5 ms·

Ask HN: What do I need to know before registering a 2 person LLC on Legal Zoom?

27 points by si2 17y ago

What do I need to know before registering a 2 person LLC on Legal Zoom?

charlesju 17y ago
That the LLC form is really 1 page and 1 follow-up form. This will cost < $100 in total if you spend 10 minutes googling how to do it. (I'm not a lawyer, but this is what I know) 1. LLC FAQ http://www.sos.ca.gov/business/llc/llc_faq.htm http://www.sos.ca.gov/business/llc/llc_faq.htm 2. LLC Form (1 pg) http://www.sos.ca.gov/business/bpd_forms.htm http://www.sos.ca.gov/business/bpd_forms.htm (search for LLC-1) — $70 When you get approved, you will need to submit a Statement of Information which costs $20. 3. If you don't make money you can waive the first year's min. franchise tax of $800. 4. Lawyers will usually help you for free if you are starting a legit business, but it will be costly (we just got a bill for $10k for starting up our s-corp). 5. Good luck!
- SwellJoe 17y ago
  Absolutely right. LLC is intended to be, and is, very easy to self-file in most, if not all, states. It took me about half an hour to fill out the forms in Texas a few years ago. Don't waste your money or time on third parties for something so simple. (Corporations are more serious, due to having stock, and you probably ought to have a lawyer involved, so online incorporation services are probably never a great idea.)
- rdouble 17y ago
  I've heard that the approval process is sped up if you actually go to Sacramento and file in person. Is this true?
  - pz 17y ago
    I don't believe so. If you file in person you have to pay an extra handling fee. If you want expedited filing i think it costs an extra few hundred dollars.
phn1x 17y ago
Legal zoom charges you on top of state fee's. Your state will normally charge you 4-500 bucks. Legal zoom will charge you 100-300 + state fee's. The forms are easy enough to fill out yourself.
dennykmiu 17y ago
One thing to keep in mind of a LLC is that the annual franchise fee is not limited to $800. If you start to make money, you will need to pay a fee calculated based on the "gross" revenue, not "net" revenue (which is sales minus expenses). Also, you will need to pay self-employment tax on any money leftover. I summarize some of the tradeoffs in the following ... http://www.lovemytool.com/blog/2008/01/bootstrapping.html http://www.lovemytool.com/blog/2008/01/bootstrapping.html
- rksprst 17y ago
  This $800 minimum franchise tax is only in California. Other states have other tax requirements. FYI: You can defer that $800 payment if its your first operating year.
rms 17y ago
It's really easy to register an LLC in Pennsylvania, you can actually mostly do it online.
pz 17y ago
First, I'll echo other people's advice: just file the forms yourself. Yes, its annoying having to handle physical paper and envelopes. However, since you have a partner in this LLC, the really important thing is to set up your "operating agreement". This will decide how the company is controlled, revenue shared, what happens when someone leaves... etc. Don't wait until someone wants to leave or you're making decent $ before trying to figure this out. You can file the agreement with the state, too. If I were you I would write down in your own words what you want in the operating agreement and then take the money you saved from NOT using legalzoom and have a lawyer codify what you have into legalese.
- pz 17y ago
  For more info check out "Business Law for Entrepreneurs"
gojomo 17y ago
Splitting ownership exactly 50-50 risks deadlock in worst case scenarios. Give someone 50+1 or give a mutually respected third party a tiny share to break ties if all else fails. You probably won't need it, but it's there just in case.
- tricky 17y ago
  You can always put Felix Dennis' "Mexican Shoot-out" clause in place. If the owners are in a deadlock, one can chose to execute the clause. When that happens, each owner places a sealed bid to buy the entire business. Whomever has the highest offer, wins... Brutal, but fair.
  - gojomo 17y ago
    Something like that is another good option. I hadn't heard exactly that variant; the one I've heard the most about has one partner offer a price, the other has to either take it for their half or pay that same amount for the other half. Within the last year I read some research suggesting a further refinement that better ensures the partner who valued the business highest winds up with it... but can't find the reference right now.
reasonattlm 17y ago
That if you're looking to raise funding, being an LLC will be a continued point of annoyance that will become worse as the level of funding rises. You'll be forced to convert to an S corp as soon as any experienced angels or VCs become involved beause they simply won't do deals with you otherwise - which can be a big headache, legal expense, and drain on time.
- fatdog789 17y ago
  An S-Corp is actually worse from the VC standpoint than an LLC, b/c S-Corps don't require incorporation (DBA's can apply for and receive S-Corp status). This means it's easier to take the money and run. Some VCs prefer LLCs because it gives them the risk-minimizing benefits of a corporation, while at the same time giving them a hand in managing the business (a la partnership form). HOWEVER, many VCs, especially the smaller ones, are unfamiliar with LLC law, and avoid it b/c they don't know about it. Some VCs prefer S-Corp because it ideally gives them access to the founders' personal assets, but in practice, a bankruptcy court will try very hard to deny this benefit.

