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Ask HN: Do you incorporate before monetizing your side projects?
- ak406 9y agoWhat is the scope of said side projects? Apps or other ventures?
- dudul 9y agoCould be something very small but generating revenue. Could be a Saas service for example. I guess I'm wondering at what point either in terms of revenue, work spent on the project, etc, do people feel the need to incorporate. Either for tax purposes or to avoid liability.
- newusertoday 9y agohow are you taking payment without incorporating? paypal? any suggesions?
- matchmike1313 9y agoYes in a way. I have a parent LLC for all of my small ventures. That way, you don't need to go through the hassle of creating separate legal entities for every project. If the side project grows at that point you could also just spin off as a more formal dedicated entity for tax purposes and write offs, but then again, at that point it may no longer be a side project.
- tixocloud 9y agoHow much would it say it costs to have the parent LLC set up? factoring for filing taxes and other administrative costs.
- jetti 9y agoIf you're in the US then it can vary by state. I used LegalZoom to form an LLC and it was ~$800 to start. Illinois charges me about $300 each year to keep my standing and I just use H&R Block software to do my taxes as I don't have much income coming in for the business and have my LLC tax structure to be passthrough so it makes tax season super easy.
- shubhamjain 9y agoI used to worry how incorporating is almost an inescapable need if you want to be taken seriously. Surely, you want a professional company label when a customer goes to bill his subscription. Right? Learning more, I have realised that you can either chose to build the right thing and try hard to get your first customer, or fuck around with these pointless tasks. It's possible some customer may balk at a one-person business but most find it perfectly acceptable and have zero-issues in buying from you.
- dudul 9y agoThanks for the answer. I guess I'm not really wondering about the "being taken seriously" aspect. More when it comes to managing taxes and liability. A LLC would protect your personal assets in case something goes wrong with your product (let's say you leak the information of your 255 million users), but when is it worth it?
- shubhamjain 9y agoWhen you're starting out, you're full of optimism about your success. I was too. But when you get down to actually doing things, you start to realise how hard it is to get first few paying customers, let alone hundreds or thousands. I think it's fairly easy to start a LLC in US, so I am not dissuading you from incorporating one but do realise that it is one of those things that can be done later; and personally, I feel, if you don't have sure-shot path to growing revenue, should be done later. I don't think taxes and liability are much of an issue when you're small. I wasted ton of time in wondering about these things when I was making something just two years back, and eventually, I realised how less it would've mattered.
- deleted 9y ago[deleted]
- shimon 9y agoGood point. You should probably incorporate once you hit, say, the 10 million user mark. ;)
- shimon 9y ago
- tarr11 9y agoIf you are in California, this will cost $800 / year in franchise fees. Since most side projects fail, consider waiting until you are actually generating revenue. If your business incurs significant liability that you are worried about, incorporating may make sense sooner.
- muzani 9y agoI have a business account for all side projects that involve money. When the prototype generates money, we move it out of the prototype bank account to a proper one.