Entity choice is usually due to 2 reasons: Taxes and Liability. Work with your CPA and Attorney, find out from them the cost benefits of the various forms and the mitigation you think appropriate at this time. Review periodically.
Ask HN: Should I incorporate a company for software side projects?
51–60 of 73 posts
Re: Ask HN: Should I incorporate a company for software side projects?
#52Entity choice is usually due to 2 reasons: Taxes and Liability. Work with your CPA and Attorney, find out from them the cost benefits of the various forms and the mitigation you think appropriate at this time. Review periodically.
This is good advice. I’d add that, in the US at least, there’s a little more overhead to deal with when it comes to an S-Corp vs an LLC. A CPA is definitely the first person to talk to.
Re: Ask HN: Should I incorporate a company for software side projects?
#53i'm not an attorney, nor should my advice be taken as legal advice. i would strongly suggest getting a lawyer to handle this. i can suggest, however, the main things to consider are separating your personal and business income tax and absolving yourself of personal liability in case something overbearing happens like a lawsuit, these are good things of incorporating. again, i'm not a lawyer, and this is not legal adv…
I've been doing some research (from a US perspective) on this topic. From what I've read, a single-person corporation only shields you from things like not being able to pay back a business loan, or paying suppliers, etc. But it doesn't necessarily shield your personal assets from liability lawsuits, since the person who is responsible for the potentially liable action is the same as the company, and is the same as 100% of the shareholders. To get that protection, your best bet is to have a good umbrella insurance policy, along with having a lawyer draft appropriate terms and conditions for your services (such as "this software is not guaranteed to be fit for any purpose, and should not be used for any purpose", but worded a bit different).
Re: Ask HN: Should I incorporate a company for software side projects?
#54Earlier quoted context omitted.
It doesn't matter if you already have a full time job or not. Yes, you can do the Nebengewerbe/Einzelunternehmen while having a full time job. You should create an additional bank account and use that one for your side business, which will make it easier for book keeping (otherwise you have to open your private bank account to the tax authorities). You can also get a VAT ID, if you do EU business outside of Germany.…
> It doesn't matter if you already have a full time job or not. It does, assuming he's going to have his company pay himself a salary. (Otherwise he'd need to wait for the yearly dividend.) In case of a salary, he'd have to 1) pay for social security and so on and make arrangements with his employer (basically, to decide who pays how much). 2) again, make arrangements with his employer because of the non-compete rule…
It matters a little but not as much as you may think.
(By the way nothing says the dividend has to be yearly, as a company you can pay multiple dividends a year if you so choose. It's more paperwork, and probably costs more in time from his accountant but otherwise you can do it as far as I know.)
Onto the two points, 1) The Social security is based on their wage, and no arrangement with the employers bookkeeping is needed. Their full time job would likely be Tax Class 1 (Or 3 if married) and the second job would be Tax Class 6. If there did happen to be a discrepancy it would likely be small, and paid back when they do their tax return. I also think that the Geschäftsführer of a company doesn't pay social security (or maybe pays a reduced amount?), but I might be wrong on that bit.
2) Yeah he/she must inform their boss, but unless they directly compete with the company, or the side business would affect their job performance they don't really have a valid reason to say no.
My suggestion would be to form a UG, they're relatively cheap and would be easier than the hassle of a foreign company. A foreign company whose operations are based completely within Germany would be liable to pay tax in Germany anyway.
I've heard http://firma.de are good with this sort of thing, and they have several articles on the different company forms in Germany to help. I am however in no way affiliated with them, and haven't used them myself yet.
Re: Ask HN: Should I incorporate a company for software side projects?
#55It’s definitely worth it. In many states you can do it online for less than $100. If you wrote a bug that cost one of your clients to loose a sale you could be personally liable for the full amount. Just spend an hour doing it and don’t risk losing all of your savings. You don’t want to go to court with a company that has many more resources for lawyer than you. This is a no brainer. Advice saying not to do it is jus…
Hum... Do you really think you can sue Google because of some bug in Gmail? I doubt it. I guess he should put some tos saying he is not responsible for lots of sales because of bugs...
Re: Ask HN: Should I incorporate a company for software side projects?
#56[deleted]
Re: Ask HN: Should I incorporate a company for software side projects?
#57Estonia is a very good option. When and if you make profit you will pay in Germany for the dividends but until you take out money from your company in Estonia the taxation is zero.
Re: Ask HN: Should I incorporate a company for software side projects?
#58Yeah, 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 don't think this is legal. If you are based in Germany and incorporate in a different country you have to tell the german authorities.
For example if you found a Limited in the UK, you have to tell the German authorities and the Limited will be seen as a German GmbH. It will be more expensive in the end because, for example, everything has to be translated and signed by a notary.
Re: Ask HN: Should I incorporate a company for software side projects?
#59Yeah, 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 don't think this is legal. If you are based in Germany and incorporate in a different country you have to tell the german authorities. For example if you found a Limited in the UK, you have to tell the German authorities and the Limited will be seen as a German GmbH. It will be more expensive in the end because, for example, everything has to be translated and signed by a notary.
You and your company are separate entities. Many Germans incorporate abroad and it seems to work.
What you have to report to the authorities is your personal income drawn from foreign companies you own or work for.
Re: Ask HN: Should I incorporate a company for software side projects?
#60You should first check your employment contract very carefully. There may be a no-compete clause that could prevent you from doing related work on your own. If there isn’t one, then it really is no business of your current employer whether you start a company while employed. Still, you should be very careful of anything that might be construed as taking advantage of confidential information gained through your employ…
> Are you prepared to travel to Tallinn and visit local banks in person to try convince one to open you a business account?
This can be deferred though. You can open an account with Transferwise or Holvi online and recieve payments/pay yourself a salary. You only need a bank account once you want to pay the share capital or withdraw dividends.
Also, if you use leapin.eu they get you a "pre-acceptance" from LHV bank _before_ you travel to Tallinn
> If you pay a dividend at the end of the year, it’s taxed as capital gains
Really ? I'm not in the EU but I would assume dividends would be taxed at regular income tax rate or a special dividend tax rate (and the company would pay corp tax). Only if you sell your shares in the company, the profit would be taxed as capital gains.