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Stripe Atlas for LLCs (stripe.com)
403 points by pc on Apr 30, 2018 | hide | past | web | favorite | 206 comments

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

Be aware that if you are "doing business" in California which means you live there you also have to file as a California foreign entity and pay the absurd anti-small business flat tax of $800 a year.

This also does not include your state income tax liabilities in California. Just because the LLC is formed in Delaware does not mean you don't have to pay income taxes in the state you reside. Delaware is just the legal residence, has nothing to do with income taxes.

I moved to Tennessee in January and switched my single-member disregarded entity LLC from California to Tennessee. The annual fee in Tennessee is $400 vs $800 and there is NO STATE INCOME tax in beautiful TN.

Watch out - Tennessee has an 6.5% excise tax on LLCs which is essentially an income tax if you're self employed.


-- Update: Buried deep in the depths of TN website and using the most confusing and counterintuitive language ever assembled is this article:


Essentially it says if I am a disregarded entity for federal tax purposes I am exempt from both franchise and exercise taxes.

Ok, I am even more confused after reading this:


How do you even have a single member LLC that is a disregarded entity where the single entity is a corporation? Huh?

That seems to indicate I am responsible for these taxes?

> How do you even have a single member LLC that is a disregarded entity where the single entity is a corporation?

LLC stands for "limited liability company," not corporation [1]. When one says "corporation" in a legal sense, it is typically understood to exclude LLCs. (That said, LLCs can elect to be treated as corporations for tax purposes.)

[1] https://en.wikipedia.org/wiki/Limited_liability_company

I'm not an accountant/lawyer, but yeah my reading is if you're a sole proprietor, disregarded for IRS purposes (e.g. you use Schedule C)... then yeah you owe TN this tax.

FWIW, I don't live in TN, but I used to. And I've done sole prop LLC's in a couple states now so I looked into moving back to TN and found this info.

That is also how I read it, but I reached out to an accountant today and he said no. His response was:

> Since you are an LLC, and you are operating an active business, you will need to file a Franchise and Excise tax return, but you will be exempt from the Excise portion of the tax.

No idea how it works? I'm thoroughly confused.

LLC members can be other LLCs or corporations.

So if I live in CA, it might be better to directly register a CA company to save cost, rather than registering a Delaware company via Strip Atlas?

Yes, here's a recent HN thread with some more background on the CA LLC formation process:


This is very important info. I've seen some founders get tripped up over this. Hopefully Stripe Atlas LLC provides support for foreign entity registration and taxes too (I would assume they do).

We don't yet foreign entity registration in the product, but you could imagine us automating this, in addition to the Delaware franchise tax filing and registered agent services which we already handle.

If foreign entity registration was automated for NY I would use this product immediately.

> could imagine us [doing]

Euphamism for "That's on the roadmap, but I'm not allowed to announce it yet." Probably.

CA in general makes absolutely no sense to start a business in. There are zero arguments for starting a business in CA. Oregon, Washington, Texas, Colorado, etc. are all objectively better choices. Even if you're interested in raising money from SV investors you're far better off locating in Seattle, Denver, Portland, Austin, etc.

I definitely agree with you that there are better states than California, but I recently moved my online company from California to Texas and discovered a really nasty surprise: Texas considers web hosting, server rental, SaaS, etc. to be services subject to sales tax [1]. Washington actually does as well, since you mentioned it.

This will complicate your life in two ways: First, your internet company now has to enumerate subscribers in the same state as you and charge them sales tax. Your competitors, located in friendlier territories, can undercut you by not having to do this.

Second, any payments you make to a SaaS/hosting vendor are now subject to use tax. Do you pay AWS for hosting every month? Get ready to cough up ~6% of that for Texas' treasury. If you're running the kind of business where your hosting bill will grow proportionally to your revenue, this amounts to a tax on revenue. In my case, it wildly exceeds anything California ever charged me in income tax.

[1] https://blog.taxjar.com/saas-sales-tax/

> this amounts to a tax on revenue.

Corporations wanted to be people. People pay income taxes on their revenue, not their profits.

What about deductions?

"I have social connections and support structures in California" sounds like a pretty good reason to me. Starting a business, paying extra taxes, and being willing to stick with it for the long term sounds better than being lonely and giving up 6 months in or deciding not to start it at all.

You forgot the lovely deseret (#2!) of Salt Lake City! https://www.cnbc.com/2017/07/21/the-top-15-cities-in-us-to-s...

Except you know, California Labor Code section 2870...


I'd be happy to know about other states which have similar laws.

Is "doing business" in California really defined as living in California? What's your source for that?

It's not exclusively defined as living in California, but if you live in California and have an LLC, it almost certainly requires registration in the state:


For taxable years beginning on or after 1/1/2011, a taxpayer is doing business in California if it actively engages in any transaction for the purpose of financial or pecuniary gain or profit in California or if any of the following conditions are satisfied:

> The taxpayer is organized or commercially domiciled in California.

> Sales, as defined in subdivision (e) or (f) of R&TC 25120, of the taxpayer in California, including sales by the taxpayer’s agents and independent contractors, exceed the lesser of $500,000 [1] or 25 percent of the taxpayer's total sales.

> Real and tangible personal property of the taxpayer in California exceed the lesser of $50,000[1] or 25 percent of the taxpayer's total real and tangible personal property.

> The amount paid in California by the taxpayer for compensation, as defined in subdivision (c) of R&TC 25120, exceeds the lesser of $50,000[1] or 25 percent of the total compensation paid by the taxpayer.

> For the conditions above, the sales, property, and payroll of the taxpayer include the taxpayer's pro rata or distributive share of pass-through entities. "Pass-through entities" means partnerships, LLCs treated as partnerships, or S corporations.

So if your 'HQ' is in California, if 25% of your sales are in California, if more than 25% of your property is in California, or if more than 25% of the total compensation you pay is in California, you need a California LLC.

