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Ask HN: Starting Your Own LLC?

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Re: Ask HN: Starting Your Own LLC?

#31

Post by ishan1121 »

mdorazio wrote: post #13

1) Doing taxes correctly as anything other than a sole proprietorship is a huge pain in the ass, especially if you're selling things across state borders, and doubly so if you're in California. I recommend finding a tax professional to handle that for you (the time it takes to do it yourself is generally not worth it). Also don't forget that if you're actually making money you'll need to pay estimated taxes quarterly…

The last point. I think its the number 1 thing every new founder should know. Getting success on the first try is tough and very rarely people achieve that. In fact, Microsoft was Bill's second business

Re: Ask HN: Starting Your Own LLC?

#32

Post by tptacek »

waffle_ss wrote: post #27
tptacek wrote: post #20

Earlier quoted context omitted.

That S-Corp trick, the "reasonable compensation" thing, is an audit flag; there is apparently a whole specialized kind of audit the IRS does for "reasonable compensation" claims (presumably because it's so easy to spot mechanically; your single-member firm made X, you claimed X-n income, X-n>threshold: audit). I wouldn't bother with it.

When I was a self-employed contractor several years ago my CPA did it this way for my LLC. 50% of the income went on a W-2 and 50% on a K-1. It's up to each person to decide their own risk level but my CPA was pretty confident it wasn't a big deal as long as the W-2 salary wasn't absurdly low, and my own googling at the time seemed to confirm that. It's definitely worth it IMO since you're double-paying FICA taxes on…

You're not "double paying" taxes. The employer portion of your taxes when you're an FTE isn't free money; it's part of your cost basis as an employee, and comes out of your comp.

Re: Ask HN: Starting Your Own LLC?

#33

Post by dawnerd »

300bps wrote: post #15
dawnerd wrote: post #10

Single member LLC wasn’t as hard as I thought to setup. 100 bucks online in Oregon, near instant approval too. Make sure you sign up with the IRS for an EIN. 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 both…

Signed up for Azlo just recently after keeping money in my personal, no big deal just makes taxes a little harder. That actually is a big deal. https://www.nolo.com/legal-encyclopedia/personal-liability-p... Commingling assets. Small business owners may be more likely than their larger counterparts to commingle their personal assets with those of the corporation or LLC. For example, some small business owners divert…

I still don’t think it’s a big deal. Single member llc are taxed on your personal (unless you opt differently but then you should have someone else handle it). It’s the people that don’t keep good records that get in trouble. Separating accounts won’t fully protect you if you do something dumb either. You can still take an owner draw whenever you want, irs don’t care.

But yes, had I known azlo existed I would have signed up from the start. I just wasn’t about ready to pay a big bank a monthly fee when I wasn’t making money yet.

Re: Ask HN: Starting Your Own LLC?

#36

Post by gshdg »

busterarm wrote: post #30
gshdg wrote: post #28

Earlier quoted context omitted.

Note that a single-person LLC can file taxes as a pass-thru entity, which is essentially the same as a sole proprietorship. You do still need to separate your finances/accounts/etc tho.

Being a single-person LLC usually doesn't give you any of the legal advantages of having an LLC in case you get sued.

I am not a lawyer. But my understanding is that it does shield your personal finances to some degree.

Re: Ask HN: Starting Your Own LLC?

#37

Post by 0xEFF »

busterarm wrote: post #30
gshdg wrote: post #28

Earlier quoted context omitted.

Note that a single-person LLC can file taxes as a pass-thru entity, which is essentially the same as a sole proprietorship. You do still need to separate your finances/accounts/etc tho.

Being a single-person LLC usually doesn't give you any of the legal advantages of having an LLC in case you get sued.

Citation?

Re: Ask HN: Starting Your Own LLC?

#38

Post by ahnick »

tptacek wrote: post #32
waffle_ss wrote: post #27

Earlier quoted context omitted.

When I was a self-employed contractor several years ago my CPA did it this way for my LLC. 50% of the income went on a W-2 and 50% on a K-1. It's up to each person to decide their own risk level but my CPA was pretty confident it wasn't a big deal as long as the W-2 salary wasn't absurdly low, and my own googling at the time seemed to confirm that. It's definitely worth it IMO since you're double-paying FICA taxes on…

You're not "double paying" taxes. The employer portion of your taxes when you're an FTE isn't free money; it's part of your cost basis as an employee, and comes out of your comp.

He wasn't implying it was free money. He simply means you're paying the employer's portion as well when you are self-employed. There is no reason to do this on excess income once you have paid yourself a reasonable salary. To determine a reasonable salary simply examine what you would make if you were employed in that same job function by another company. If you are ever audited you can show you made a good faith effort to determine reasonable salary and you will be fine. Many people set it lower than typical industry rates and are never even audited, because frankly the IRS has better things to do. It typically needs to be dramatically below what you would make in industry for you to be audited. Talk to any CPA and they'll tell you the same thing. Taking excess profits from an LLC as a distribution is an entirely legal and appropriate thing to do.

Re: Ask HN: Starting Your Own LLC?

#39

Post by patio11 »

OrgNet wrote: post #34
nik736 wrote: post #8

Are you in the US?

Just wondering, does it make a big difference?

Ask a simple question, get a simple answer: yes.

Simplest possible illustration: Japan's equivalent of an LLC costs +/- $10k in running costs for most HNers and doesn't do pass-through taxation, which might counsel sole proprietorship for longer here than it would in the US.

Re: Ask HN: Starting Your Own LLC?

#40

Post by emanlin »

dawnerd wrote: post #33
300bps wrote: post #15

Earlier quoted context omitted.

Signed up for Azlo just recently after keeping money in my personal, no big deal just makes taxes a little harder. That actually is a big deal. https://www.nolo.com/legal-encyclopedia/personal-liability-p... Commingling assets. Small business owners may be more likely than their larger counterparts to commingle their personal assets with those of the corporation or LLC. For example, some small business owners divert…

I still don’t think it’s a big deal. Single member llc are taxed on your personal (unless you opt differently but then you should have someone else handle it). It’s the people that don’t keep good records that get in trouble. Separating accounts won’t fully protect you if you do something dumb either. You can still take an owner draw whenever you want, irs don’t care. But yes, had I known azlo existed I would have si…

It’s only a big deal if someone sues you and wins. If you comingle assets there’s an increased risk you could lose them in a judgement. If you don’t comingle there’s lower risk of losing personal assets.
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