I would urge you to find a local lawyer that handles incorporation. Most small law firms will do a one-hour introductory consultation for free where you can get professional advice. They can explain properly the various choices and what that means for your situation specifically.
Ask HN: Should I incorporate my new company?
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Re: Ask HN: Should I incorporate my new company?
#12I'm not a lawyer, but I think you should (a) get an LLC, and (b) not spend real (meaning: hundreds of dollars) money on it. You can get a DE LLC online about as easily as you can order a book from Amazon.
The LLC allows you to enter into contracts as your firm and not you yourself. If any arrangement you enter into ever blows up and threatens you with tens of thousands in liabilities, the company eats it, not your home equity. If you're savvy at negotiating, you can even get some of your overhead expenses (rent, Internet) in the LLC's name, so if the firm dies you're not on the hook.
Having an LLC also makes it possible for you to do business-to-business transactions with big companies. Consultant friends of mine have learned that invoicing a bigco as a sole proprietorship is likely to end up with that bigco withholding taxes, or worse, severing the contract altogether.
The reason not to spend money now is that contract liability protection is really the only thing an LLC is getting you. Most of what you're spending legal dollars on with a new company has to do with equity allocation. With neither partners nor investors, there's no reason to get that stuff nailed down perfectly. In fact, should you ever raise a round, chances are you're going to rip all your current incorporation stuff up anyways.
Re: Ask HN: Should I incorporate my new company?
#13For those suggesting an LLC for liability protection purposes, just a quick note to be careful here. Depending on your state, a single-member LLC might not actually provide any legal protection. For those interested, do a quick search for "piercing the corporate veil".
tl;dr the courts may see through the LLC "veil", determine the "company" is really just you, and may stick you with any liabilities/debts.
Re: Ask HN: Should I incorporate my new company?
#14I'm not a lawyer, but I think you should (a) get an LLC, and (b) not spend real (meaning: hundreds of dollars) money on it. You can get a DE LLC online about as easily as you can order a book from Amazon. The LLC allows you to enter into contracts as your firm and not you yourself. If any arrangement you enter into ever blows up and threatens you with tens of thousands in liabilities, the company eats it, not your ho…
I am also not a lawyer, but unless O.P. is in DE, he/she will almost certainly have to register as a "foreign entity doing business" in his/her home state despite being registered in DE. In many states, this is about as expensive as simply registering the LLC there in the first place. Some states (such as NY) have somewhat byzantine requirements such as having to publish the application for your foreign (or even native) LLC in two local papers.
But otherwise, an LLC is the way to go; you might however want to elect to have the LLC taxed as an S-corp so you don't get taxed twice.
Re: Ask HN: Should I incorporate my new company?
#15You're familiar with the term "premature optimization", right? Don't bother forming a corporation, renting office space, or even making business cards when you don't have any customers or revenue. It's perfectly acceptable, and the recommended approach, to simply operate as a Sole Proprietorship (no legal entity for the business, just self-employed income for you) until you have a REASON to form a corporation -- thin…
Thanks for the advice! When I file for DBA, lets say "cool internet company", is it best to get the business bank account, EIN, etc? Or can I just skip this step?
The reason you get a DBA is so your bank will cash checks payable to "Cool Internet Company" and put the money in your bank account - without brain damage to you.
Apply for an EIN. Otherwise you will be spraying your personal social security number all over the place.
Your income and expenses go on Schedule C of your tax return. You pay income tax on your profit and you also pay self-employment tax. If you do well, expect your tax bill to hover around 50%.
Disclaimer - IAAL but all of that stuff I just told you is off the top of my head and probably wrong. Call up your local bar association. They probably have a referral program with cheap initial consultations.
Get a good accountant. If you are in San Jose on Dec 11 2014 attend the CalCPA Startup Conference and schmooze. http://calcpa.hs-sites.com/startup14-hacker
Re: Ask HN: Should I incorporate my new company?
#16I'm not a lawyer, but I think you should (a) get an LLC, and (b) not spend real (meaning: hundreds of dollars) money on it. You can get a DE LLC online about as easily as you can order a book from Amazon. The LLC allows you to enter into contracts as your firm and not you yourself. If any arrangement you enter into ever blows up and threatens you with tens of thousands in liabilities, the company eats it, not your ho…
I am also not a lawyer, but unless O.P. is in DE, he/she will almost certainly have to register as a "foreign entity doing business" in his/her home state despite being registered in DE. In many states, this is about as expensive as simply registering the LLC there in the first place. Some states (such as NY) have somewhat byzantine requirements such as having to publish the application for your foreign (or even nati…
Diddo. My understanding is if you're doing an LLC, you should just do it in the state you're operating in not Delaware.
Re: Ask HN: Should I incorporate my new company?
#17For a C-corp you'd be in over your head trying to meet all the requirements to stay legal. And it's totally not needed unless you have investors. An LLC in your home state is easy and probably about $100. But it's also not needed unless you expect substantial income--because the only way to actually limit liability is to separate personal finances from business. Probably with an LLC you'd end up filing a tax return where you merge business income into your personal income, so there's not really a tax reason then.
In summary, if spending $100 is no sweat, sure get an LLC.
--not a lawyer--