If you have a physical presence in a state you are considered doing business in that state.

Normally I’m pro simple answers but I think this answer over simplifies a bit too far. When it comes to allocating state revenue just having a presence in a state doesn’t mean as much as “where services are performed” or products sold. It’s a heck of a dance dealing with these issues some tax time.

Given this, is there any advantage (as a Californian) to having a Delaware LLC?

> is there any advantage (as a Californian) to having a Delaware LLC?

Two big advantages to Delaware:

1. Fast courts. When I last looked, it was 180 days from complaint to decision in the Superior Courts while California took 900+ days. (Also notable, Delaware proudly publishes these statistics. California's were tougher to find.)

2. Developed law. Since most companies are in Delaware, most law is settled in Delaware. Lots of edge cases have been smoothed out. It's also a more business-friendly code than California's.

That said, everyone's situation is different. Consulting with a lawyer is advisable.

I just went through this with my attorney and lawyer and the answer was pretty much “no”

> attorney and lawyer

Two different people? Aren't those words synonyms?

Sorry I meant lawyer and accountant.

Damn, I was hoping for this about 6 months ago, I ended up filing my own paperwork instead. It was actually easier and cheaper than I thought for my state (Michigan). $50 and like five lines on a form. I even got my own EID completely online in about 10 minutes, and a bank account at my local small business bank the same day.

But just like with Stripe Atlas for C-Corps, what you're paying for isn't the paperwork and the filing fees, it's the access to lawyers and tax help and the network of other founders. It's Stripe's experience, and help for people who aren't in the US. I'd say it's worth it because to be honest I have no idea what my company's responsibilities for taxes are and yeah that makes me a little uneasy.

> I'd say it's worth it because to be honest I have no idea what my company's responsibilities for taxes are and yeah that makes me a little uneasy.

Yikes. You should get an accountant. Ask for referrals from other businesses in your area that are similar to yours. Ask your local co-working spaces or incubators. Google...

Yup, I'm working with an accountant to better understand what's going on. Last year I was in a grace period but this year I'm going to have to file. Luckily it's just me, no employees and no cofounder to worry about. But man tax law is complicated and I don't like not knowing every part of what I'm doing.

Part of the reason I started working at Stripe is that I remember going through exactly this and it freaking sucked. Building a product and finding customers for it is hard enough without also having to cross-class as an expert in international taxes of software sales.

(Drop us a line if you need a referral to an accountant; we can introduce you to an accountancy that works with a lot of Internet businesses. We also have some guides about it at https://stripe.com/atlas/guides to demystify it a bit.)

Out of curiosity, are you guys thinking of something like an UpCounsel for startup/technology-focused accountants?

We have a number of accounting firms which we work with that we refer Atlas customers to. This lets us explain the Atlas concept once, prepare the firms for "You're going to have a high volume of companies who will often have the same set of issues so let's research and brief those in advance", build out tools to assist with information gathering, etc.

It also lets us help refer companies to accountancies whose sweet spot most closely corresponds to the facts of the company.

And don't skimp on a quality accountant. I "saved" $2k one year by shopping for a bargain accountant. I've since learned his advice cost me between $50k and $100k in unnecessary taxes.

What was the advice about? I’m curious what led to such a big difference.

LLC vs S-Corp. Trump muddied the waters though. Now it's unclear which is better.

S-Corp is still strictly better for tax purposes for companies with net profit before owner salaries north of $100k.

If its just you, then you just have to file a Schedule C. More details on IRS: https://www.irs.gov/businesses/small-businesses-self-employe...

Disclaimer, not a CPA or lawyer, this is not legal advice

This is all very cool. But: don't operate a multi-partner company in any form, LLC or C-Corp, without formal vesting. Companies without vesting are rigged to explode if any member leaves.

Context for folks who haven't encountered vesting before: vesting is an arrangement where, instead of getting all of your ownership up front, you earn it over time. For example, you might have a fairly common arrangement in Silicon Valley where you get 1/4 of your equity after working for a year and the remaining 3/4 over the next 3 years. This pre-commits to what happens regarding ownership if someone leaves 18 months (or 18 days) into running the company.

Atlas C corporations with multiple founders have a vesting schedule built-in (4 year vesting; 1 year cliff), the market standard in Silicon Valley.

Vesting in an LLC is complicated:

Because an LLC is a partnership, there can be complicated consequences of someone stepping back from an operational role (like e.g. being a founder) but remaining an owner of the business. We didn't think it was appropriate to have a one-size-fits-all answer for this: some companies might choose to buy out the departing founder, some might choose to pay them dividends on an ongoing fashion, and some might not have financial bandwidth to pay dividends but might want them to participate in upside in the event of a future acquisition.

Conversely, adopting vesting establishes some fairly substantial tax consequences (83(b) elections, etc).

This is heavily dependent on facts-and-circumstances.

Vesting is more of an established concept, with off-the-shelf support throughout the ecosystem, for C corporations. For those who want it in an LLC, please speak to an attourney. You can still adopt it for your Stripe Atlas LLC, it just isn't built in to the default experience.

We paid a lawyer to put together an OE for us at Latacora (we have 10-year vesting). I assumed it would be complicated, but, nope, it works pretty much the way it would in any company: you vest equity over time, and if you leave halfway through your vesting term, you keep half your equity.

The only LLC-specific wrinkle I think we ran into is that we had to spell out that vested equity wasn't equivalent to a pro-rata claim on profits or distributions. But that's like a a sentence or two.

Non-vesting Atlas LLCs are probably super useful for a bunch of different kinds of companies.

But I'll argue that a non-vesting structure is never appropriate for a multi-member startup.

I'm not picking on Atlas; lots of people DIY or even pay lawyers to put this stuff together and get it wrong. We got it wrong at Matasano. It was painful.

What was the motivation for 10 year vesting vs the more widely used 1 year cliff/4 year vest out?

