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Comment by tptacek | Hacker News Reader

Sachin, I don't get it. It costs almost nothing to create an LLC. Do it, and now you can't lose your house over hosting fees. Later on, when you want to form a relationship with a lawyer, spend money on an S-Corp or a C-Corp.

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I'm not sure I'd consider it "almost nothing"; if your startup budget is $10k and ramen, it's a noticeable chunk of that. In California, it's $800 per year to keep an LLC incorporated, plus an extra $200 or so the first year in fees. In NYC, it's $1500 or so to set up an LLC. Some states are cheaper, though (Texas is a one-time $300).

This is the cost of starting up a business. It's not a Wordpress Blog--it's a business and it's gonna cost money. If you can't stomach $1000/year in filing fees you either need to find a business that will earn some revenue in the first year or move on to greener pastures.

Or, you could just not pay those fees, and operate as a sole proprietor initially. If you don't have large savings, there's not really much risk; if you lose your $10k, declare bankruptcy and start over.

Start over with a new company with a personal bankruptcy in your credit history?

$125 a year for a PA LLC (and a PA LLC is a strong LLC, in some states an LLC is missing some protections that corporations have).

Lose your house over hosting fees? When has that ever happened?

It didn't happen, because the person who would have gotten screwed instead bought hosting as an LLC.

I'd like to understand more about this situation. If you are in a position where there is a reasonable chance that you will incur large amounts of debt with no ability to pay it off, for example your free facebook game unexpectedly gets way more popular than you expected and you didnt read the fine print of your hosting agreement that says you suddenly owe them a zillion dollars in bandwith usage fees, then it does make sense to incorporate against this kind of liability but I'd like to know how the particular situation you are referring to came about.

What you're asking is, describe a situation in which a startup crashed with a large outstanding hosting bill. I'm not going to, but I don't think it's hard to see how that could happen.

I could give other examples, but they hit somewhat closer to home.

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