Ask HN: I want to create a software business, where do I start? | Hacker News Reader

Ask HN: I want to create a software business, where do I start?

47 pointsbobblywobbles24 comments

I'm sure a lot of us feel the same way, I know I do. We have great ideas for software but when we actually start thinking about creating a business, there are many legal hurtles we have to jump over in order to make everything "official."

To those who have done it, can you share advice with us? Is it possible starting a one-man business? Are there companies that help startups get their feet off the ground with the necessary resources?

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Not sure of your country but it's extremely simple in the UK.

Here's what I did in the UK.

1. Create company for £15 on government website

2. Get bank account in company name, applied online, took 20 minutes. I had card and everything within a week.

3. Enrol for tax on government website (optional in UK if your company turnover is less than £80k). Bit confusing, but accountant can help and only takes 1/2 hour at most

4. Start selling subs to my app, stripe integration

There are some admin tasks I have to do regularly:

1. Monthly, keep on top of accounts. I use an app, QuickBooks online. But I've previously used a spreadsheet for my consultancy company as there were only a handful of invoices and expenses each month

2. Every 3 months. Submit VAT returns and pay government tax. Takes 1/2 hour

5. File accounts yearly. Accountant will do this for £400 per year or you can do it yourself (half days work, but confusing)

6. File confirmation statement yearly (UK company thing, confirms who the shareholders are and the share composition). Costs £18, takes 10 mins

To break it down:

- Incorporate company

- Get bank account

- Register for taxes

- Make sure you do your admin

You might find you need to get certain things certified when providing ID, our Post Office does that. There's other little things I'm skipping over, like some people prefer not to use their home address and setup a virtual office, etc, but generally it's pretty simple.

Incredibly helpful. In the US here, some of these are definitely things I'll need to do, but I don't know the places I need to go yet. Something tells me that registering is easier in the UK, but I'll find out.

How do you keep on top of your accounts for your business?

In the new one it's mostly all automated, with the app it imports your bank statements and you just need to match the payments to invoices and classify the expenses. Upload pictures of any receipts for expenses, etc.

In my consultancy business I have a spreadsheet tab for invoices and one for expenses, and try and update it every month. And then a template for calculating the p&l accounts and tax I need to submit each year. I would use an app, but never get round to sorting it out.

I really would recommend just getting an accountant and accountancy app unless your turnover is very low.

It is worth getting your ledger codes right if you get to the sort of size where you employ people (codes are how you classify your income and spending), and I would recommend the less ledger codes the better, you can always create more later.

To be honest, you should be able to find a 'dummies guide' to setting up a business in the US, I would just buy that. Read it and then come back and ask more specific starting a web app business questions. People will recommend you the right US state to incorporate in and corp structure.

You should probably use an accounting software.

I used a self-hosted instance of Odoo for my consultancy company. It worked well when I did it right. It worked really bad, and data loss when I tried to use Docker.

You know I bet there's a market for this --- because when you say "Submit VAR returns and pay government tax - takes 1/2 hour" I can tell you it doesn't take half an hour if you have no idea how to do it.

But if you made a video tutorial of each step and sold it as a pack, I'd buy it from you. I'd easily pay £100 GBP for that, and I bet others would too ...

I started Surreal CMS 10 years ago. By far, my biggest fear was how to setup a business, taxes, etc.

It’s actually quite easy.

I’m in the US, but from what I’ve read below, it’s very similar to the UK. I think people get confused about the types of businesses and how they’re taxed. For a one-man show (and even some larger businesses) an LLC is probably the easiest way to go.

With an LLC, your business taxes are passed through to you. Instead of filing taxes for yourself AND your business, you’ll just file once and include a Schedule C for the business. Makes things a lot easier.

It’s a bit different in each state, but setting up the business is a matter of searching for a name (usually done online) and submitting a couple of forms. Once you’re “approved”, you’ll receive Articles of Organization.

You’ll also need to get an EIN number from the IRS. You can do this online in minutes and print it out. Take all this to bank and you’ll be able to setup an account. Now you’re in business.

After that, the only really complicated thing is taxes. You’ll need to pay quarterlies, and the amount is estimated from what you’ve made and what you expect to make. Once you have revenue, I 100% recommend hiring a CPA to help with this. They’re not as expensive as you think. (I was doing my own taxes with software for a couple years. Then I hired a CPA and she saves me more money than I pay her each year.)

That said, until you actually have something earning revenue, you probably don’t need to start the business yet. Here in the US, you can operate as a sole proprietor. The big drawback here is your personal assets aren’t protected, but until you have customers you probably aren’t worried about that.

I probably just made it sound more complicated than it really is, but I promise, once you get through the intial setup you’ll think, “what was I ever worried about?” Just keep in mind that this is my experience as a one-man show. More complex business structures should probably consult with an attorney.

My takeaway is this: starting a business is easy. Running it can be tough sometimes, but it’s one of the best decisisions I’ve ever made and it’s extremely rewarding.

Best of luck!

Edit: fixed typos

We've talked before- I really enjoyed your earlier HN posts on Surreal CMS and the experiences/challenges you've faced (and overcame).

