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- Hacker News
- >Cost-wise it’s maybe $500 a year, all in (unless you have the pleasure of living in California, in which case you have to add their inane $800 on top). But that’s pretty reasonable considering the optionality it gives you to just… build shit these days.
You don't need an LLC to build things and sell things. And you also get the downsides of needing to stay at an office to be able to be served or having to have your active home address be publicly viewable.
by charcircuit - I feel like a lot of people (not holman) are looking for permission, as if having an LLC is a marker that says "I am a serious business doing serious business things." You don't need permission. You can just do things.
A formal business structure is good (but not required!) if you have employees and/or business partners, or if your attorney tells you you need one. IME as a solo entrepreneur an LLC (or two, in my case) just invited more paperwork into my life.
You know what actually functionally limits liability as a solo business? Good contracts backed up with business insurance.
by zrail - I agree that if you're engaging in the tech business you should have an umbrella llc. I have been asked multiple times to do projects for people and it's always easier to invoice as an llc with everything already set up.
However most software engineers don't engage in the tech business at all outside of regular employment. It's not useful for them
by anon291 - A question is: where do you register one? Should it be Caymans or Panama or South Dakota or Texas or Delaware or your home state?
Also, what type of LLC should it be?
by OutOfHere - > Cost-wise it’s maybe $500 a year
This is not my experience. My costs are higher, but the costs offset and then some by tax advantages.
Sharing here, to give a picture of what a real single person LLC looks like, compared to a vanity hobby LLC as described by OP.
I'm a contractor with a registered LLC S-Corp in the US. Almost all of my income is 1099 from one source. I was converted from W-2 to contract when my employer was acquired, my job role did not change. You might call me a misclassified full time employee. I could report this of course, and then I would burn my professional contacts and lose my job. So I don't.
I hire myself, pay myself a fair market rate as a salary, and run a payroll just for me. And I provide myself a few benefits from the LLC, like health insurance.
I'm required to keep up with a pile of quarterly and yearly fillings between the state, county, city and IRS. This is a non trivial amount of time and effort. I have to maintain separate business books and bank accounts in coordination with my accountant. I don't actually get to access the money I earned until it exits the business entity through a controlled process. I have to file business taxes separate from personal taxes. I still have to pay quarterly estimates on my personal taxes too.
My family health insurance is roughly $12k this year. If I purchase that insurance directly, I use post-tax income to do so. I'd pay ~$4k in taxes to take home the ~$12k income used to buy health insurance. But when the LLC buys the health insurance and provides it as a employee benefit, the ~$12k is not taxed.
The salary I pay myself is taxed at ~37%. The same as if I just filed as self employed. But the business income I earn over that salary is taxed at ~20%. This is the biggest advantage. The gap between a "fair market value" for my role, and my actual contract rate. In that gap, the LLC structure saves me 20% on taxes by labeling that portion of income as "shareholder profit disbursement".
Rough yearly costs:
$150 registered agent service $150 state registration filing $2500 tax prep and account services throughout year $1500 payroll services, including payroll tax filings
Rough yearly tax advantage:
$15,000
- For all these things I think just having an EIN is simpler.
You don’t even need that to start; you set up Capital One (for example) business accounts using your SSN. The EIN is just to avoid putting your personal SSN on invoices.
LLC matters if you think you’ll have liability risks.
by theptip - > "An LLC will help you force a separation of personal and work finances"
No it won't.
> "it’ll help you accept payments"
No it won't.
> "or sign up for a bank account"
No it won't.
An LLC doesn't make those things any easier than they already are (very easy) as a sole proprietor.
An LLC only does the liability thing. And that's fine. Just don't make other things up. You don't need to.
- LLCs are great, but you should be aware that single-member LLCs may offer less liability protection than you expect, and in some circumstances it can be easier to pierce the corporate veil.by _Bruno42