We're a consulting firm. We looked back at Matasano and thought about how value was added over the life of the firm, and 4 years didn't nearly capture it. If we do product stuff, we'll just spin that out into a separate entity, and that would probably be 4/1.

Makes sense. Appreciate the reply.

Out of curiosity, if founders' shares vest who owns the stock before it vests? I'm thinking it will be the company but that doesn't feel quite right. Or does it mean that the unvested shares have no voting or other privileges?

There's a variety of ways to implement it. A common way is that you purchase your shares from the company for par value (e.g. $0.000001 per share) and the company has the right to repurchase them for par value, with the number of shares subject to repurchase declining over time as shares vest.

> Because an LLC is a partnership

An LLC is not a partnership. (A limited liability partnership is an LLP.) An LLC is a distinct business structure with some similarities to a corporation, some to a partnership, and some unique features.

He's referring to the fact that, by default, the United States taxes LLCs having more than one member as a partnership. An interest in a partnership is taxed differently than an interest in a corporation (stock).

citation, since I have it open: https://www.irs.gov/businesses/small-businesses-self-employe...

> Specifically, a domestic LLC with at least two members is classified as a partnership for federal income tax purposes unless [...etc...]

(To grandparent comment: for what it's worth, I too find it highly confusing that "partnership" and "LLP" (vs LLC) are both terms and not as closely related as one might first suspect...)

> for what it's worth, I too find it highly confusing that "partnership" and "LLP" (vs LLC) are both terms and not as closely related as one might first suspect...

They are just as closely related as one might suspect: an LLP is a partnership where the partners enjoy limited liability.

An LLC is not a partnership, though multimember LLCs are, by default, treated like a partnership for federal income tax purposes.

(The LLC is a fairly new form of business entity originally created as a lower overhead alternative to the corporation that would provide a distinct entity for corporate joint ventures; the LLP is also fairly new, but [in its US form] it was formed to protect innocent members of professional firms from personal liability for actions of other members of the firms, and is in many jurisdictions restricted to professional firms.)

LPs and LLLPs make things even more fun, though.

Owners of LLCs and LLPs generally have "limited liability" with respect to their equity investment, meaning that they are only liable for the entity's debts to the extent of their investment.

The primary difference between an LLC and an LLP: an LLC must have at least one "general partner" who is fully liable for all of the LLP's debts in the event the LLP defaults.

Another major difference: until recently, law firms and accounting firms could be LLPs but not LLCs, due to malpractice liability concerns. Now that most bar associations and/or states require these firms to maintain malpractice insurance, many states allow law firms and accounting firms to be LLCs.

LLCs are partnerships for tax purposes in the US (unless they have only a single owner, in which case they are disregarded), hybrid entities for legal purposes in the US however many owners they have, and are either corporations or partnerships outside the US depending on the country. Most countries treat LLCs as corporate-type entities regardless of the number of owners, and only a handful will treat an LLC as a disregarded entity if it has a single owner.

[1] Edited to be more comprehensive.

Nope, still more complicated than that. Single member LLCs are not partnerships by default. Multimember LLCs are partnerships by default. Either group can choose to be a yet a different category. See citation and quote in https://news.ycombinator.com/item?id=16961968 .

You're right, I left out that single member LLCs are disregarded entities because I wasn't trying to be comprehensive. I've updated the comment with more detail.

It is taxed as a partnership if you don't elect to be taxed as an S corp.

>if any member leaves.

This brings up a very interesting issue under the Delaware Limited Liability Company Act, that is without an Operating Agreement in place that allows a Member to resign their ownership, the Delaware Law is controlling and does not allow a member of a multi-member LLC to withdraw (resign their interest) prior to dissolution and winding up of the company. One may be able to get the other member(s) to consent in writing but at the point someone wants to leave, good luck getting the other(s) to sign anything.

Edit: it doesn’t appear the Stripe Atlas LLC comes with an operating agreement; therefore, the Delaware Limited Liability Company Act is controlling and a Member would not have the right to resign their interest prior to dissolution.

The Stripe Atlas LLC does come with an operating agreement which contemplates members leaving.

> it doesn’t appear the Stripe Atlas LLC comes with an operating agreement

I'm 100% sure it does. The description talks about things like being split into 10,000,000 units, for example, which is definitely not in the Act.

Yes, after Patio11 replied I clicked on the guide and there is reference to a stock operating agreement drafted by Orrick.

Their Operating Agreement is drafted so the resigning member would require unanimous consent of all the other members to resign.

Also, it’s important to keep in mind that a vesting schedule is just a piece of paper at the end of the day. Even if you have one signed and notarized, it’s just a contract. In America, contracts boil down to who has more money to dispute one in court. If you’re a scrappy startup, and one of your founders is wealthy- be careful. They can destroy your business fighting a multi year civil court case.

Depends. If there's an arbitration provision, their options to do that are limited (not zero).

Can you elaborate on what this means? What is formal vesting (and as opposed to what... informal vesting?) and how does not doing it make a company explode?

I’m sure I’m not the only one here who has never started a company and has no idea what this means. :)

Without a written vesting schedule for ownership of shares of a company, a founder could leave (or die or become disabled/incompetent due to sickness/accident) and keep their (or their estate's) share of the company. Those events can completely destroy the value of a company. For example in a 50/50 partnership, the remaining partner would be responsible for 100% of the work, but only receive 50% of the dividends or liquidation value. Those type of events are hard enough to deal with anyway - not having a vesting schedule makes it almost impossible to recover from. For instance if there _was_ a vesting schedule for a partner that left after a very short period of time, the unvested equity could be used to attract another partner.

The vesting schedule should reflect their contribution to the company over time, and can be whatever the founders negotiate as reasonable. If someone helps found a company and brings a ton of immediate value (ie IP or cash or contracts, etc) then their vesting schedule can reflect that. Issues such as assignment to estate or beneficiaries are important legal issues that need to be considered at startup time as 'insurance' against things no one wants to see happen, but might.

