for the annual report filing.)

~~~
charliepark
And if you end up close to the end of the year before filing, hold off until
January to form the LLC if you can. Otherwise they’ll expect the annual fees
($800 in California!) for the partial year. And if you end up paying late,
they’ll come for the penalty as well.

------
zubspace
What would you fine people advice for a single guy making money through a
website in Europe? What kind of corporation? At how much revenue do I need to
think about that? How much money (and time) does it cost per year? How does it
differ among EU countries? What do I need to take care of, when I take money
from customers around the world?

------
dawnerd
Single member LLC wasn’t as hard as I thought to setup. 100 bucks online in
Oregon, near instant approval too. Make sure you sign up with the IRS for an
EIN.

Signed up for Azlo just recently after keeping money in my personal, no big
deal just makes taxes a little harder.

Make sure you keep records of everything. Get yourself a good receipt scanner
that does OCR, like neat. Keep the physicals around too.

I’m not bothering with a lawyer, CPA until I start having a lot more cash
flow. Right now it’s enough for me to manage, but I will get professionals to
manage in the future.

One thing I wish I did was not use my residence as the address. Oh well, too
late for that.

~~~
300bps
_Signed up for Azlo just recently after keeping money in my personal, no big
deal just makes taxes a little harder._

That actually is a big deal.

[https://www.nolo.com/legal-encyclopedia/personal-
liability-p...](https://www.nolo.com/legal-encyclopedia/personal-liability-
piercing-corporate-veil-33006.html)

 _Commingling assets. Small business owners may be more likely than their
larger counterparts to commingle their personal assets with those of the
corporation or LLC. For example, some small business owners divert corporate
assets for their own personal use by writing a check from the company account
to make a payment on a personal mortgage -- or by depositing a check made
payable to the corporation into the owner 's personal bank account. This is
called "commingling of assets." To avoid trouble, the corporation should
maintain its own bank account and the owner should never use the company
account for personal use or deposit checks payable to the company in a
personal account._

~~~
dawnerd
I still don’t think it’s a big deal. Single member llc are taxed on your
personal (unless you opt differently but then you should have someone else
handle it). It’s the people that don’t keep good records that get in trouble.
Separating accounts won’t fully protect you if you do something dumb either.
You can still take an owner draw whenever you want, irs don’t care.

But yes, had I known azlo existed I would have signed up from the start. I
just wasn’t about ready to pay a big bank a monthly fee when I wasn’t making
money yet.

~~~
0xEFF
It’s only a big deal if someone sues you and wins. If you comingle assets
there’s an increased risk you could lose them in a judgement. If you don’t
comingle there’s lower risk of losing personal assets.

------
piotrkaminski
One tip that's not specific to LLCs but that I nearly missed: don't forget to
check if the city you're based in has its own business licensing/taxing
requirements. For example, in San Jose you need to pay $150/year for a
"business license", even if you're just working from home by yourself.

------
metapsj
i don't have any experience with Stripe Atlas. here are the highlights of
their offering.

Enables founders to assign relevant IP to the company at formation,
formalizing ownership of key technology.

Is designed to make conversion to a C Corporation as simple as possible. (We
can connect Stripe Atlas users to a lawyer to manage the conversion process
with discounted, flat-rate packages).

Provides a simplified process for adding members after formation.

Is organized in Delaware, the jurisdiction of choice for many new LLCs.

[https://stripe.com/blog/atlas-llc](https://stripe.com/blog/atlas-llc)

------
theturtletalks
So 4 years ago, me and a couple of partners decided to start an online website
selling vaporizers. Our supplier told us he was using Stripe and so we applied
for a seller account. I stupidly put my personal information to get up and
running quickly. In the next few days, I get an email from Stripe that
vaporizers are prohibited and they can't accept the payments. We were
surprised but moved on since we couldn't do anything.

So we eventually scrape the project and I move on to a new website selling
electronics. I signed up for a new Stripe account, but immediately got an
email from stripe saying:

"our banking partners prohibit us from helping with payments associated with a
business we've had to reject previously."

Has anyone faced this or had any recourse? This was 4 years ago and now I am
pursuing building a SaaS using Stripe Connect and using Stripe Atlas. Whenever
I reached out to Stripe back then, only response I got was decisions are
final.

Are all those doors closed for me since I made a stupid mistake years ago?

~~~
mistersquid
Since you used your personal information previously, can’t you use the
business information this time?

From Stripe’s perspective (as well as your business’s), wouldn’t this
application be from a different business though the owner/proprietor is the
same?

EDIT: spelling

~~~
theturtletalks
Even if you put in your company’s info, they need a real person connected to
the account.

