Ask HN: Do you incorporate before monetizing your side projects? | Hacker News Reader

Ask HN: Do you incorporate before monetizing your side projects?

22 pointsdudul15 comments

I used to worry how incorporating is almost an inescapable need if you want to be taken seriously. Surely, you want a professional company label when a customer goes to bill his subscription. Right? Learning more, I have realised that you can either chose to build the right thing and try hard to get your first customer, or fuck around with these pointless tasks. It's possible some customer may balk at a one-person business but most find it perfectly acceptable and have zero-issues in buying from you.

Thanks for the answer. I guess I'm not really wondering about the "being taken seriously" aspect. More when it comes to managing taxes and liability. A LLC would protect your personal assets in case something goes wrong with your product (let's say you leak the information of your 255 million users), but when is it worth it?

When you're starting out, you're full of optimism about your success. I was too. But when you get down to actually doing things, you start to realise how hard it is to get first few paying customers, let alone hundreds or thousands. I think it's fairly easy to start a LLC in US, so I am not dissuading you from incorporating one but do realise that it is one of those things that can be done later; and personally, I feel, if you don't have sure-shot path to growing revenue, should be done later. I don't think taxes and liability are much of an issue when you're small.

I wasted ton of time in wondering about these things when I was making something just two years back, and eventually, I realised how less it would've mattered.

Good point. You should probably incorporate once you hit, say, the 10 million user mark. ;)

This. Getting real customers is so, so much more important than incorporating. Not only that, it's more important than building the full product. It's also hard, so hard that you should be doggedly single-minded about it.

If you're concerned about taking money, just figure out how to get attention and have conversations with your target customers. When you notice your customers are getting frustrated that they can't give you money for this thing you have that they neeeeeeeeeeed, then do whatever they need to make it work.

Yes in a way. I have a parent LLC for all of my small ventures. That way, you don't need to go through the hassle of creating separate legal entities for every project. If the side project grows at that point you could also just spin off as a more formal dedicated entity for tax purposes and write offs, but then again, at that point it may no longer be a side project.

How much would it say it costs to have the parent LLC set up? factoring for filing taxes and other administrative costs.

If you're in the US then it can vary by state. I used LegalZoom to form an LLC and it was ~$800 to start. Illinois charges me about $300 each year to keep my standing and I just use H&R Block software to do my taxes as I don't have much income coming in for the business and have my LLC tax structure to be passthrough so it makes tax season super easy.

If you are in California, this will cost $800 / year in franchise fees.

Since most side projects fail, consider waiting until you are actually generating revenue.

If your business incurs significant liability that you are worried about, incorporating may make sense sooner.

I have a business account for all side projects that involve money. When the prototype generates money, we move it out of the prototype bank account to a proper one.

What is the scope of said side projects? Apps or other ventures?

Could be something very small but generating revenue. Could be a Saas service for example. I guess I'm wondering at what point either in terms of revenue, work spent on the project, etc, do people feel the need to incorporate. Either for tax purposes or to avoid liability.

how are you taking payment without incorporating? paypal? any suggesions?

Stripe allows it.

What does the charge say on your customer's statement?

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