It's also important to note that much of the value of any company created in the future as it grows, matures, etc. It sometimes happens that people default to ascribing value based on history or past contributions -- which certainly does matter with respect to the idea, tech, product, early customers, etc -- but is an incomplete ascription of anyone's particular value with respect to the life of a company. Depending on what stage the company is in -- but because we are talking about formation we can assume it is early -- much of the work is likely yet to come. If the past is too heavily weighted, it can cripple the company in the future. Among other things, vesting can help protect founders against over-indexing on the past while ensuring the team is aligned on the future of the company and that are all in it "for the long-haul". Plenty of other reasons to do so as noted in the other comments throughout the thread.

Here is a useful link from Cooley (a large, well-respected law firm) that goes into some of the nuance of these things: https://www.cooleygo.com/founder-basics-founders-stock/

if you get in a fight with your cofounder on day 2, you really don't want them to quit and still own half the company. "Formal" in the sense that it's written down in a binding legal document as opposed to a "handshake agreement."

Formal as in somehow written into the contracts that govern your company.

Relevant for non-residents / foreign owned LLC :


If you don’t have a dependent agent that substantially furthers your business in the US and don’t have an office in the US, you are not subject to US tax. Even if the LLC generates income in the US, the income is not taxed in the US.

Furthermore, if you reside in a country with an applicable tax treaty with the US, then you would not be subject to US tax. Since you reside in your tax home, you can claim you operate a “permanent establishment” (e.g., an office or other fixed place of business) in your home country.

When does it makes sense for a European to start a Delaware LLC?

Let's say you have a lifestyle side-business and many clients in US.

Where is the legal tax avoidance here?

You still have to report the pass-through income to your home country.

You can't just keep the money in the LLC and delay the tax?

Maybe you want to buy 10 servers in US to be used and shipped home to Europe to be used for the same business.

Would you be able to deduct those kind of expenses?

PS I had a vanity Delaware C Corp in in the 90s which I did absolutely nothing with besides getting all the cool corporate knick knacks.

There are many countries where Stripe etc. aren't available. Starting an LLC in USA is an easy route to get that going albeit at additional compliance cost (e.g. filing informational returns). The article above clarifies that a foreign owned LLC with no income connected with US doesn't have to pay taxes in US. They just have to pay tax in their home country. It makes it more appealing & easier to start an LLC.

This looks like a great service!

For my state (NY), I am required to register an out of state LLC (a "foreign" LLC [1]) before conducting business in NY. Is this registration or assistance with this registration included?

[1] https://www.nolo.com/legal-encyclopedia/how-qualify-foreign-...

This is likewise required in WA.

Is the LLC anonymous by default? For privacy reasons, not legal. I know I can still get subpoenaed. I just don't want my name/address associated with the company on anything public.

It seems to do this I will need a lawyer to be my registered agent for mail forwarding (a regular mail forwarding service such as https://www.virtualpostmail.com/services/registered-agent/ was apparently not enough since it doesn't have attorney-client protection). That was as far as I got when I last tried to start a LLC for my side project.

Delaware ain't the Caribbean.

I didn't understand the Caribbean reference which led me down a pretty fun rabbit hole trying to figure out how that world works. Apparently it's fairly common to incorporate in British Virgin Islands (and a few others like Cayman islands, Bahamas, or Panama) for international companies.

I was sincerely asking about it because of privacy and not tax reasons though.

To clarify: Many countries allow "anonymous associations", which provide privacy and the side effect of enabling tax evasion.

Hiya folks! I worked with the team on this; happy to answer any questions you have.

I know you’re not a lawyer/accountant, but what kinds of implications does signing up for this have on someone who doesn’t live in the US? I’m concerned about all of the secondary and tertiary effects (like FATCA?) of having a business in the US and living in NZ.

I'd say: a) if you are a US citizen, then FATCA and FBAR already apply to you, and you pay your personal income taxes on your worldwide income anyway, b) if you are not a US citizen, then I'd rather carefully consider the legal implications: your company can now easily be sued in the US, where a single lawsuit can bankrupt you.

I think (b) in particular is not considered by many who look at Stripe Atlas. I consider it a tremendous risk.

Is there a way for businesses that are already registered corporations not using Atlas to get some of the other benefits like tax help, issuing stock, the expert help, etc?

We do not at present have this available, but we’re quite aware of many people wanting to do that, and we want to support it if we can figure out a way to do it fantastically.

Unlike C-Corps, incorporation for LLCs is trivial. The real value prop for Atlas is everything that comes after!

I just did my own LLC in MI, too—two hours and $50.

I appreciate the advice you've given through your blog and podcast. Thanks for taking the time to create those things. They've been inspiring.

I'm wonder if a US LLC would be better for me? I'm a mISV in Canada. I use Stripe & PayPal and make almost enough to live on. I have a US bank account but Canadian everything else (sole proprietorship, business license, tax id, citizenship, etc.). I don't plan on ever being funded, selling the business, taking on partners or making more than a 150k/yr.

A Canadian sole proprietorship is about as simple as it gets, since you can file taxes on your T1 and business income just passes through to you. Stripe can also transfer USD straight to a USD account at a Canadian bank.

Any kind of corporation (US or Canadian) is much more effort, both from legal and accounting perspectives. It's worth it if you need legal protections a corporation gives you or care for some of the tax advantages. But it comes at the cost of extra effort in managing the complexities if a corporation.

US LLC has... interesting interactions with Canadian tax law and the US-Canada tax treaty. Even if it is formed in the US, if management and control are in Canada, it may be considered a Canadian corporation. Canadian-controlled private corporation is an advantageous tax status you'd miss out on with a US entity. Bottom line, see a Canadian tax accountant.

Hi patio11, this is really great. It would be awesome to have some resources for EU citizens, mainly how it is with taxes and where I tax what and how.