------
chrisan
Isn't Delaware $300 a year to have an LLC there?

Shouldn't you pick a state that has little to no annual filing fee?

[https://www.llcuniversity.com/llc-filing-fees-by-
state/](https://www.llcuniversity.com/llc-filing-fees-by-state/)

~~~
kpommerenke
If you register your LLC in a different state from where you live, you need to
hire a Registered Agent in that state for legal reasons, which adds a bit of
cost (about $100-200 per year) and some complexity.

------
ahnick
I hate how this information is so spread out so I will try to condense this:

(1) Register your domain name and setup email (GSuite is simple enough). I put
this first, because it is nice to have all the business communications
actually going to the business email, so you don't start intermixing with your
personal email.

(2) Next, I'd recommend hiring a local lawyer for the LLC filing and
paperwork, not because you can't do it yourself, but because they can do it a
lot faster and will help find any mistakes throughout the entire process.
(they do this all the time) You will basically end up using them to file the
Articles of Organization, act as your registered agent (avoids having to put
your name and address directly on file with the SoS office), and they
typically have boiler plate Operating Agreements that you can use to bootstrap
your own.

(3) Next, you (or your lawyer) need to file Articles of Organization with the
Secretary of State's office and pay the filing fee. (Normally $100 or so)
You'll typically have to renew this registration annually. Your lawyer can
take care of it.

(4) You then need to decide how you will be taxed. Your basic choices are to
be taxed like a sole proprietorship or as an S Corp. I would choose S corp, so
that you can save on taxes. When you go this route you will select a
"reasonable salary" for yourself to be paid. Anything you earn above and
beyond your reasonable salary you can take as a distribution from the company,
which is not subject to self-employment taxes. If you go the sole proprietor
route it is simpler (you report income on your schedule c for the IRS), but
everything is subject to self-employment taxes.

(5) If going the S Corp route you will want to obtain an
FEIN([https://www.irs.gov/businesses/small-businesses-self-
employe...](https://www.irs.gov/businesses/small-businesses-self-
employed/apply-for-an-employer-identification-number-ein-online)) and file
form 2553 with the IRS for the subchapter S election. You have a limited
window to do this, so do it shortly after filing the Articles of Organization.
If you have an accountant they can assist you or do this for you. (6) Next I'd
recommend getting a payroll company to run your payroll if you've gone the S
Corp route. (Something like Square Payroll
[https://squareup.com/payroll/](https://squareup.com/payroll/)) They take care
of filing all the required forms with your state and will make it really easy
for you should you ever add additional employees beyond yourself. What are
some of these forms? They vary by state, but to give you an idea here is a
look at the items for the state of Oklahoma
([https://squareup.com/help/us/en/article/6319?utm_medium=web&...](https://squareup.com/help/us/en/article/6319?utm_medium=web&utm_source=dashboard)):

\- Withholding Payment Coupon (WTH 10004)

\- Wage Withholding Tax Return (WTH 10001)

\- Transmittal of Wage and Tax Statements (OK W-3)

\- Wage and Tax Statement (W-2)

\- Employer's Quarterly Contribution Report (OES-3)

\- New Hire Report

(7) This leads to the next item, which is you likely need to register for a
state tax ID and a state unemployment insurance ID and then input those IDs
into your payroll provider's system. Again this varies by state, but normally
each state has some analog of this.

(8) Make sure you create an Operating Agreement. It is an important governance
document for your LLC. Your lawyer can help bootstrap you here or you can find
samples online. Although, not strictly required it is an important document in
establishing your LLC as a legitimate LLC and not just an extension of
yourself. It helps prevent "piercing of the corporate veil" in instances where
you might be sued. (i.e. keeping your personal assets protected in the event
of a lawsuit)

(9) Hire an accountant (if you haven't already) to handle the K-1s and taxes
of the LLC. This saves you time and potential penalties that you might run
into in making a mistake with filing.

(10) Use some software like Quickbooks Online or similar to track your
accounting. Bonus here if your payroll feeds directly into your accounting
software.

(11) Get a Small Business Credit Card like this one from AMEX
([https://www.americanexpress.com/us/credit-
cards/business/bus...](https://www.americanexpress.com/us/credit-
cards/business/business-credit-cards/american-express-blue-business-plus-
credit-card-amex/45094?linknav=US-Acq-GCP-BusinessCards-ViewAllCards-
CardTitle-BlueForBusinessPlus)). You are going to have expenses and you might
as well get some points while you're at it. Also, easier to track expenses.
The bonus with these too is if you add employees then their travel expenses
are tracked and you get the points for them as well.

That's all the basics to get the LLC operational. Obviously there are things
like business plans, industry specific compliance regulations and
certifications(not typical of software companies though), health insurance,
etc., but this is a basic list to meet the requirements of the federal and
state government. Good luck!

