Ask HN: Starting a small business

3 points by cwt 9 years ago | 7 comments

I've worked in software development for a few years now and want to start my own business. I have an idea, a website/service, that I am building offline currently. When I put it under a domain I would like to have all the business parts figured out. Does that even matter?

What advice can you give me from you own experience and knowledge on how to smoothly create a small business for an online company, that for the foreseeable future will have 1 employee.

I've heard that I should start an LLC for myself and use that to create the online business.

I don't expect to make any money in 2017 - but it's always a possibility.

Thanks!

markqq 9 years ago |

Make an LLC. They are really easy. In most states you just file articles of organization to the secretary of state. The articles of organization really just say what you have for a name, what the address is, etc. There are many low-cost online services that will also do it for you, like LegalZoom.

Of course it depends a lot on your state.

If your business won't make any money, I'd certainly take that 1 employee down to 0 employees. Once you get the first employee, the tax hassles increase by a couple orders of magnitude. (Payroll taxes include income tax withholding, social security, state income tax withholding, state unemployment tax, just to name a few. It's a huge mess.)

lastofus 9 years ago |

LLCs are great to limit your liability, but vary from state to state. In CA for instance, they are very expensive ~$800, but in WI, they are ~$150, and can be done online in less than hour. I believe some states let you create an LLC even if you do not have residency there.

LLCs are passthrough entities, so you are taxed the same as 1099 work. You are not an employee, but an owner. All profit is considered income for you. You have to file one extra form denoting the (profit - deductions) for your business, and then you take that net profit in the form a K1, and pay taxes.

If you make no money in 2017, you don't need to file anything extra for the LLC (though a crafty CPA might find a good reason to do so for deductions).

Once you have an LLC, open a dedicated business bank account and get a business CC. Capital One offers one w/ 2% rewards which is nice. More importantly, all your business income/deductions are well documented and separate from your personal. You will be happy you did this come tax time, and mostly eliminates the need for bookkeeping.

apolymatth 9 years ago |

Probably a good idea to set things up as a 1 member LLC in order to limit any liability, so that if anything happens, you're not personally liable for anything.

I'm also getting ready to start another small business for a side project, and have had a good experience getting it setup using LegalZoom. Quick and really easy to do.

https://www.legalzoom.com/business/business-formation/llc-ov...

Just opt to get the EIN (employee identification number), yourself from irs.gov instead of having them do it for you. It's free on irs.gov and can be done in a couple minutes. LegalZoom however charges like $69 for it, which isn't worth it.

https://www.irs.gov/businesses/small-businesses-self-employe...

Hope this helps.

kidlogic 9 years ago |

If you're an individual, form a sole proprietorship (https://www.sba.gov/starting-business/choose-your-business-s...). Just note that, if someone sues you, you are personally liable for any damages.

If you intend to work on projects that carry risk (e.g software that handles a business process that, if fails, costs a client thousands of dollars in damages), opt for a LLC (where your personal finances will be protected from any lawsuits).

BjoernKW 9 years ago |

Don't worry about the bureaucratic stuff before you have your first customer. Specifically, don't set up an LLC before a customer wants to give you money. Worst case, you'll just end up with a useless entity that does nothing but eat up time and money. I've been through that twice (both with a German UG / Ltd.-style corporation and an American Inc.)

jetti 9 years ago | |

Setting up an LLC is a fairly straight forward thing to do, especially with services like LegalZoom. There are direct benefits of setting this up before you do any work as you can run your business costs through the business rather then paying them on your own. When it comes to tax time you'll have business deductions rather than just spending money out of your own pocket

sharemywin 9 years ago |

Unless, you already have clients lined up you should probably create a website or process to generate leads.