5 ms·

I don't see any advantage in incorporation if you want to run your own private business, but I'm willing to accept that I'm being the weirdo here.

koolba 10y ago
Vs LLC?
- idlewords 10y ago
  Vs sole proprietorship.
  - koolba 10y ago
    Can you set up 401k and all the other "corporate only" type things with a sole proprietorship or does it just become a legal shield with everything else as passthrough?
    - zrail 10y ago
      You can set up a solo 401K with a sole proprietorship. All you have to show is that you have self employment income showing up on a Schedule C (for a sole proprietorship) or a K1 (for a partnership/LLC/S-Corp).
    - deleted 10y ago
      [deleted]
  - rev_bird 10y ago
    Liability protection, if nothing else. If someone sues a company, they can't (in theory) take the CEO's house. Also, in the US, you can save a bunch of money on payroll taxes if you elect to be taxed as an S-corp. The short version is that you only pay those taxes (Social Security, FICA, Medicare, etc etc) on money you get in paychecks -- so, if you make $100k in a year and "pay" yourself $70k, you end up with the other $30k but didn't have to pay a bunch of tax on it.
    - blackbagboys 10y ago
      What becomes of that other $30k? I assume there's a reason why you wouldn't just pay yourself $30k and keep the tax-free $70k.
      - idlewords 10y ago
        It has to sit within the company. You can use it to buy an ice sculpture for the office lobby, but not for your own palazzo. As you can imagine, there is a ton of bookkeeping and bureaucratic pain associated with having an S-corp (like pretending to have annual meetings, and having to write minutes for them).
        zrail 10y ago
        You can have an LLC that's just taxed as an S-corp. For IRS purposes you're an LLC but for bureaucratic state level bullshit purposes you're an LLC.
        rev_bird 10y ago
        >It has to sit within the company. I don't think this is true. If you buy an ice sculpture for the office lobby, it's totally tax deductible (it's a business expense), but you can use money for whatever you want if you take it out of the bank as a "distribution" instead of a "paycheck." In that situation, you still pay income tax on the money, but not the other taxes.
        jessaustin 10y ago
        IANAL, but this might still cause trouble if the firm has cashflow issues. If there's a $10k distribution one quarter, and the next quarter a $10k bill can't be paid, suddenly you're pierced.
        deleted 10y ago
        [deleted]
        tptacek 10y ago
        The other half of the "claim a low salary" S-corp dodge is that distributions (the standard way LLC's pay their principals, and the standard way S-corps pay "profit sharing") aren't payroll-taxed (technically: aren't self-employment taxed). So I think the trick here is, you pay yourself $70k in salary, but issue yourself a $30k profit sharing distribution.
deleted 10y ago
[deleted]
nstj 10y ago
Incorporated entities enjoy the benefit of "limited liability"[0], ie: if your company does something "bad" you can't be liable beyond your share capital contributions. For example, if you make a self driving car and sell it, and it results in harm, and someone sues the company, you can't lose any of your personal assets; rather your only loss can be the capital which you put into the company. tl;dr: if you do something commercial as a sole trader and not as a company, it's possible for you to be sued for your personal assets. [0]: https://en.wikipedia.org/wiki/Limited_liability https://en.wikipedia.org/wiki/Limited_liability
- idlewords 10y ago
  I think for businesses like "running a website" this threat is overrated, to the point of absurdity, but again: willing to accept that I'm the weirdo.
  - k-mcgrady 10y ago
    It's overrated until a customer decides to sue you. Also there are very few downsides to incorporating and limited liability is a massive upside.
  - icebraining 10y ago
    I wonder if you'll say the same when Pinboard gets sued for copyright infringement by its archival feature. I hope it never happens, but saying "it's just a website" is a little cavalier. (Yes, it merely takes an publicly available work that the users could download themselves, and makes it available to each individually. That's essentially what Aereo did, and look at them now.)
    - idlewords 10y ago
      I'm not saying there's no legal exposure. My point is that no one is going to slip and fall on your website, and leave you on the hook for tens of millions of dollars in personal liability. If I was building an Internet of Things blender I would incorporate in a heartbeat.
  - 10y ago
losvedir 10y ago
Oh wow, that surprises me. Does that mean pinboard isn't a Delaware C-Corp like everything seems to be? I suppose it makes sense since everything about it screams "the anti-startup", but I'd be curious to know what the real ramifications of going about it that way are.
- idlewords 10y ago
  Nope, nothing but a logo, a tiny server farm, and a long series of tweets. I spooked myself into starting the process with LegalZoom at some point, but then couldn't figure out how to transfer assets, and then I got real sleepy.
  - kasey_junk 10y ago
    Don't forget the expensive bus insurance.
    - nicky0 10y ago
      Well if you're going to drive an expensive bus, you're gonna want to insure it.
      - idlewords 10y ago
        Those expensive buses aren't cheap.
  - codinghorror 10y ago
    Have I ever told you you're my hero? You're everything I long to be.
  - tptacek 10y ago
    You get a tax ID, online, and use that to open a business bank account wherever your normal bank account is. Just saying. :)
    - 10y ago
cperciva 10y ago
I incorporated Tarsnap Backup Inc. five years ago (to the day!) largely for tax paperwork purposes. By being a separate legal entity it became possible to do things like having Tarsnap register to collect sales taxes without having Colin register to collect sales taxes. But the company was running quite successfully as a sole proprietorship until that point. Probably more important, although I didn't realize it at the time, is that being a corporation gave Tarsnap more credibility, especially when dealing with other corporations. I saw a sharp increase in the number of large users of Tarsnap after it I incorporated it.
jakobegger 10y ago
I'm also weird! In my opinion incorporating only makes sense if you have multiple cofounders and want shared ownership, or if you get investment etc. If you are running your business alone, I don't see the point of incorporation. Limited liability doesn't magically protect you from lawsuits. But it does cost a lot of money (obviously this depends on location, but even if it's cheap to register a business somewhere, all the accounting and minimum taxes and reporting etc sum up). I run my company as a sole proprietorship, and I'm not planning to incorporate any time soon. I've seen people waste thousands of euros on incorporating and setting up a company, only to close up again a year later... what a waste of time and money...
- saryant 10y ago
  Maybe in Europe it's different, but in Colorado I keep my LLC maintained and compliant for a couple hundred bucks a year. It's almost no work.
tptacek 10y ago
* Contracts you've made with hosting providers and other services expire when your company does, not when your personal assets are liquidated. * Same goes for anyone who sues you. * Business partners and clients won't deduct taxes from your invoices, but often will if you're a sole proprietor. * If you ever have employees and later liquidate the company, you can have arranged in advance for them to get a portion of the proceeds, which may or may not be motivating earlier on in the company. Maybe few of these apply to you, since if you get sued you'll surely just flee to Antarctica to snark from amongst the penguins, who are likely to be the only employees you'll ever have either way.