~~~
tptacek
That S-Corp trick, the "reasonable compensation" thing, is an audit flag;
there is apparently a whole specialized kind of audit the IRS does for
"reasonable compensation" claims (presumably because it's so easy to spot
mechanically; your single-member firm made X, you claimed X-n income,
X-n>threshold: audit). I wouldn't bother with it.

~~~
waffle_ss
When I was a self-employed contractor several years ago my CPA did it this way
for my LLC. 50% of the income went on a W-2 and 50% on a K-1. It's up to each
person to decide their own risk level but my CPA was pretty confident it
wasn't a big deal as long as the W-2 salary wasn't absurdly low, and my own
googling at the time seemed to confirm that.

It's definitely worth it IMO since you're double-paying FICA taxes on your W-2
(i.e. paying both the employee + employer sides).

~~~
tptacek
You're not "double paying" taxes. The employer portion of your taxes when
you're an FTE isn't free money; it's part of your cost basis as an employee,
and comes out of your comp.

~~~
ahnick
He wasn't implying it was free money. He simply means you're paying the
employer's portion as well when you are self-employed. There is no reason to
do this on excess income once you have paid yourself a reasonable salary. To
determine a reasonable salary simply examine what you would make if you were
employed in that same job function by another company. If you are ever audited
you can show you made a good faith effort to determine reasonable salary and
you will be fine. Many people set it lower than typical industry rates and are
never even audited, because frankly the IRS has better things to do. It
typically needs to be dramatically below what you would make in industry for
you to be audited. Talk to any CPA and they'll tell you the same thing. Taking
excess profits from an LLC as a distribution is an entirely legal and
appropriate thing to do.

~~~
tptacek
If you're filing as an LLC, I don't believe any of your income, distribution
or otherwise, is exempt from self-employment tax.

~~~
ahnick
There is no such thing as "filing as an LLC". When you form an LLC by default
the IRS considers the LLC a disregarded entity and will tax you just as if you
were a sole proprietorship. (i.e. you will report your income on schedule c)
You can however elect to have your LLC taxed as an S Corporation. In which
case you have to pay yourself a reasonable salary and then you can take a
distribution on any excess income above your reasonable salary. When you take
a distribution from an S Corp it is only subject to ordinary income tax. You
do NOT pay self-employment tax on distributions. If you don't believe me you
can read it on TurboTax's website ([https://turbotax.intuit.com/tax-
tips/small-business-taxes/ho...](https://turbotax.intuit.com/tax-tips/small-
business-taxes/how-an-s-corp-can-reduce-your-self-employment-taxes/L4abUcaRn))
or any number of websites for that matter.

------
ycombonator
I have started a Delaware LLC several years ago and abandoned the use of it,
never got a chance to file reports or close it properly. It now shows
thousands I owe in annual fees. Is anyone here in the same position?

~~~
patio11
The state of Delaware will continue assessing _your LLC_ franchise taxes until
it puts your LLC in a "void" status after 3 years of non-filing of the annual
report / payment of the tax.

[https://delcode.delaware.gov/title6/c018/sc11/](https://delcode.delaware.gov/title6/c018/sc11/)

If you need to make a decision based on this information I'd recommend calling
up any practicing business attorney; it's a question they will likely be able
to answer even in the free consultation.

------
PopeDotNinja
Spending money on legal entities for is an expensive way to find out you have
no know idea what you are doing (speaking from personal experience here). My
guidance is worry about driving revenue. If you have a customer that wants to
give you money, that is a great time to figure out what you actually need.
Everyone will take your money and sell you something that sounds like what you
wanted. It doesn't take that long to set up a legal entity, and even paying
more for a rush job will be cheaper than starting the wrong legal entity now.

------
chasingthewind
I used to work at a company that did incorporations so I may simply be
parroting the company sales pitch here, but I did get the honest impression
that finding a company that helps you incorporate can really save you some
huge headaches later on. The state where you incorporate can have a huge
impact on a number of things and a company that specializes in this can steer
you clear of some minefields. It will cost more but I think it's very likely
to be worth it.

------
tidwall
Sounds like you want a Single Member LLC. This is the easiest to start. From a
tax perspective you can file as a Disregarded Entity, which means you'll
report taxes your (the owner's) personal tax return.

I've started a few different business this way and the nicest thing about a
disregarded entity is that if you need to sell or fold the business, you won't
have any complicated forms to fill out with the IRS. You just stop reporting
the following year.

