Should I make an LLC or Corp for a social app?

Tough luck with CA. You have to pay the $800 a year franchise fee before you make a single dollar in revenue.

So the real question is "LLC or corporation"? There are good reasons for both, but some of the key factors are:

1. There's an upper limit to how many owners (members) an LLC can have, whereas a corporation can have an unlimited number of owners (shareholders). So if you're envisioning being a Unicorn one day, going public, having your stock traded on the NYSE, etc., then you want to be a corporation.

2. Venture capitalists will not invest in an LLC. There are technical / legal / structural reasons for this that I don't know all the details of, but take it as a given. VC's simply don't invest in LLC's. Now, if you start an LLC and then decide to try and raise money, does that mean you're screwed? No, as it's always possible to convert from one form to the other. But doing that is going to cost you time, money, attention, etc., and generally complicate your life. So it's probably better to pick the right option up front.

3. It's usually the case that forming an LLC is faster, cheaper, and simpler, and the annual reporting / paperwork requirements are likewise less burdensome. This is another argument in favor of the LLC if you're planning to stay solo or very small, as it's less b.s. you have to deal with as far as filling out and submitting reports and paying fees.

Both an LLC and a corporation provide a measure of protection from liability for you as the founder (the "LL" in LLC stands for "Limited Liability" after all), but neither is absolute.

Setting up a business entity is easier than finding customers. And less important. If you don't have customers, then setting up a business entity is "playing house." It feels like work, but doesn't change anything important.

Keep in mind that while YC companies incorporate early on the YC pipeline, there is a sound business reason for doing so. They incorporate so that they can get YC's investment.

In California, an LLC costs a few hundred dollars a year. If you don't have customers, that money is clearly not doing anything for you. And even if you do have customers, there are probably opportunities with greater return than incorporation.

Incorporation is potentially insurance against personal liability. It won't prevent someone from suing you. It just means in the six-sigma event that you wind up in court with a good lawyer, the case might be thrown out. "Might" because very small corporate entities are sometimes no better than a sole proprietorship in the eyes of the law.

But if you want to set up an LLC or S-corp, talk with your accountant and lawyer (probably your insurance agent too, just to cover the full team).

Having an accountant, lawyer, and insurance agent is a reasonable bellwether for enough of a going concern for incorporation. If you can't afford an accountant, lawyer, and insurance agent, that's a symptom of an unviable business. It's probably not worth doing.

Good luck.

California is ridiculous with their fees. If it were me, I'd register the LLC in another state and pay a registered agent fee (you need a physical address in the state you register the LLC). Here's one for $99/yr:

https://startupsavant.com/best-registered-agent-services#zen...

Living in CA and having the LLC in another state might have some tax implications you could review with an accountant.

My business partner and I initially setup a partnership for rubylane.com, but then had to change it to a regular corp because once we actually had income, we were going to have to each file personal state returns in every state we had customers, ie, all 50. As a regular corp (and probably an LLC), you only file in the corporation's state. According to our CA accountant, an S-election would have put us back into the situation of needing to file personal returns for every state we had customers.

There are other tax implications you should review with an accountant, for example, if you setup a regular corp (no S-election) and decide to leave money in the corportion, you will get taxed on it at corporate rates, whereas if you pay it to yourself, you'll get taxed at your personal rate.

Another thing to keep in mind: everyone thinks that corporations provide some magic liability protection, and that is somewhat true when a group of people form the corporation. But if you are the only officer, a corporation doesn't provide much protection IMO: anything liability incurred by the corporation is obviously caused by you, so "piercing the corporate veil" is not much more than paperwork. Just my opinion. You'd be better off with an umbrella insurance policy - again, just my opionion as I'm neither a lawyer nor an accountant.

You'll probably want to start either an LLC or a S Corporation. There are a lot of resources on the internet, and on youtube. Just look up "what structure should I use for my business" and searches like that. Watch videos and read about them. That way, when you go into your CPA to discuss which option is best for your specific requirements, your CPA won't have to waste time explaining what a C corporation or an S corporation or LLC, except for a few lingering questions that you might have.

There's a LOT of companies that will start your corporation up. They usually charge $50 or $100 or thereabouts. Don't pay some lawyer to do it for you for $5,000. Well, if it is a "standard" type of business, that is, which it seems like yours is. For example, you can use https://www.swyftfilings.com/ They charge $49. This does not include state fees. This is just the price that swyft charges for what they do. I would get the Basic choice for $49. It does not cost a cent for an EIN and it is easy and fast to get, for example. For the corporate bylaws, just do a search on that: https://duckduckgo.com/?q=corporate+bylaws+examples&atb=v217...

Just copy and paste into a document and see what pertains to your company. It helps to look at a bunch of bylaw examples to see all of them and take from then what applies to your company. when you see a lot of bylaws, you start to understand how they are put together, rather than just look at only one sample.

Here are a copy of the state of California fees: https://bpd.cdn.sos.ca.gov/pdf/be-fee-schedule-062018.pdf

Here is info on California's Franchise Tax Board: https://www.ftb.ca.gov/file/business/types/corporations/inde... You will see that there is a minimum of $800 per year for operating a California corporation.

Remember, the government comes first before anything. They are #1. Before paying rent, before paying your health insurance, before getting needed medication for your children. OK that last one was not really true but used to emphasize a point, in that the government is really #1. They will kick you ass with penalties and interest if you don't pay correctly. Do not mess around with them, especially with payroll. Use a payroll company, don't do it yourself. Most payroll companies will take full responsibilities to pay penalties and interest if they mess up.

Remember, the corporation really isn't "yours." The corporation is a legal person. A corporation can open up a bank account in it's name, but your office chair cannot. You will be both a board member and an officer, which are two different things, so you need to put on a different hat for each role. This is extremely important because if you run the company as an extension of yourself, the courts will "pierce the corporate veil" and declare that the corporation is not a corporation, and you will be personally responsible for a...