Would it be possible to use Stripe Atlas to create the LLC, bank account etc and use Stripe normally for handling the payments side for the subscriptions.

However, if a marketplace came with the application. To use a 3rd party for all that comes with it. IOW, not wanting to use Stripe Connect for various reasons that make sense to the business.

You're welcome to have your company do business with anyone you wish it to do business with. We do not obligate you to use any Stripe product; we feel like we should always have to earn your business.

(We in fact go further than that; Atlas actively goes out of our way to help our companies take payments outside of Stripe, for example getting paperwork together to e.g. publish apps on the App Store.)

That sounds great. I will definitely be following up very soon! Many thanks for taking the time to respond.

Wow, this is great! I want to jump in but need to know more about the tax/expense and legal consequences of forming an LLC in Delaware versus my home state for my mISV (for anyone reading this who doesn't read Patrick's blog, micro-independent software vendor). What do we have to look out for?

I am considering starting an LLC but I live and work in Japan. Do you know somebody who might be able to help me understand what my options are in terms of tax implications (the interaction of having income in both places)? This will be a sole proprietorship.

We should chat! My email is my username at stripe.com

Will there be a way for a C-Corp to change into an LLC?

There's a great and very common use case for LLC to C corp, so we prioritized building that. I'd love to hear what your use case is for the other way around; if it is something which creates a lot of value for a lot of founders, we'll certainly consider supporting it in the future.

Speaking broadly: You can always work with lawyers/accountants to see about the feasibility of converting your C corp into an LLC. We just haven't worked to specifically enable it in the fashion that we attempted to smooth out LLC-to-C-corp.

I'll add another vote for this.

My use case is that I used Atlas to incorporate quickly -- which was lovely -- but the business is turning out to be a solo venture and the C Corp is overkill.

The real user need is a way to reduce business operations time and cost for a small biz.

If you're primarily looking for pass-through taxation it might also be worth looking at electing your C-Corp to be treated as an S-Corp: https://www.irs.gov/businesses/small-businesses-self-employe...

(not a tax advisor / CPA, talk to one for actual specifics)

Can you apply for atlas if you already have a stripe account in use? Or can a new entity be linked to an existing account?

You can absolutely apply to Atlas if you already have a Stripe account, and (without interrupting use of that account) can use your new Atlas company as the owner of the account and take payouts from it into your own bank account.

(It's under Business Details in your Stripe Dashboard; same process as usual.)

What bank does the LLC version use?

This is in no way a criticism of anything and isn't directed at Stripe or any employee, just an honest question to the general HN community: How does Azlo make money?

If I'm going to trust my accounts anywhere, I like to know at least something about their business operations. Azlo is completely fee-free according to their FAQ. They also say they require zero minimum balance and have no ATM fees at 55,000 partner ATMs nationwide. That raises some serious red flags to me. Either they make money from fees or they make money on the interest of your minimum balance, but somehow they have to make money. Of course they're low overhead with no branches and no owned ATMs, but they're not cost-less.

What's the catch? Are they going out of business when the VC/Partner money dries up, or are they aiming to get you hooked and then jack up fees afterwards or what's the deal?

They don't make money on the interest on the minimum balance, they make money on the total balance. True, for some customers this will be very low or zero. But as long as some of the companies they work with have money in their accounts (not an unlikely state of affairs), they can make their money from those accounts.

As long as they've set up their underlying tech stack such that the marginal cost of an extra account is nearly zero, then offering accounts with no fees or minimum balances is useful way of attracting customers, many of whom will grow into good sources of revenue.

dont forget about interchange fees. every time you use your Azlo Visa, bank gets paid.




I’d always thought that a bank’s primary revenue source was from loans. Banks are able to actually write more loans (and charge interest) than cash in the bank [0]. Profit ensues.

[0] https://en.m.wikipedia.org/wiki/Fractional-reserve_banking

That's something I forgot to stick in there: it looks like Azlo doesn't do loans either. There is literally no way for them to make any sort of money being fee-free, not offering loans or credit cards, and not having minimum balances. It's all the good will of BBVA, which we know how far the good will of a major bank gets you.

They don't need to write their own loans. They can just open an interest-bearing account with a bank that does and park the money there.

It appears that azlo is just a front-end reseller of banking services provided by "BBVA Compass."

They probably make a lot of money on transaction fees (charging merchants when you use your debit card) and loaning your money to other customers at interest.

Hi @freehunter, as a fellow skeptic, I can appreciate your question as to how Azlo makes money if there are no fees. As an executive of Azlo, I can tell you that there are many ways Azlo can and will make money without having to charge fees. Some have been mentioned here (interchange and deposits) and some are coming down the pipe (lending, international payments, etc). Many accounts will be lost leaders in that their deposits and their activity do not give us any substantial revenue. But having LLCs and C-Corps (who tend to have larger balances and do more transactions) will make it very worthwhile. Rest assured that the banking fees you are used to with other banks are not and will not be there with Azlo.

Also, we are a banking platform built for developers. Tech-savvy customers will have access to their accounts through our recently announced API portal https://www.azlo.com/tech/ (scroll down to 'Coming soon')

Hope you give us a shot and provide feedback for our API beta!

Perfect, thanks! I don't mean to criticize, I just want to make sure that my bank will be able to survive and won't unexpectedly shut down. Thanks for the clarification!

We didn't take it as a criticism at all! I love that people other than us, think about these sorts of things. It was a perfectly valid question and one that everyone should know the answer to so that doubt and/or fear are not part of your decision to join our community.

If you are in the market, I hope you check us out. If you aren't, tell your friends!

Azlo.com looks nice. I got fed up with Silicon Valley Bank (awful) a few years back and switched to Capital One Spark Business[1] which is great. However they have "temporary" halted new signups which makes me a bit nervous about their long-term plans.