------
stcredzero
Don't use LegalZoom. I've been a customer of them for years, but I'm trying to
transition off of them. Stripe has a project to replace them, I think.

------
marktani
Hopefully this provides a good intro to LLCs to you
[https://medium.com/@parissathena/what-the-hell-c-is-an-
llc-l...](https://medium.com/@parissathena/what-the-hell-c-is-an-llc-llcs-for-
newbies-24a42eb1bb56)

Pariss is also talking about LLC on Twitter you might want to follow her

------
trcarney
Here is a good blog post that goes through all the various options for legal
structures for starting a business

[https://www.toptal.com/finance/interim-cfos/c-corp-vs-s-
corp](https://www.toptal.com/finance/interim-cfos/c-corp-vs-s-corp)

------
cosmodisk
A) learn enough accounting so educated and motivated crooks couldn't take you
for a ride so easy. B) Check point A C) Check point B D) Try to find
reasonable person that can do payroll,taxes etc for you,as otherwise you'll be
a full time accountant for your own business in no time..

------
bastawhiz
Get a lawyer and get an accountant. Don't do your own taxes. Don't try to file
paperwork for business things if you're not 100% confident that you'll do it
completely correctly. The $300 you spend on a lawyer to file something will
save you thousands in the long run.

------
pinsleybream
If you are open for a full solution (formation + taxes) these guys did an
amazing job for me - www.hyke.me

------
gumby
I don’t see the point of an LLC if you plan to have an outside investor. The
LLC will have to be converted to regular corporation (typically. C Corp)
anyway.

The LLC makes it easy to pass profits through but if you don’t have any
yet...what’s the point?

~~~
CalChris
A Delaware LLC can be easily converted to a Delaware C. During early stages,
an LLC is easier to manage with less reporting and paperwork. An LLC gives
limited liability and a receptacle for IP rights. While taxes at this point
won't be an issue, they're simpler.

[https://www.nolo.com/legal-encyclopedia/converting-llc-
corpo...](https://www.nolo.com/legal-encyclopedia/converting-llc-corporation-
s-corporation-delaware.html)

[https://www.delawareinc.com/blog/how-to-convert-your-llc-
to-...](https://www.delawareinc.com/blog/how-to-convert-your-llc-to-a-
corporation/)

------
michaelrkn
I made a simple website to walk you through the nuts and bolts of starting an
LLC or S Corp:
[https://www.startmybusiness.us/](https://www.startmybusiness.us/). Let me
know if you find it useful!

------
CalChris
I would think that an LLC would be the simplest thing to manage during early
formation. It is simple and low maintenance. Then convert that to a Delaware C
which has greater reporting overhead, ..., when necessary.

Any downsides to that approach?

------
dangero
Add to your list to research corporate structures because LLCs are not always
the best choice. A lot of people assume LLC is right for them based on advice
from friends, but it’s something to think through.

~~~
tptacek
For a solo operator an LLC is probably always the best choice. LLCs can elect
to file taxes as S-Corps (your accountant is going to do this for you when you
get to the point where your taxes are complicated enough). Sole
proprietorships have all the downsides of an LLC and none of the potential
upsides. C-Corps are complicated and are useful primarily when you have
investors; if you take investment from an actual fund, they're going to want
to rip up and re-do your corporate structure anyways.

