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Ask HN: What is required for the business/legal side of web apps?
9 points by thisisdallas on Oct 31, 2012 | hide | past | web | favorite | 4 comments
In other words, if I was to launch a web app (US based) that actually cost users money and generated an income for myself, what all would I need to do to be legally recognized as a business?

You are legally recognized as a business the moment you earn a dollar doing business. You're called a sole proprietor, which is a business doing business under the name of its owner. Taxes and legal obligations pass through directly to you.

There are other types of business entities you can form -- partnerships, LLCs, S-corps, C-corps, or a simple DBA ("doing business as") -- which can have both benefits and downsides. You can talk to either a CPA or a lawyer that specializes in small business about what makes sense for you.


The next and easiest 'upgrade' from sole proprietor for most people is likely an LLC. As a sole proprietor, your personal assets are at risk in the event of a lawsuit or class action and such. Incorporating in some fashion will protect your personal assets in such an event and is arguably a more direct upgrade from sole proprietor tax-wise.

It's only your call when to 'upgrade' if ever, but the answer is generally somewhere between 'getting traction' and 'getting sued', with the real kicker that you obviously can't incorporate after getting sued so, y'know, there's that.

There are a number of ways to go about this. The SBA has a decent breakdown of the various business structures: http://www.sba.gov/category/navigation-structure/starting-ma...

The bottom line is that you really should talk to an expert. There are legal and financial ramifications of each type of business entity, and you don't want to get screwed.

How far are you planning on going with this? More apps, turning into a full on app studio? Just yourself, or hiring? Will you seek investors? These are all considerations as to whether it's worth the hassle and cost of incorporating an LLC or Corporation.

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