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Ask HN: What is legally required to run a small service-based web application?

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Re: Ask HN: What is legally required to run a small service-based web application?

#11

Post by patio11 »

You don't need a legal structure to charge people money. Sole proprietorship is the most common form of business in the United States -- by quite a large margin. For example, BCC is structured as a sole proprietorship: when someone pays me for bingo cards, they're really paying me for bingo cards.

You will probably find that no B2C customer actually cares about the structure of your business, legally. Your website design matters 10,000 times more in terms of trust gained. Your mileage may vary if you sell B2B, particular B2BigFreakingEnterprise.

With regards to liability: your main defense against liability is not your corporate structure or your terms of service. It is not pissing anyone off so bad that they decide to sue you.

You can, if you choose, get an LLC and create a Terms of Service. These are more to allow you to sleep better at night than insurance against catastrophe: no matter what you do right now, if you get sued, life is going to suck.

You want to sell subscriptions? Paypal Website Payments Pro + Spreedly. You can do it in two hours of coding and about two days or so in time it takes Paypal to review your business. I do not recommend doing yearly subscriptions until you have history: doing so increases your risk profile.

Your main regulatory issue for the typical SaaS app is simple: you owe income taxes on it, both to the US and to North Carolina. Luckily, you will have very good records of sales (because you'll be able to grab them from Paypal). If you want to deduct expenses, make sure to record them and keep proof of them (generally, receipts work fine -- for e-receipts, print to PDF and put it in your Dropbox so that you don't lose it).

Re: Ask HN: What is legally required to run a small service-based web application?

#13

Post by IgorPartola »

nolite wrote: post #9
IgorPartola wrote: post #7

Earlier quoted context omitted.

My personal finances are with a credit union that most people haven't heard of. Any suggestions of a non-horrible bank? Would using such a service mean that I have to be PCI compliant, or does my application never see the credit card number?

Read up on Recurly, Spreedly, and/or Chargify... and also read this: http://news.ycombinator.com/item?id=2169870

Thanks. These look very promising.

Re: Ask HN: What is legally required to run a small service-based web application?

#15

Post by tsycho »

patio11 wrote: post #11

You don't need a legal structure to charge people money. Sole proprietorship is the most common form of business in the United States -- by quite a large margin. For example, BCC is structured as a sole proprietorship: when someone pays me for bingo cards, they're really paying me for bingo cards. You will probably find that no B2C customer actually cares about the structure of your business, legally. Your website de…

For a "sole proprietorship", is it necessary to register a company at all for doing what the OP asked (starting a website as a side project), or can he just do it as an individual and just pay taxes on the profits as regular income?

PS> I am thinking of doing something similar to the OP, and not sure if this complicates things, I am on a H1 visa.

Re: Ask HN: What is legally required to run a small service-based web application?

#16

Post by IgorPartola »

patio11 wrote: post #11

You don't need a legal structure to charge people money. Sole proprietorship is the most common form of business in the United States -- by quite a large margin. For example, BCC is structured as a sole proprietorship: when someone pays me for bingo cards, they're really paying me for bingo cards. You will probably find that no B2C customer actually cares about the structure of your business, legally. Your website de…

Thank you for a detailed reply. What do you recommend as a source for the Terms of Service. Is it worthwhile to get it from a lawyer or is there a sort of "industry standard"?

Re: Ask HN: What is legally required to run a small service-based web application?

#17

Post by IgorPartola »

haploid wrote: post #12

Why paypal/google instead of a real payments gateway like authorize.net?

I was under the impression that using something like authorize.net would impose more restrictions on my application (e.g.: require it to be PCI compliant, etc.) and require more work to get going.

Re: Ask HN: What is legally required to run a small service-based web application?

#18

Post by IgorPartola »

kmanlives wrote: post #10

I'm in the US (Georgia), and the first thing I did to limit liability is to form an LLC (simple overview: http://en.wikipedia.org/wiki/Limited_liability_company )

I realize the laws are different between the two states, but how expensive and time-intensive was the process?

Re: Ask HN: What is legally required to run a small service-based web application?

#19

Post by patio11 »

tsycho wrote: post #15
patio11 wrote: post #11

You don't need a legal structure to charge people money. Sole proprietorship is the most common form of business in the United States -- by quite a large margin. For example, BCC is structured as a sole proprietorship: when someone pays me for bingo cards, they're really paying me for bingo cards. You will probably find that no B2C customer actually cares about the structure of your business, legally. Your website de…

For a "sole proprietorship", is it necessary to register a company at all for doing what the OP asked (starting a website as a side project), or can he just do it as an individual and just pay taxes on the profits as regular income? PS> I am thinking of doing something similar to the OP, and not sure if this complicates things, I am on a H1 visa.

There may be local rules which require some form of business registration, but in the US the typical case is that the first -- and only -- time the government hears of the existence of a sole proprietorship is on Schedule C attached to the individual's tax return, which documents its income and expenses, calculates the profits, and tells you what other pieces of paper to copy the profit number onto to figure out how much tax you owe.

Sole propretorship == doing it as an individual.

This is not legal advice: if you're physically in America when doing the work, the IRS probably doesn't care about your citizenship, you owe it money on your sideline income. It may not be, strictly speaking, legal to work for someone other than your employer (yes, including yourself) while you are on a H1. In practice I'd bet you that this is commonly overlooked.

Re: Ask HN: What is legally required to run a small service-based web application?

#20

Post by [deleted] »

IgorPartola wrote: post #17
haploid wrote: post #12

Why paypal/google instead of a real payments gateway like authorize.net?

I was under the impression that using something like authorize.net would impose more restrictions on my application (e.g.: require it to be PCI compliant, etc.) and require more work to get going.

[deleted]
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