by pullo on 5/25/19, 3:25 PM with 111 comments
by mdorazio on 5/25/19, 4:45 PM
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.
by patio11 on 5/25/19, 6:31 PM
If there are holes after reading them, we'd love to hear about them.
by dctoedt on 5/25/19, 7:03 PM
(The page includes links to lots of HN discussions in this area; depending on how this discussion goes, I might add it as well.)
by kjksf on 5/25/19, 5:34 PM
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).
by C00L on 5/25/19, 7:32 PM
- 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 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 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 is great. If you're selling apps, doing ecommerce etc https://www.stripe.com/atlas is great.
Hope helps.
by chrisked on 5/25/19, 4:01 PM
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.
by sokoloff on 5/25/19, 4:44 PM
by zubspace on 5/25/19, 5:56 PM
by dawnerd on 5/25/19, 4:40 PM
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.
by piotrkaminski on 5/25/19, 7:25 PM
by metapsj on 5/25/19, 4:39 PM
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.
by theturtletalks on 5/25/19, 7:08 PM
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?
by chrisan on 5/25/19, 9:45 PM
Shouldn't you pick a state that has little to no annual filing fee?
by ahnick on 5/25/19, 4:37 PM
(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...) 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/) 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&...):
- 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...). 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!
by PopeDotNinja on 5/26/19, 6:30 AM
by chasingthewind on 5/25/19, 5:45 PM
by tidwall on 5/25/19, 5:33 PM
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.
by stcredzero on 5/25/19, 7:31 PM
by marktani on 5/25/19, 5:00 PM
Pariss is also talking about LLC on Twitter you might want to follow her
by trcarney on 5/28/19, 6:45 PM
https://www.toptal.com/finance/interim-cfos/c-corp-vs-s-corp
by cosmodisk on 5/25/19, 6:39 PM
by bastawhiz on 5/25/19, 8:17 PM
by pinsleybream on 5/26/19, 12:21 AM
by gumby on 5/25/19, 6:49 PM
The LLC makes it easy to pass profits through but if you don’t have any yet...what’s the point?
by michaelrkn on 5/27/19, 4:15 PM
by CalChris on 5/25/19, 4:43 PM
Any downsides to that approach?
by dangero on 5/25/19, 4:49 PM
by edwhitesell on 5/25/19, 4:21 PM
by idlewords on 5/25/19, 6:49 PM
by eropple on 5/25/19, 4:30 PM
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
- 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.
by nik736 on 5/25/19, 4:37 PM
by ycombonator on 5/25/19, 6:20 PM