[1] https://www.capitalone.com/small-business-bank/

Interesting! I like their pitch.

Before doing this, be sure to read your home state's requirements for registering out-of-state LLCs. You'll likely be required to file annual paperwork and fees in your home state, thus possibly counteracting any convenience you thought you were getting by registering in Delaware.

Or consult with an accountant, many of whom offer free first-time consultations.

> 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).

This is the most important part. LLCs tend to be cheaper and more flexible before you raise money, but a C-Corp is basically necessary to raise money. Converting an LLC to C-Corp conversion is often quoted at about $10K from a law firm. With Stripe Atlas, you are set up to make the conversion easily.

$10k isn't the high end, either.

Any ballpark figure on how much it costs with Atlas?

Starts at $500. We can't quote a firm price because you can do things in the company (it is your company, after all) which make it more complicated. There are an infinite number of contracts that a company could hypothetically sign, some of which have interesting implications for conversion. Those contracts have to be read and interpreted; that isn't going to be free for a lawyer.

I am not a USA resident, I live in Europe (not EU zone). What would be my tax obligations to the USA if I had LLC formed through Atlas for a purpose of software SAS business (selling software subscriptions worldwide)? I know I would be obliged to pay income taxes in my country, but I don`t know if and what would I need to pay regarding taxes to the USA.

You generally need to talk to a tax lawyer about this, but in a nutshell:

You could owe tax to the state in which you incorporate, if they tax LLC income earned out of state. (Most states don't, but you will have a "minimum franchise tax" that you must pay regardless of LLC income for the privilege of being registered in their state.)

You generally would owe US federal income tax on the income you earn from your US customers. But, in many cases you could qualify for tax treaty benefits that reduce your US tax liability to zero. You would still need to file a US tax return, but you would not actually pay US taxes. (Your tax return would explain why you don't need to pay.)

You would generally be taxed on the income in your home country. Despite common belief, almost all countries tax the worldwide income of citizens residing in their country. (Territorial taxation is generally reserved for corporations and expatriates.)

Consider the legal implications, too: if your form an Atlas LLC, you can easily be sued in the US.

Heads up, if you’re not a US citizen, Azlo (the underlying checking account provider they use) doesn’t let you open an account. I’m not sure if they have a special deal with Stripe that lets you through, but they definitely don’t let their regular customers through without a US passport.

Hi @rolleiflex, this is not exactly correct. You do not need a passport to sign up for Azlo. It certainly is accepted as a form of identification, but not the only one. Also, we will be accepting both resident aliens and non-resident aliens this month!

@wbmstrmjb Just tried to sign up as nra a few days ago. It told me it was not available. Also sadly I forgot the password and now can't even recover it because it complains that there's no verified phone number (???), it never asked for one as the procedure failed as soon I selected a different country than USA.

nvm got answer from support.

Before doing this, be sure to read your home state's requirements for registering out-of-state LLCs. You might still be required to file annual paperwork and fees in your home state, thus possibly counteracting any convenience you thought you were getting by registering in Delaware.

Or consult with an accountant, many of whom offer free first-time consultations.

I believe every state requires you to register your business in that state if you have a tax nexus there. California is particularly onerous about this, requiring LLCs to register and pay a minimum $800 franchise tax every year.

S-Corp always seems to get short shrift compared to LLC. I live in MA, where I registered my S-Corp, and it simply costs less, w/ no downside. Do your research (or, better, ask your accountant) before following the herd! :)

There is downside to S-Corps. Lots more regulatory requirements, minutes, and tax forms required. As a general rule of thumb assuming you are a single person company it doesn't make sense unless profits are greater than at a minimum of $150,000 a year. At that level you can pay yourself a "reasonable" salary say $80,000 and then lump dividend for the rest which is taxed at 15%.

"unless profits are greater than at a minimum of $150,000 a year."

Ok, sure. Similarly, an LLC is probably overkill if you're making under $100k. I'd argue it's a minority of entrepreneurial software consultants who make over $100 but under $150. Finding a good accountant to help you figure it out (and to handle the paperwork) is also likely to help you join the S-Corp cohort.

You just setup a straw-man.

No one else agrees LLC is overkill if making under 100k profit. I would in fact encourage LLC from day 1 for anyone making anything.

(and just auto converting to S-Corp at 150k is also silly, talk to an accountant. Many reasons to be a LLC even if making millions of dollars a year, see many real estate LLCs or companies with 100-1000 employees but still a LLC)

It sounded right until $500 part... llc setup cost is $50, bank accounts, stripe accounts are all free, same goes for any “credits” from aws and elsewhere.

I understand the desire to turn a profit on this, but that’s kind of overboard, IMO.

It's roughly in line (albeit on the high end) with what RocketLawyer and other do-it-yourself companies charge. Yes they are all more expensive than truly doing it yourself (as in, printing forms from the local gov site and mailing them), but you're paying for convenience and the increased likelihood of getting the paperwork done right.

I don't know why you put "credits" in quotes so I went to look it up. They give you $5000! Unless there's some catch this actually makes atlas free and maybe even profitable to do since I am already paying AWS for running servers already.

(Unless you're saying there are easier ways to get those free credits? Where else would you find them? Startup accelerators?)

>> bank accounts, stripe accounts are all free, same goes for any “credits” from aws and elsewhere

Free only if you don't value your time, I suppose. And you left out the support part from Stripe Atlas and their community, which could easily be worth many multiples of $500.

It’s unlikely you work for free and neither do the employees and lawyers at Stripe.

It includes a bank account that is huge money and time saving for people outside of US. If you do it elsewhere you will have to fly to the US and open the account yourself.

agreed... Was happy to see a standardized LLC product from Stripe till I saw it costs a whopping $500!

What would be the combined fed+state corporate income tax rate for a Delaware LLC?

Quick google says this is 21% (federal) + 8.7% (Delaware). Is my understanding of this correct, that a Delaware LLC pays 29.7% taxes on its profits?