My really big questions are when it comes to the taxes. I know I'll need some provider to take in payments, but then how do I report this properly to the IRS. Your explanation gives me some insight how it can be done for one-man shows. So you say the CPA helps you file all of this? Or do you do the quarterlies by yourself and go to the CPA with this?

What about all the legal? As a one-person business, I imagine it's too much to understand all the legal rules w/o consulting with an expert.

> So you say the CPA helps you file all of this? Or do you do the quarterlies by yourself and go to the CPA with this?

Every year, I bring my invoices, receipts, etc. and my CPA figures out what I owe and handles all the details and the filing. Then she estimates my quarterly taxes and sends me "bills" before they're due. I basically write a check and I'm done.

A good CPA will meet with you when you get started to coach you on what things to keep track of (e.g. invoices, receipts, mileage, etc.).

> What about all the legal? As a one-person business, I imagine it's too much to understand all the legal rules w/o consulting with an expert.

For more complex businesses, maybe. I've never had an issue. If you're really worried, consider getting a prepaid legal service as cheap insurance.

Hello!

I have not started a business yet but have kept track of three resources folks have found useful (I think I saved them off of HN, not entirely sure):

Book:

Acceleration: What All Entrepreneurs Must Know about Startup Law https://www.amazon.com/dp/B07NLK5GZM/ref=cm_sw_r_cp_apa_i_Xv...

Blog (26 min read):

HOW TO REGISTER A COMPANY IN THE USA: COMPREHENSIVE GUIDE FOR FOUNDERS http://aynuriev.com/how-to-register-company-usa/

Free document generator (a YC company):

https://business.axdraft.com

I'll look at all of these resources, thank you for sharing!

Checkout StartUpsForTheRestOfUs.com podcast, it has a lot of great info, start with greatest hits and then the archives.

You can start out as a sole proprietorship. Get an EIN number from the IRS website so you don't use your SSN.

Use stripe for your payments, you could create a separate business checking account but not 100% necessary till you start making sales.

If your software takes off, then think about an LLC or other structure.

You're better off thinking about your idea, implementation, marketing strategy, etc. first. The "paperwork" is the easy part.

I have all that done, the "paperwork" part is the step I'm at now. It's the "paperwork" part that's a mystery for me, as unless I imagine you are in business or have been exposed to it, there's a lot of area you've never covered before (this is the way it is for me).

The folks over at Knowable ( knowable.fyi ) are launching an audio series on this topic that is really great. I got a chance to hear an early cut, and the content is top notch. I’d recommend adding yourself to get notified when it launches, as I learned new things even as someone who has launched a VC backed startup.

Build the software first (or at least a proof of concept). Don't get caught up in paperwork, because that ultimately won't matter if you don't have anything to sell.

Thanks for your suggestion! I do have software that's ready, just need to start working in the "legal how-to's."

If you are in the US, don't bother with paper work or any of that garbage for now.

You can run sole proprietor and not bother with unnecessary paperwork for now.

I saw you said "software is ready." How many have you sold? What's your validation?

A business is about the cash, not the paperwork. I paid $500+ to register a startup that never got off the ground or even had a customer. Dumb, dumb past me.

Aren't taxes going to be an issue if I run as a "sole proprietor"?

Not really. 1040 Schedule C and 1040 Schedule SE.

Between an LLC and sole proprietorship, my understanding is that an LLC creates a legal barrier between yourself and the business. The tax implications are the same. LLCs, from what I understand, especially a one-member LLC will just be pass-through (I believe you can elect differently) tax-wise but an LLC protects your personal assets from the business.

No one should really mess with C-corps or S-corps until they have someone telling them to. It's expensive and cumbersome to maintain one. Stripe Atlas is misleading a lot of young startups into believing they need a Delaware C-Corp immediately, when really it just benefits VCs not having to make businesses convert to those structures. If you aren't going VC, don't bother.

For instance, a C-Corp costs about $700 / year before doing taxes. An LLC costs about $30 / year.

A C-corp requires you to file monthly (or is it yearly?) minutes... which costs money to do... and you'll be the president, secretary and treasurer of. Then you have to fill out forms and junk (Stripe Atlas makes this easy but costs $).

An LLC on the other hand, you file a yearly report basically just saying "Hi, we are still around." and pay your yearly dues to your state.

Sole proprietorship is even easier. You just declare yourself as one. Like, just say "I am a sole proprietor" and boom, you are one. No filing required (Check the state, I am sure some are different). You can file a DBA (Doing business as) with your state treasurer and still be a sole proprietorship.

To be honest, an LLC is probably the safest thing to do in the long-term but short-term sole proprietorship is fastest.

The thing that I do is have an all encompassing LLC that I run all of my projects under, rather than having a new structure for every business.

This is an incredibly helpful explanation of everything, thank you!

Stripe Atlas provides a pretty good service for the nuts and bolts stuff. Getting going from the business side is best left to reading PG, SA, et. Al.

What do those acronyms stand for, PG, SA, etc?

Paul Graham, Sam Altman

Thanks!

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