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Ask HN: Incorporate or LLC?

1 points by bahador ↗ HN
I'm developing a web application and will soon need to incur AWS and GitHub fees. Before I do this, I want to create a business so that I can go get a dedicated bank account. I don't care about having a board, investors, or equity. And I plan on being the only employee. What's the best way to go about this? Should I incorporate via Clerky, or should I create a local LLC? Or is there some other better option?

Thanks in advance.

8 comments

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tjr
I've done LLCs [edit: for the kind of business arrangement you described]. I've been happy.
coreyp_1
IANAL

I have heard that, if you are looking to sell some time in the future, then a corporation is greatly preferred to an LLC, by investors and the larger companies who would be interested in purchasing your company.

A corporation, though, has strict rules (including annual meetings for which you must maintain accurate records, sign contracts as a representative of the corp, etc). If you do not comply with the rules, then it is possible for someone to "pierce the corporate veil" and come after you personally.

IANAL. I repeat, IANAL.

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jamesdharper3
I recommend an LLC. I've had great success with them too. Also, I've had people purchase my LLC. Just my recommendation.
sjs382
If you're okay with being treated as a Sole Proprietor, then you can get a "Does Business As" name, and get a bank account in that name.
hwstar
The last time I did this, it was the LLC. I worked directly with the Secretary of State, and did not use a service to do it for me.

If you are a 100% owner with no partners, you can file your paperwork as a "Disregarded Entity" which means that you have less tax returns to prepare at tax time. If you have partners, maybe a "C" corp. would be better, but this is where I'd talk to an attorney.

You will need a Taxpayer Identification number to create an LLC in the State of California. These are easy to get from the IRS.

In California, you will still need to file some paperwork with the Secretary of State on bi-annual basis, and pay the $800 franchise fee annually. Also, you will pay a separate franchise tax on any sales over $250,000 per annum. You have to file form 586 with the Franchise Tax Board annually.

One last thing: Although a corporation can protect your personal assets from being taken, you should also have business E&O and liability insurance. The courts may look unfavorably at any corporate entity which does not have insurance, especially if it is obvious that the corporation was set up in a risky area of business, and was only incorporated to protect the owner's personal assets.