27 points by si2 17y ago

What do I need to know before registering a 2 person LLC on Legal Zoom?

That the LLC form is really 1 page and 1 follow-up form. This will cost < $100 in total if you spend 10 minutes googling how to do it. (I'm not a lawyer, but this is what I know) 1. LLC FAQ http://www.sos.ca.gov/business/llc/llc_faq.htm http://www.sos.ca.gov/business/llc/llc_faq.htm 2. LLC Form (1 pg) http://www.sos.ca.gov/business/bpd_forms.htm http://www.sos.ca.gov/business/bpd_forms.htm (search for LLC-1) — $70 When you get approved, you will need to submit a Statement of Information which costs $20. 3. If you don't make money you can waive the first year's min. franchise tax of $800. 4. Lawyers will usually help you for free if you are starting a legit business, but it will be costly (we just got a bill for $10k for starting up our s-corp). 5. Good luck!

SwellJoe 17y ago
Absolutely right. LLC is intended to be, and is, very easy to self-file in most, if not all, states. It took me about half an hour to fill out the forms in Texas a few years ago. Don't waste your money or time on third parties for something so simple. (Corporations are more serious, due to having stock, and you probably ought to have a lawyer involved, so online incorporation services are probably never a great idea.)
rdouble 17y ago
I've heard that the approval process is sped up if you actually go to Sacramento and file in person. Is this true?
- pz 17y ago
  I don't believe so. If you file in person you have to pay an extra handling fee. If you want expedited filing i think it costs an extra few hundred dollars.

phn1x 17y ago

Legal zoom charges you on top of state fee's. Your state will normally charge you 4-500 bucks. Legal zoom will charge you 100-300 + state fee's. The forms are easy enough to fill out yourself.

dennykmiu 17y ago

One thing to keep in mind of a LLC is that the annual franchise fee is not limited to $800. If you start to make money, you will need to pay a fee calculated based on the "gross" revenue, not "net" revenue (which is sales minus expenses). Also, you will need to pay self-employment tax on any money leftover. I summarize some of the tradeoffs in the following ... http://www.lovemytool.com/blog/2008/01/bootstrapping.html http://www.lovemytool.com/blog/2008/01/bootstrapping.html

rksprst 17y ago
This $800 minimum franchise tax is only in California. Other states have other tax requirements. FYI: You can defer that $800 payment if its your first operating year.

rms 17y ago

It's really easy to register an LLC in Pennsylvania, you can actually mostly do it online.

pz 17y ago

First, I'll echo other people's advice: just file the forms yourself. Yes, its annoying having to handle physical paper and envelopes. However, since you have a partner in this LLC, the really important thing is to set up your "operating agreement". This will decide how the company is controlled, revenue shared, what happens when someone leaves... etc. Don't wait until someone wants to leave or you're making decent $ before trying to figure this out. You can file the agreement with the state, too. If I were you I would write down in your own words what you want in the operating agreement and then take the money you saved from NOT using legalzoom and have a lawyer codify what you have into legalese.

pz 17y ago
For more info check out "Business Law for Entrepreneurs"

gojomo 17y ago

Splitting ownership exactly 50-50 risks deadlock in worst case scenarios. Give someone 50+1 or give a mutually respected third party a tiny share to break ties if all else fails. You probably won't need it, but it's there just in case.

tricky 17y ago
You can always put Felix Dennis' "Mexican Shoot-out" clause in place. If the owners are in a deadlock, one can chose to execute the clause. When that happens, each owner places a sealed bid to buy the entire business. Whomever has the highest offer, wins... Brutal, but fair.
- gojomo 17y ago
  Something like that is another good option. I hadn't heard exactly that variant; the one I've heard the most about has one partner offer a price, the other has to either take it for their half or pay that same amount for the other half. Within the last year I read some research suggesting a further refinement that better ensures the partner who valued the business highest winds up with it... but can't find the reference right now.

reasonattlm 17y ago

That if you're looking to raise funding, being an LLC will be a continued point of annoyance that will become worse as the level of funding rises. You'll be forced to convert to an S corp as soon as any experienced angels or VCs become involved beause they simply won't do deals with you otherwise - which can be a big headache, legal expense, and drain on time.

fatdog789 17y ago
An S-Corp is actually worse from the VC standpoint than an LLC, b/c S-Corps don't require incorporation (DBA's can apply for and receive S-Corp status). This means it's easier to take the money and run. Some VCs prefer LLCs because it gives them the risk-minimizing benefits of a corporation, while at the same time giving them a hand in managing the business (a la partnership form). HOWEVER, many VCs, especially the smaller ones, are unfamiliar with LLC law, and avoid it b/c they don't know about it. Some VCs prefer S-Corp because it ideally gives them access to the founders' personal assets, but in practice, a bankruptcy court will try very hard to deny this benefit.