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Comment by floatingatoll | Hacker News Reader

This is an incredibly misleading title. They charge you $70 in filing fees, yes - and then over $800/year in annual LLC fees.

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Iowa has it good, $50 every two years for an LLC. The funny part is that they don't even have a form to fill out. You just have to print the right words on a paper and mail it to the Secretary of State's office with a $50 check...

Yes there are ongoing fees/taxes, but forming it is $70. I highlight this fact in the "Before you begin" section of the post.

My goal was to point out that you don't necessarily have to shell out $500 - $1,500 bucks just to get the LLC paperwork done.

The Franchise fee is a separate issue and is charged on any company doing business in CA\... Only way to avoid it is not to be in California at all.

\edit: according to my tax attorney. Get your own legal advice, etc.

>charged on any company doing business in CA

That's not correct. It's not charged to sole proprietorships.

A sole proprietorship is not a distinct legal entity from its owner.

I don't believe Sole Proprietors are charged a franchise fee.

If you intend to be a single member LLC, then from most angles is the only difference vs a sole proprietorship is that you'll pay $800.

IANAL and all that.

The difference between a sole proprietorship and an LLC is that an LLC is a legal entity and an SP is a guy pretending to be a business.

An LLC--even a single-member LLC--has limited liability for legal purposes, though the practical effect is usually limited if the business is under-funded or with respect to third-party loan security requirements.

A single member LLC with one employee is also just a person pretending to be a business. You are going to have very limited legal protection in the case of a small one man operation that has an LLC.

How is it misleading? It costs $70 to form the LLC, just like the title says.

Because your newly formed LLC will disappear if you don't pay $800 more?

My Ferrari costs only $1! Well, it also costs $2000/mo, but let's just ignore that.

Yep, a buddy and I kicked around the idea of doing a startup and we thought it would be best to do it right by writing up a simple operating agreement and officially registering with the state. Several months later we realized we didn’t have a realistic plan and decided against continuing. We still owed that tax though! That $800 (and additional $400 to an accountant to make sure we didn’t screw up any paperwork around CA taxes) was far and away our largest “business expense”. We might as well have lit it on fire—what a waste.

I've done the same thing multiple times. My current preference is to validate a concept before forming an LLC, and preferably before even looking for a partner.

$800 is a lot of money for someone pretending at business but it's a trivial cost for a real business actually earning money.

And that's the point. It's a filter to weed out those that can't afford $800/year or aren't serious enough about their business activities to put up with the expense.

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