in most states you can file to open an LLC online (or by printing and mailing a form and a check) - 2nd step is to apply to the IRS for an EIN (tax id) for the new entity. then you need to do annual filings with the secretary of states office of the state your in (This is all applicable to the U.S)
Ask HN: Should I incorporate a company for software side projects?
31–40 of 73 posts
Re: Ask HN: Should I incorporate a company for software side projects?
#32Yeah, you should incorporate. Not only that, keep separate accounts such as hosting, email, payment gateway, etc.
Incorporating abroad spares you of a hassle dealing with German bureaucracy as a company. Not as an individual. Same goes for tax liabilities. Whatever you draw from a company either as income or dividends gets taxed wherever you happen to be a resident.
What many of my Germany-based friends, relatives, business associates do. They incorporate abroad and pay income to their Germany registered gewerbe (for those unfamiliar with German system, it's like sole trader).
A cousin is a steuerberater in Hamburg while a close friend is a wealth manager in Berlin. If you think they could be of any help, feel free to reach out to me.
Re: Ask HN: Should I incorporate a company for software side projects?
#33- only if your idea is already profitable beyond ramen profitability, i.e. you can quit the job and survive from the income, and you have a financial buffer for ~1-2 years - hire an accountant, 100EUR/month and you don't have to care about taxes that much, unless you go wildly profitable - LLC/GmbH is a better idea than having your life on the line if SHTF (though corporate veil might require at least 2 partners in s…
> - only if your idea is already profitable beyond ramen profitability, i.e. you can quit the job and survive from the income, and you have a financial buffer for ~1-2 years
But how would you make it there without being incorporated? Or does this applies to have an LLC only? How would you issue invoices to your first customers without having a legal entity?
Re: Ask HN: Should I incorporate a company for software side projects?
#34[deleted]
Re: Ask HN: Should I incorporate a company for software side projects?
#35As a German, I would strongly advise against incorporating too early (at least in Germany). I once made the mistake of founding a UG for a small side project and had to realize at some point that all the required bureaucracy was keeping me from doing the actual work. Let me break down the work for you because I hadn't been fully aware of what was awaiting me:
- double-entry bookkeeping: This is easier than it sounds because there're lots and lots of rules. I mean, even though I had learned this stuff in school for a bit and my mom actually used to teach bookkeeping, it was still hard. An Excel sheet won't cut it! (In fact, Excel is not allowed anymore as it can be manipulated after the fact, so you'll need actual bookkeeping software.) Sure, you could hire a bookkeeper but then you'd be spending even more (see below).
- Umsatzsteuer-Voranmeldung: monthly, for the first two years
- Umsatzsteuererklärung, Körperschaftsteuererklärung, Gewerbesteuererklärung, Handelsbilanz, Steuerbilanz/E-Bilanz: 6 months after the end of a fiscal year (usually May 31). Make no mistake, this is tons of work.
And then there're the costs:
- Founding: at least ~300€
- Mandatory IHK membership fee: ~160€/year
- Business bank account: at least 10€/month
- Bookkeeping software: at least 15€/month (unless you want to use pen & paper)
- Sending E-Bilanz & Handelsbilanz electronically to the tax authorities & the Handelsregister: ~50€/year
So yeah, unless your ramen-profitable as people call it, I'd say: Don't do it [in Germany]!
Re: Ask HN: Should I incorporate a company for software side projects?
#36Incorporate when you have a sale set up. That is the same for any product, any industry.
Re: Ask HN: Should I incorporate a company for software side projects?
#37- only if your idea is already profitable beyond ramen profitability, i.e. you can quit the job and survive from the income, and you have a financial buffer for ~1-2 years - hire an accountant, 100EUR/month and you don't have to care about taxes that much, unless you go wildly profitable - LLC/GmbH is a better idea than having your life on the line if SHTF (though corporate veil might require at least 2 partners in s…
"only if your idea is already profitable beyond ramen profitability" I don't know if this applies in EU, but in the US, incorporating would give the separate benefit of protecting your personal assets in the case your company was sued. So, it might be worthwhile even if you aren't profitable.
> in the US, incorporating would give the separate benefit of protecting your personal assets in the case your company was sued
Be careful with this advice and consult a lawyer. Incorporating alone does NOT guarantee protection of your personal assets.
In my non-lawyerly understanding, single-member LLCs offer particularly fragile protection.
See "piercing the corporate veil" [1]
[1] https://www.nolo.com/legal-encyclopedia/personal-liability-p...
Re: Ask HN: Should I incorporate a company for software side projects?
#38Earlier quoted context omitted.
Atlas is built to form a registered Delaware Corp with an agent and a corporate bank account in the US. If your goal is to be acquired or go the traditional startup route then it's perfect. If you just want to roll a new entity for legal/financial protection it is akin to combating mosquitos with a grenade.
Because atlas costs $500?
No, because you're creating a company in a country you don't live in unnecessarily.
Re: Ask HN: Should I incorporate a company for software side projects?
#39Yeah, you should incorporate. Not only that, keep separate accounts such as hosting, email, payment gateway, etc. Incorporating abroad spares you of a hassle dealing with German bureaucracy as a company. Not as an individual. Same goes for tax liabilities. Whatever you draw from a company either as income or dividends gets taxed wherever you happen to be a resident. What many of my Germany-based friends, relatives, b…
I've been wondering about similar things as a foreigner in Berlin. Would love an intro to your Germany-based friends to chat about what they recommend when incorporating! My email: alan.hamlett@gmail.com
Re: Ask HN: Should I incorporate a company for software side projects?
#40I have 2 friends who incorporated but they both raised funds. One used Stripe Atlas for incorporating in Delaware, USA and not sure if the other incorporated in Germany or abroad. Lemme know if you want an intro!