------
edwhitesell
I've used LegalZoom twice. Once for a corp, another for an LLC, it was easy
both times. Other than that, I'd say it's helpful to have a good CPA.

~~~
SamWhited
Please don't use these sorts of services. Even if you technically can be savvy
and avoid all their fees and things, they're dishonest and try to tack them on
constantly for things you may or may not need (eg. for making them a
registered agent, unnecessary credit checks, etc.). Even if it is possible to
make it work and avoid most of this, don't support their business model.
Chances are you'll pay more in hidden fees than just learning to do it
yourself (which is probably find if you're just filing an LLC, not fine if you
need advise on whether an LLC is the right business vehicle for you) or the
few hundred dollars a lawyer will charge you to file an LLC.

------
idlewords
Just want to give a shout-out to all the other sole proprietorships out there.
It's a nice route to follow if you hate paperwork and legal fees.

------
eropple
One lead-in question: are you in the USA? If not, most advice is going to be
fraught as hell. Assuming you are: this is a well-paved path these days.

A few things as they come to mind (and, disclaimer, I am not an expert, I've
just done this before):

\- Any advice you read here, including mine, should be immediately superceded
by that of your tax professional or your lawyer. If you do not have a tax
professional, I strongly advise at least getting a consult even if you elect
to do your taxes yourself (and if you're a single-member LLC, see further
down, this is not unreasonable). It is not merely a "strongly advise" to have
a lawyer on tap. Get a lawyer and make sure they're the kind of lawyer who is
comfortable telling you when you are a dumbass. That kind of lawyer is
invaluable.

\- Corporations and LLCs are not the same thing. You can elect, as an LLC, to
be taxed as a corporate entity, but that's a question between you, your deity
of choice, and your tax professional (who I encourage you to think of, in this
venue, as your deity of choice).

\- IANAL, IANYL, and TINLA, but you will notice that many don't-dig-for-gold-
sell-shovels outfits like Clerky will tell you you want to be a C-Corp
because, as their website says, it's the best for "high growth startups". I
assume you are not a "high growth startup". I would look at LLCs long before I
looked at a C-Corp and an S-Corp long before a C-Corp. Minimize your hassles
as best you can because otherwise it'll bite you in the ass later; IMO and
IME, this means "default to an LLC".

\- Formation is a moderate pain in the ass. I used Harvard Business Services
for registration and continue to use them for registered agent services. No
relationship, they just work fine and I don't have to think about it much.
[https://www.delawareinc.com](https://www.delawareinc.com)

\- Single-member LLCs are the easiest way to manage your stuff, if not the
most tax-advantaged way. (I do this because I optimize for simplicity.)
Effectively you just file a Schedule C with your personal income taxes.

\- Once you've formed, get an EIN immediately. You can do it online, it takes
like ten seconds. It will help with the next point.

\- Regardless of how you do it, it is incumbent upon you to do some real
careful management of funds. The second you get that LLC, go to your bank and
open a business checking account. Route _everything_ business-related through
it. Eventually you will, if you're successful, want to take money out and
that's fine--but having this structure to start will make it a lot easier to,
if in the worst case, demonstrate enough separation to retain your limited
liability if you get sued into the ground.

\- Relatedly, I like QuickBooks Self-Employed for keeping track of revenue and
expenses. It's free if you use TurboTax.

\- If you're successful, get ready to file taxes quarterly. QuickBooks Self-
Employed has helped me deal with that stuff, too, and if you make enough to
have to file quarterly then it'll help you with reminders, etc. about that.

~~~
tptacek
I'm not sure what the benefit of an S-Corp is over an LLC these days, because
LLCs are simpler and can elect to file taxes as an S-Corp. It might be more
straightforward to issue equity to employees as an S? But our legal (Grellas
Shah) was emphatic that anything we wanted to do w/r/t/ employee equity
compensation was going to be doable in an LLC if we wanted it that way.

~~~
eropple
Neither am I. My understanding is that it's more of a pain to deal with equity
distribution for an LLC, but it is doable (the other LLC I own a bit of has
done it a couple times to add new members).

S before C is more the amount of nonsense involved in a C-Corp unless you're
getting investor money.

------
nik736
Are you in the US?

~~~
OrgNet
Just wondering, does it make a big difference?

~~~
patio11
Ask a simple question, get a simple answer: yes.

Simplest possible illustration: Japan's equivalent of an LLC costs +/\- $10k
in running costs for most HNers and doesn't do pass-through taxation, which
might counsel sole proprietorship for longer here than it would in the US.

~~~
OrgNet
He was asking about an LLC from USA... not an LLC from Japan...

And I was asking about the cost difference for an LLC created in the USA by an
outsider VS an American citizen...

I guess it was not so simple after all... (you just misunderstood the simple
question).

How about candies? Do they poison people?

~~~
csa
He used an example of Japan as an illustration of why it is important to know
the location of the person asking the question.

You seem to be new here (73 days). Note that 'patio11 has been here for 11
_years_ and is one of HNs top posters. Not that longevity makes someone right,
but 'patio11's posts have been high quality for many years, and one should
assume that he is probably not pulling a reply out of his ass when he does
reply.

While not every poster on HN posts high quality replies, most people here
reply with a clear purpose. This is not Reddit -- I encourage you to assume
that most replies are actually substantive. If you are not sure, check the
poster's history -- this will help you get a feel for the potential quality of
their posts.

Welcome to HN, and good luck with your endeavors.

~~~
OrgNet
I didn't know that all countries used the LLC term (or more then one)...
specially not Japan which I expected them to use Japanese characters... I
guess that they have been successfully Americanized. Sorry for the confusion.

BTW I know that this is not reddit but there is about as much censoring, if
not more (there is just more users on reddit).

Also, I see that your account was created in 2013... did you create any
throwaway account since then? (this account, for me, is a throwaway account)

Conflict: do you work for the economist.com ? most of your submissions appear
to point there

but thanks for the insight as to why I get all the downvotes...