Unless you have presence in Delaware (offices or employees), you don't pay corporate income taxes there just because you formed as Delware LLC or C Corp. You pay a nominal franchise tax, and you're taxed in the other state(s) you operate in.

Yep. An LLC* is not taxed as a corporation unless it chooses to be, by default it is taxed as a sole proprietorship (and so the owner would pay income tax). This is known as a disregarded entity” at the federal level.

Also watch out for franchise taxes - if you live in California it’s $800/yr minimum.

* Edit: a single-member LLC

The California franchise tax applies to California LLCs and to non-California LLCs that do business in California, so you don't avoid it by registering in Delaware.

Pretty sure you can only be a "disregarded entity" (schedule-c) with a single member LLC. Beyond that is get's more complicated.

Yes, that’s right. Good point!

You can choose to be taxed as a corporation even in that case, but it's usually not worth the tradeoffs.

How is an LLC taxed with foreign members? Is it tax exempt in the US and does the income accrue to the partners (i.e. foreign companies and/or people)?

I don’t know, for a single member I think the LLC might be required to pay the income tax itself in that case. You can be sure that the federal government will want its taxes.

For multiple members it will be taxed as a corporation.

Assuming the LLC is taxed as a corporation, that 8.7% only applies to the portion of income which actually came from customers in Delaware.

Why Delaware over Wyoming? Wyoming has no corporate income tax and lower fees.

Quoting the Orrick legal guide:

Each U.S. state has laws that allow you to form an LLC. Similarly, each state has its own rules governing the formation, governance and management of LLCs. Delaware LLCs have the benefit of being simple to form, extremely flexible (with few restrictions on management and governance arrangements), and more familiar to parties you will interact with. In addition, the process of converting a Delaware LLC to a Delaware corporation, should you ever decide to do so, is straightforward and common enough that there are standard forms addressing most elements of the process.

LLCs will not typically pay corporate income tax anywhere; they're a pass-through entity. Establishing a Delaware LLC will not, by itself, obligate a person to file a personal income tax return in Delaware.

Delaware has the most established precedent history for business case law. That's why so many corporations file there, despite the high fees.

This! Delaware is simply the choice for most because of conventions, marketing, and (legal) history. The ideal choice should be Wyoming in my humble opinion.

Why wyoming vs nevada

Unless you live in Wyoming or Nevada, you plan on raising VC money[1], or you know that you will be having substantial business operations in multiple states, you should generally incorporate an LLC in the state in which your primary business operations will take place.

[1] Most VCs require C-Corps. A few enlightened VCs will invest in LLCs, recognizing the tremendous tax benefits of the LLC form. In either case, they will require the entity be formed in Delaware due to its business law history.

It’s cheaper

If the annual renewal cost of your business entity is a dominating factor of where you're going to site the entity, you should probably be thinking strongly about whether you should be forming an entity at all.

I am particularly interested in the liability protection provided by an LLC (selling physical products).

How much legally grounded advice is provided as a part of the service about how to avoid activities that could make the corporate veil easier to pierce in the event of a lawsuit?

I've heard anecdotally about doing a good job of keeping business and personal accounts completely separate, for example. This is the type of advice that I would typically lean on a lawyer for, but it seems could be easily provided as a part of this service.

We're not lawyers and we cannot licitly give legal advice, but part of the service is that we can introduce you to lawyers. We do have guides about topics including that topic specifically; you can find them at https://stripe.com/atlas/guides ; I can't remember which one addresses that issue off the top of my head.

I'll soon need to move an LLC from Texas to Colorado. Should I instead consider shutting down my Texas LLC and forming a new one with Stripe Atlas? Would there be any benefit to this?

Nice, this is why I didn't use Atlas despite being offered a beta slot.

I ended up forming a local state LLC. This is still delaware LLC, which seems an extra hoop for (potentially dubious consult your lawyer) gain... but still good to see them going this direction.

That send - end to end to form a LLC in the state of Indiana, it took about a half day and $250. I do not need to file anything in delaware or deal with my company as a foreign entity or any of the extra stuff you would get going this route.

I recently opened an LLC in NYC for $200 and took me less than an hour. All I did is to follow the (free) instructions here (https://www.llcuniversity.com/new-york-llc/), was super simple and worth it. Opening a business account took me less than an hour and nowadays you can do it online.

The New York State fee by itself is $200. Unless I'm missing something, you paid significantly more than that for the publication requirement (it was around $1,000, give or take a couple hundred, last I checked).

Re: SVB bank I heard you can’t even get a debit card. What other restrictions are there? Is it only good for using Stripe and nothing else?

@Patio11 - I recently moved from California to Florida and I'm about to open an LLC here.

What are the advantages / disadvantages of having an LLC based in Delaware vs creating one in Florida?

I'd love to use Stripe Atlas - but not sure if I'm making things more complicated than they need to be by opening in Delaware vs Florida.

If you don't plan on trying to raise VC money, then a local LLC is preferable to a Delaware LLC in 99.999999% of business cases.

Or another way to put it: if don't plan to do business outside of Florida, why would you subject yourself to the laws and jurisdiction of another state just to save a few bucks?

> If you don't plan on trying to raise VC money, then a local LLC is preferable to a Delaware LLC in 99.999999% of business cases.

Well, I do have clients and customers outside FL - lots of them. Does that make a difference?

It depends on where you plan on doing work for those clients.

Mostly in FL but I also travel a bunch cause I'm remote.

You should probably talk to an attorney, but as I understand, Florida isn't a bad state to consider either. It really comes down to cost savings and specific laws, and where you're primarily doing business.

I own and operate several LLCs in Florida. One that files as a C Corp, which means it's subject to corporate tax in the state. FL is 3.2% lower than DE right now and that's something to consider. LLCs in Florida that are not filing as a corp are not required to pay corporate taxes (in most situations). For me, there was zero reason to use a DE LLC here. If I were still in Michigan there would have been A LOT of incentive to go with a DE LLC.