koolba 10y ago

Vs LLC?

idlewords 10y ago
Vs sole proprietorship.
- koolba 10y ago
  Can you set up 401k and all the other "corporate only" type things with a sole proprietorship or does it just become a legal shield with everything else as passthrough?
  - zrail 10y ago
    You can set up a solo 401K with a sole proprietorship. All you have to show is that you have self employment income showing up on a Schedule C (for a sole proprietorship) or a K1 (for a partnership/LLC/S-Corp).
  - deleted 10y ago
    [deleted]
- rev_bird 10y ago
  Liability protection, if nothing else. If someone sues a company, they can't (in theory) take the CEO's house. Also, in the US, you can save a bunch of money on payroll taxes if you elect to be taxed as an S-corp. The short version is that you only pay those taxes (Social Security, FICA, Medicare, etc etc) on money you get in paychecks -- so, if you make $100k in a year and "pay" yourself $70k, you end up with the other $30k but didn't have to pay a bunch of tax on it.
  - blackbagboys 10y ago
    What becomes of that other $30k? I assume there's a reason why you wouldn't just pay yourself $30k and keep the tax-free $70k.
    - idlewords 10y ago
      It has to sit within the company. You can use it to buy an ice sculpture for the office lobby, but not for your own palazzo. As you can imagine, there is a ton of bookkeeping and bureaucratic pain associated with having an S-corp (like pretending to have annual meetings, and having to write minutes for them).
      - zrail 10y ago
        You can have an LLC that's just taxed as an S-corp. For IRS purposes you're an LLC but for bureaucratic state level bullshit purposes you're an LLC.
      - rev_bird 10y ago
        >It has to sit within the company. I don't think this is true. If you buy an ice sculpture for the office lobby, it's totally tax deductible (it's a business expense), but you can use money for whatever you want if you take it out of the bank as a "distribution" instead of a "paycheck." In that situation, you still pay income tax on the money, but not the other taxes.
        jessaustin 10y ago
        IANAL, but this might still cause trouble if the firm has cashflow issues. If there's a $10k distribution one quarter, and the next quarter a $10k bill can't be paid, suddenly you're pierced.
      - deleted 10y ago
        [deleted]
      - tptacek 10y ago
        The other half of the "claim a low salary" S-corp dodge is that distributions (the standard way LLC's pay their principals, and the standard way S-corps pay "profit sharing") aren't payroll-taxed (technically: aren't self-employment taxed). So I think the trick here is, you pay yourself $70k in salary, but issue yourself a $30k profit sharing distribution.

