Ask HN: Should I incorporate a company for software side projects?

#1

Post by ___cs____ » Sat, Oct 06, 2018, 1:48 PM UTC

I am a software engineer, working on a side project. The project consists of platform in the area of real-estates, I already have consumers (real estate agencies). I would like to know when should I incorporate LLC, how, and where to do it.

- I checked Estonia as an option, but I am not sure how to manage taxes in this case (I am in EU). I am paying taxes as a citizen, and as part of my daily work. In case I start a company, do I need to care about paying other taxes https://investinestonia.com/business-in-estonia/establishing-company/

- Is it a good idea to incorporate an LLC while having full-time job ?

I am getting mixed signals whenever I read similar discussions, those who are interested in reading more about the topic:

https://news.ycombinator.com/item?id=15441846

https://www.mycompanyworks.com/create-a-company-to-manage-your-side-projects/

http://stu.mp/2010/09/why-you-should-probably-have-an-llc-for-side-projects.html

P.S: In case you are wondering, I am based in Germany. Feel free to suggest contacts to get legal advises (I couldn't find any one)

Re: Ask HN: Should I incorporate a company for software side projects?

#2

Post by epynonymous » Sat, Oct 06, 2018, 2:15 PM UTC

i'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 advice, i know nothing of eu laws either.

Re: Ask HN: Should I incorporate a company for software side projects?

#3

Post by neptvn » Sat, Oct 06, 2018, 2:18 PM UTC

Are your clients based globally or solely in Germany?

I would look into Stripe Atlas in any case.

https://stripe.com/atlas

Re: Ask HN: Should I incorporate a company for software side projects?

#4

Post by 9wzYQbTYsAIc » Sat, Oct 06, 2018, 2:18 PM UTC

If you already have customers, it’s probably a good idea to at a minimum create a legal entity to be liable and insured for the work that you do for said entity.

Re: Ask HN: Should I incorporate a company for software side projects?

#5

Post by znpy » Sat, Oct 06, 2018, 2:19 PM UTC

Fellow EU resident here.

Keep in mind that even if you incorporated in Estonia, you still might have to pay taxes in your country of residence. Failing to do so might result in unpleasant meeting with your local tax collection state representative.

Re: Ask HN: Should I incorporate a company for software side projects?

#6

Post by lettergram » Sat, Oct 06, 2018, 2:20 PM UTC

My typical advice, is ince you have customers, create an LLC as it protects you from some liability. A lawyer costs a bit of money, but is worth it.

In terms of where you are located, there may be different laws and protections for an LLC. So be careful to read them. Youll also likely have taxes to pay (I create my LLCs in wyoming - where taxes are much lower - I think just a fee)

Good luck

Re: Ask HN: Should I incorporate a company for software side projects?

#7

Post by [deleted] » Sat, Oct 06, 2018, 2:23 PM UTC

znpy wrote: post #5

Fellow EU resident here. Keep in mind that even if you incorporated in Estonia, you still might have to pay taxes in your country of residence. Failing to do so might result in unpleasant meeting with your local tax collection state representative.

[deleted]

Re: Ask HN: Should I incorporate a company for software side projects?

#8

Post by nik736 » Sat, Oct 06, 2018, 2:23 PM UTC

You have to pay taxes in Germany, it doesn't matter if you found a company in the US, Estonia or somewhere else, you are living in Germany and that's the important thing that decides you need to pay taxes there.

In Germany you could do a "Nebengewerbe or Einzelunternehmen", where you can write invoices in your name, this is a fast way to get started.

Otherwise you have the UG, which can be created with 1 EUR "Stammkapital", or the GmbH with 25k EUR, but you only need to have 12,5k when founding it.

Which taxes have to be paid is different if you do the "Einzelunternehmen" or found a company (UG/GmbH). With the company there is the Körperschaftssteuer instead of the Einkommenssteuer, additionally the regular Umsatzsteuer (19%) and also you have to pay Gewerbesteuer. Gewerbesteuer, Körperschaftssteuer and Einkommensteuer all have a free amount per year, if you don't hit that limit you don't have to pay it.

I would advise against founding in a different country, because taxes have to be paid in Germany and founding a company outside of Germany makes it a mess and really expensive.

Re: Ask HN: Should I incorporate a company for software side projects?

#9

Post by nik736 » Sat, Oct 06, 2018, 2:24 PM UTC

neptvn wrote: post #3

Are your clients based globally or solely in Germany? I would look into Stripe Atlas in any case. https://stripe.com/atlas

That's really bad advise, because he still has to pay taxes in Germany and Atlas creates a huge mess.

Re: Ask HN: Should I incorporate a company for software side projects?

#10

Post by ___cs____ » Sat, Oct 06, 2018, 2:24 PM UTC

epynonymous wrote: post #2

i'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 would strongly suggest getting a lawyer to handle this.

As stated above, I couldn't find one, someone who can deal with tech-y stuffs here in my area.