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Ask HN: Expenses for C-corp startup?

6 points by dxoapv ↗ HN
TLDR: What are the yearly expenses and hidden costs for a Delaware C-corp?

I'm looking to incorporate and from what I've read the most common option is a Delaware C-corporation.

I'm aware this can be done electronically by using services like Clerky (https://www.clerky.com/pricing) by filling and sumbitting a couple of forms (and paying a fee of course).

My question is what happens after this in regards of costs/expenses.

Do I have to pay the state of Delaware extra money at some point? Do I have to pay a tax every month/year (even if the corp doesn't have revenue)? Do I have to pay a bookkeeper and/or lawyer? Can all these be done remotely and if yes, how (and how much does it cost)?

Note: I'm not a US citizen, I'm in Europe.

17 comments

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abfan1127
I have an AZ S-Corp (very similar). I have a bunch of additional filings I have to stay on top of. I strongly recommend using a service like ZenPayroll to do it all for you automatically. I'm an army of 1, and its well worth the monthly fee not to miss a single filing and have to pay the IRS a penalty equal to 30% of your withholdings.

There are a bunch of taxes I have to pay in AZ, including withholding taxes (federal and state), unemployment taxes, federal corp taxes. Its a mess. Be very good at Quickbooks (or equivalent). I've made just about every mistake possible. I regret not taking some courses on it.

Lawyers are probably not necessary early on, but definitely a good bookkeeper or quickbooks training is very valuable.

dxoapv
Sounds like a real mess. Is there a service that takes care of all these problems automagically? I feel I'm very inexperienced to be able to handle all the tax/expense pitfalls (I'm not familiar with the US tax system).

Or at least a resource that describes everything that is needed from start to finish? For example the book Venture Deals (by Brad Feld) describes the basics of venture funding, but is there any practical guide for incorporating?

I'm very reluctant to incorporate because I don't know if I will be able to handle all the bureaucratic mess and keep up with everything (time and cost wise).

Really liked the 'army of 1' phrase, I'm in the same situation.

abfan1127
I originally incorporated in 2006 for the only reason of Limited Liability. There are mild benefits (shareholder distributions are taxed as longer term capital gains rather than income), but the extra hassle wasn't worth it for me until I found Zenpayroll (this year!).

That being said, I would probably follow Dave Ramsey's guidance that early on, I would just open an account, deposit checks there, pay business stuff from there, and use Zen to pay myself. Keep it simple. Quickbooks is nice to track that and generate invoices. Its also way over kill.

rdegges
Question: does ZenPayroll handle all this stuff?

I run several companies solo, and it'd be awesome to have a one-stop-shop for doing everything: paying all my taxes, handling all the legal stuff, etc.

abfan1127
ZenPayroll handles unemployment taxes and withholdings, state and federal. Its fantastic. Its also the cheapest payroll I've found by a long shot. I've even turned my CPA to convert their clients to it from Quickbooks Payroll.
FlopV
What are the benefits of incorporating? It sounds like it's been a nightmare.
abfan1127
As a single-owner, there are only 2 that I see. 1) limited liability (personally a single-owner LLC is probably a better choice for this). 2) I bill my clients over a "market value wage" for a developer. Then I "hire myself" and pay myself a "market value" wage". I pay normal taxes on this, plus unemployment taxes. Any income over this "market value" wage, I can take as shareholder distributions (i.e. dividend). Those are taxed at long term capital gains, which is 5-8% lower than my tax bracket.

If you have partners, then its easy to set ownership (its % of shares), sell shares to VC, etc. Note: I am no where near this step yet, so I don't know the gritty details here.

I made every mistake possible as a corporation and have big scars to prove it. If you get some training, it won't be such a bad experience I'd hope.

dxoapv
What does limited liability mean in practice?
abfan1127
the intent is to limit the liabilities (financial and otherwise) to the corporation. If the corporation takes on debt and fails to pay, the lenders can't come after your personal assets. There are several ways to ruin your corporate protection, pierce the corporate veil. For example, if you personally sign for a loan, then you are personally liable for it. Its like a mine field. If you can navigate it properly, you can protect yourself. But, if you step incorrectly, you can really ruin your day.
t829
Distributions are not long term capital gains. The only real tax advantage is no FICA. It could be a lot if you aren't paying yourself much in wages, but I would be wary of the IRS disagreeing with your "market value wage" in that situation.
abfan1127
This is the advice I've received from 4 different CPAs. Maybe I've found 4 consistently bad CPAs...

Agree on the FICA.

For market value wages, I consult websites that report average salaries like glassdoor, again a recommendation from those CPAs.

t829
> If you organize your business as an S-corporation, you can classify some of your income as salary and some as a distribution. You'll still be liable for self-employment taxes on the salary portion of your income, but you'll just pay ordinary income tax on the distribution portion.

https://turbotax.intuit.com/tax-tools/tax-tips/Small-Busines...

abfan1127
you are 100% right. Right after I clicked submit, I started to realize I had recalled incorrectly. Thanks for the link and keeping me honest.
jtfairbank
Look into InDinero. It's basically accounting as a service, super helpful.