deleted 10y ago

[deleted]

nstj 10y ago

Incorporated entities enjoy the benefit of "limited liability"[0], ie: if your company does something "bad" you can't be liable beyond your share capital contributions. For example, if you make a self driving car and sell it, and it results in harm, and someone sues the company, you can't lose any of your personal assets; rather your only loss can be the capital which you put into the company. tl;dr: if you do something commercial as a sole trader and not as a company, it's possible for you to be sued for your personal assets. [0]: https://en.wikipedia.org/wiki/Limited_liability https://en.wikipedia.org/wiki/Limited_liability

idlewords 10y ago
I think for businesses like "running a website" this threat is overrated, to the point of absurdity, but again: willing to accept that I'm the weirdo.
- k-mcgrady 10y ago
  It's overrated until a customer decides to sue you. Also there are very few downsides to incorporating and limited liability is a massive upside.
- icebraining 10y ago
  I wonder if you'll say the same when Pinboard gets sued for copyright infringement by its archival feature. I hope it never happens, but saying "it's just a website" is a little cavalier. (Yes, it merely takes an publicly available work that the users could download themselves, and makes it available to each individually. That's essentially what Aereo did, and look at them now.)
  - idlewords 10y ago
    I'm not saying there's no legal exposure. My point is that no one is going to slip and fall on your website, and leave you on the hook for tens of millions of dollars in personal liability. If I was building an Internet of Things blender I would incorporate in a heartbeat.
- 10y ago

losvedir 10y ago

Oh wow, that surprises me. Does that mean pinboard isn't a Delaware C-Corp like everything seems to be? I suppose it makes sense since everything about it screams "the anti-startup", but I'd be curious to know what the real ramifications of going about it that way are.

idlewords 10y ago
Nope, nothing but a logo, a tiny server farm, and a long series of tweets. I spooked myself into starting the process with LegalZoom at some point, but then couldn't figure out how to transfer assets, and then I got real sleepy.
- kasey_junk 10y ago
  Don't forget the expensive bus insurance.
  - nicky0 10y ago
    Well if you're going to drive an expensive bus, you're gonna want to insure it.
    - idlewords 10y ago
      Those expensive buses aren't cheap.
- codinghorror 10y ago
  Have I ever told you you're my hero? You're everything I long to be.
- tptacek 10y ago
  You get a tax ID, online, and use that to open a business bank account wherever your normal bank account is. Just saying. :)
  - 10y ago

cperciva 10y ago

I incorporated Tarsnap Backup Inc. five years ago (to the day!) largely for tax paperwork purposes. By being a separate legal entity it became possible to do things like having Tarsnap register to collect sales taxes without having Colin register to collect sales taxes. But the company was running quite successfully as a sole proprietorship until that point. Probably more important, although I didn't realize it at the time, is that being a corporation gave Tarsnap more credibility, especially when dealing with other corporations. I saw a sharp increase in the number of large users of Tarsnap after it I incorporated it.

jakobegger 10y ago

I'm also weird! In my opinion incorporating only makes sense if you have multiple cofounders and want shared ownership, or if you get investment etc. If you are running your business alone, I don't see the point of incorporation. Limited liability doesn't magically protect you from lawsuits. But it does cost a lot of money (obviously this depends on location, but even if it's cheap to register a business somewhere, all the accounting and minimum taxes and reporting etc sum up). I run my company as a sole proprietorship, and I'm not planning to incorporate any time soon. I've seen people waste thousands of euros on incorporating and setting up a company, only to close up again a year later... what a waste of time and money...

saryant 10y ago
Maybe in Europe it's different, but in Colorado I keep my LLC maintained and compliant for a couple hundred bucks a year. It's almost no work.

tptacek 10y ago

* Contracts you've made with hosting providers and other services expire when your company does, not when your personal assets are liquidated. * Same goes for anyone who sues you. * Business partners and clients won't deduct taxes from your invoices, but often will if you're a sole proprietor. * If you ever have employees and later liquidate the company, you can have arranged in advance for them to get a portion of the proceeds, which may or may not be motivating earlier on in the company. Maybe few of these apply to you, since if you get sued you'll surely just flee to Antarctica to snark from amongst the penguins, who are likely to be the only employees you'll ever have either way.