Thanks Patrick. I've heard of Atlas recently and am seriously considering it. I was simply wondering if you provide any tax advice for people living in different countries but who own a Delaware LLC (or C-Corp) through Atlas?

Anyone know what is the total cost of Striple Atlas? What others cost beside the $500 one time fee? Will really appreciated some breakdown numbers

https://stripe.com/atlas Ctrl-F for "ongoing costs"

It's impossible to give you a fully inclusive quote without knowing more of your situation, and I'm not qualified to comment on e.g. tax consequences for you if you live outside the United States, but broadly speaking the total cost of ownership ranges from about $1k to about $2k depending on circumstances (C corp vs LLC, number of founders, whether founders are US-based or not, etc). This includes annual costs for Delaware taxes but doesn't include e.g. corporate or personal income taxes.

FYI, there seems to be some disparity on two different pages:

On https://stripe.com/atlas: Delaware tax filing: preparation is free, Delaware fee starts at $225

On https://stripe.com/docs/atlas/tax-obligations: All LLCs formed or registered in Delaware must pay an annual LLC tax, currently at a flat rate of $300.00.

Thanks; will correct.

@patio11 does the LLC package come with a DUNS number?

It doesn't, but we help people get them on an ad hoc basis.

Mind if I make a guess? You're probably wondering "Can I get a DUNS number so that I can list something on the App Store?" if you're like 90% of people who ask us this. If so, let me just tell you now what we'd tell you in the future:

> My most recent understanding is that if they’re using the DUNS number as a part of the Apple Developer program, we should recommend that they email appdeveloper@dnb.com and they will advise you how to apply for your situation. Just let them know that you’re representing a US company trying to get a DUNS number but that you’re headquartered in [country outside of the US if that’s an additional consideration].

Not OP but that's my only use case for the DUNS number.

Are you saying we may not need it? Or that there's an expedited / cheaper way if we're just getting it for that sole purpose?

If the US company is going to be a fully owned child company of another EU company, which is most suitable, a C Corporation or an LLC and why?

We do not support LLCs as subsidiary of other companies, for reasons. We do support that use case for C corporations. There are complicated tax issues involved here; an accountant can talk you through them.

Isn’t Google LLC a subsidiary of Alphabet Inc?

Google has some issues that you and I probably do not, and has some lawyers and accountants that you and I probably do not. Thankfully, we don't have to build a product which seemlessly works for this Google; we just have to build one which seemlessly works for the next Google.

It is, I believe patio11 is saying that Stripe does not support setting that up due to the complex tax and other requirements.

I wish atlas allow transferring over our Delaware c Corp to them. They launched around 3 months after we incorporated :(

If I'm not a resident of US and didn't visit US in a tax year, would I have to pay US income tax for the LLC?

Owning a US LLC as a non-resident can be complicated; it depends on a variety of circumstances regarding what you do, how your business interacts with the US market, whether you are a US citizen, where you live, etc. You may wish to speak to an accountant.

Would it be easier to own a C Corp as a non-resident? Does Atlas provide that as well?

We do provide C corporations. It was the first option we launched with, and a core goal of that was supporting non-US founders.

If I want to release a bunch of different projects under the same company name which one is better LLC or C Corp?

Either supports that use case; the decision is typically driven by other considerations. I wrote a guide about them: https://stripe.com/atlas/guides/llc-vs-c-corp

You can be an LLC that is taxed as an S-corp as well, but only make sense if you have significant profits which you wish to reduce your liability by paying dividends instead of payroll taxes. -- I am not an accountant or lawyer --

Apparently Stripe Atlas is being used by and tailored for US residents only, which is odd.

We have thousands of users in over 125 countries, and do substantial amounts of work to ensure that we're making our services available as widely as possible.

If there is a particular thing you'd want to improve the service for folks outside the US, I'd love to hear about it -- feel free to email me at my HN name at stripe.com

Looks like you have to have a Web site up and running to be invited to the preview.

Does this support converting an existing LLC into one that Atlas would set up?

No. I asked them. They said

We're still in the growing phases and constantly looking for ways to expand and improve, but I'm afraid, the Atlas program is only accessible as a package deal.

This is pretty exciting. $500 is a great deal for an LLC with a fully vetted operating agreement suited for an internet company as well as a bank account out of the box.

Can I be taxed as a s corp with stripe atlas?

An LLC can elect to be taxed as an S Corp. We're happy to introduce all Atlas companies to accountants; this is something you can ask them to do for you.

I think parent meant a C Corp with automated IRS tax election for S Corp... not llc.

Why do you think so? LLCs can elect to be taxed as S-Corps, and this thread is about LLCs...

Same story for C Corps, FWIW.

If you want to run a remotely lean organization, spending $500 to incorporate your LLC is not starting off on the right foot.

Sorry, but lean and cheap aren't synonyms.

As an example, a pal once worked for some medium-sized company where if you wanted a new pencil, you go down to the basement and through a long hallway to a window. At the window you had to confront the Dragon of the Office Supply Horde, and to prove your worthiness, you had to bring a sufficiently used existing pencil. That company was definitely cheap, but was very much not lean.

Toyota, on the other hand, is the classic lean company. When they don't need to build cars, they don't lay people off or send them home, which would be the cheap thing to do. Instead, they have them clean, polish, train, and generally improve the plants and themselves. They spent extraordinary sums building the first Prius prototype, which could barely get around a track. But they kept on improving it, eventually making one of the world's best-selling cars and making them a leader in a new market.

Spending $500 to incorporate a startup may not be cheap, but it certainly can be lean if you determine that the investment in learning how to correctly do the legal and financial dance will not have as much ROI as paying for it to happen and focusing instead on building the actual business.

Liability can not be limited. Someone is either liable or not.

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