4 ms·

Just curious, did you go about setting up a formal corporation for the product? I'm thinking about setting up my own SaaS product and I'm not sure if I need to

Just curious, did you go about setting up a formal corporation for the product? I'm thinking about setting up my own SaaS product and I'm not sure if I need to do anything on the legal/business side.

anandkulkarni 7y ago
I wouldn't set up a corporation until you have either a reasonable amount of cash coming in or someone ready to give you a check. After that, I'd start with an LLC in your home state, unless you think there's a chance you'll take outside investment. If you do, conversion to a Delaware C-corp costs around $10K in legal fees.
- stevenwoo 7y ago
  I thought that an LLC in California required a yearly fee that was close to a $1000 the last time I looked. Is that no longer true or not true at all? Related - isn't it much cheaper in other states?
  - benmanns 7y ago
    Yes, the franchise tax. You can't get out of it by incorporating in another state. CA residents pay CA taxes.
  - trazire 7y ago
    Yea, $850 franchise tax minimum. I personally think it's a bit excess even by Californian standards. Also, you'd need to get an office in Delaware to not mandate a foreign registration in California which still involves the taxes. Getting an office in Delaware is pretty expensive but it's about $400 cheaper than California franchise tax. They assess their own but it still works out lower. Edit: Nevermind, they still tax you on that. I don't condone tax evasion, but Wyoming doesn't track the owners of a corporation.
- ed 7y ago
  +1 to this advice. Don't incorporate until you're already paying yourself a good salary. The wrong structure can easily cost you thousands per year in taxes and fees.
  - nicholas73 7y ago
    Would it be "piercing the corporate veil" to accept payments before incorporating, then moving everything to separate accounts afterwards?
    - ed 7y ago
      No you simply convert the sole proprietorship to an LLC (or corporation). You "sell" your intellectual property to the newly created corporation in exchange for your founder stock. A sole proprietorship is sort of like the default business structure, you don't really need to do anything to start it, everything just ends up on your personal tax return. "Piercing the corporate veil" is different. Google will be helpful if you're interested, but basically if you run a company don't do shady shit -- don't commit fraud or gross negligence, and respect the separation between company and personal finances. Otherwise you may lose the protection of the corporation (the "limited liability" part of LLC) and become personally liable if things go bad.
benmanns 7y ago
Look up setting up a single-member LLC in your state. It's usually fairly simple and cheap (but state dependent).
srecio 7y ago
Just use Stripe Atlas. I've been very happy with them.
- ed 7y ago
  Stripe Atlas is awesome for C corps, which is great if you plan to raise outside capital. If you plan to bootstrap, you're better off creating an LLC in your home state. Atlas only offers LLC's in Delaware.
  - srecio 7y ago
    Why not set up a Delaware LLC? Makes sense if you're doing business online
    - ed 7y ago
      Unless you live and work in Delaware, you will foreign qualify in another state. You pay taxes to the states you operate in, so if you e.g. register in Delaware and operate in California, you'll be stuck paying both CA ($800) and DE ($400) taxes.
      - marktangotango 7y ago
        I think Delaware allows “anonymous” llc which not a lot of states do. That is the main draw iirc.
    - AlchemistCamp 7y ago
      Why Delaware for an LLC?

Just curious, did you go about setting up a formal corporation for the product? I'm thinking about setting up my own SaaS product and I'm not sure if I need to do anything on the legal/business side.

anandkulkarni 7y ago

I wouldn't set up a corporation until you have either a reasonable amount of cash coming in or someone ready to give you a check. After that, I'd start with an LLC in your home state, unless you think there's a chance you'll take outside investment. If you do, conversion to a Delaware C-corp costs around $10K in legal fees.

stevenwoo 7y ago
I thought that an LLC in California required a yearly fee that was close to a $1000 the last time I looked. Is that no longer true or not true at all? Related - isn't it much cheaper in other states?
- benmanns 7y ago
  Yes, the franchise tax. You can't get out of it by incorporating in another state. CA residents pay CA taxes.
- trazire 7y ago
  Yea, $850 franchise tax minimum. I personally think it's a bit excess even by Californian standards. Also, you'd need to get an office in Delaware to not mandate a foreign registration in California which still involves the taxes. Getting an office in Delaware is pretty expensive but it's about $400 cheaper than California franchise tax. They assess their own but it still works out lower. Edit: Nevermind, they still tax you on that. I don't condone tax evasion, but Wyoming doesn't track the owners of a corporation.
ed 7y ago
+1 to this advice. Don't incorporate until you're already paying yourself a good salary. The wrong structure can easily cost you thousands per year in taxes and fees.
- nicholas73 7y ago
  Would it be "piercing the corporate veil" to accept payments before incorporating, then moving everything to separate accounts afterwards?
  - ed 7y ago
    No you simply convert the sole proprietorship to an LLC (or corporation). You "sell" your intellectual property to the newly created corporation in exchange for your founder stock. A sole proprietorship is sort of like the default business structure, you don't really need to do anything to start it, everything just ends up on your personal tax return. "Piercing the corporate veil" is different. Google will be helpful if you're interested, but basically if you run a company don't do shady shit -- don't commit fraud or gross negligence, and respect the separation between company and personal finances. Otherwise you may lose the protection of the corporation (the "limited liability" part of LLC) and become personally liable if things go bad.

benmanns 7y ago

Look up setting up a single-member LLC in your state. It's usually fairly simple and cheap (but state dependent).

srecio 7y ago

Just use Stripe Atlas. I've been very happy with them.

ed 7y ago
Stripe Atlas is awesome for C corps, which is great if you plan to raise outside capital. If you plan to bootstrap, you're better off creating an LLC in your home state. Atlas only offers LLC's in Delaware.
- srecio 7y ago
  Why not set up a Delaware LLC? Makes sense if you're doing business online
  - ed 7y ago
    Unless you live and work in Delaware, you will foreign qualify in another state. You pay taxes to the states you operate in, so if you e.g. register in Delaware and operate in California, you'll be stuck paying both CA ($800) and DE ($400) taxes.
    - marktangotango 7y ago
      I think Delaware allows “anonymous” llc which not a lot of states do. That is the main draw iirc.
  - AlchemistCamp 7y ago
    Why Delaware for an LLC?