Our Experience with Stripe Atlas | Hacker News Reader

Our Experience with Stripe Atlas

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130 pointsCoreSet21 comments

I love Stripe. And I agree that Atlas makes incorporation process quite easy.

But when I hear about a SaaS startup being organized as an LLC, I wonder if the founders considered the potential benefits of "qualified small business stock" or QSBS, which is only available in a c-corp.

With QSBS, each founder and investor can supersize their exit proceeds by wiping out at least $10 million in U.S. taxes. (See https://www.businessinsider.com/qsbs-qualified-small-busines...).

Most startups convert from an LLC to a C-Corp when they first formally fundraise.

True. But the 5 year holding period doesn't start until conversion to a c-corp. So, plan accordingly.

This is true, but starting as an LLC and converting to a C corp does have a potential QSBS benefit, if you are able to meet the 5-year holding period. The QSBS deduction is the greater of $10 million or 10 times your adjusted basis at the time of acquisition of the C corp stock. If you incorporate as a C corp initially, you get the $10 million deduction, at best. If you form as an LLC and only convert to a C corp (and get your C corp stock) at the time of your first financing, your adjusted basis may be significant. If the value of your equity share is, say, $3 million at the time of your first equity round (not unheard of), when you convert to a C corp, you potentially get a QSBS deduction of 10 times that (i.e. $30 million).

Please note that in a conversion from LLC to C corp, you only get the QSBS on the gain over the initial basis. So, in my example above, if you end up selling the shares for $2 million in an exit (when the basis when you received the shares was $3 million), you will get no QSBS deduction.

but how do you avoid double taxation with a c-corp?

I setup a c-corp via stripe but switched to s-corp because of this.

Most startups on the venture track aren't profitable or reinvest any profits into growing the business. No profits = no tax. So double taxation usually isn't a problem.

thanks, good info!

Attempted Stripe Atlas user here. While the product looks great, it doesn’t cover all corner cases of business creation, so we ended up not being able to use it. It turns out that following this revelation, we had to scrap the associated Stripe account just to be able to rid ourselves of the “complete your Atlas application” (or similar) at the top of the dashboard too. Just one anecdote.

What corner cases did it not cover for you?

Stripe Atlas advertises as a way for non American companies to incorporate, but I had trouble finding more information about what complications to expect as a foreigner who owns an American company

+1 to this. I know every case is different, but cases aren't that different. Examples on paying taxes, recurrent costs, important dates won't hurt, and give a better idea of what people is getting into.

I want to second the sentiments here - as a one-person Saas biz, Atlas made it a breeze for me to setup my LLC. Seeing the Visa card with my company name on it inspires me every day (yes I’m still wet behind the ears). I highly recommend Stripe and Atlas.

As a non-US person, is there anyway to bill using Stripe without incorporating? I dont mind withholding tax, etc, i just want to be able to bill and track the initial revenues.

AFAIK, Stripe is not available in all-EU countries. Paypal just works in this case.

I used to teach middle and high school kids how to code for several years. Two of my students were particularly prodigious programmers who turned their prototype of an idea into a real company making real money thanks to Stripe Atlas. With such an accessible avenue to entrepreneurship we are bound to see many more entrepreneurs.

Does anybody know if there’s a strict requirement to use Stripe’s payment processing when part of Atlas? Or can you still use Adyen, authorize.net and the like?

I work at Stripe.

Absolutely not; your company is your company. We’d be thrilled if you used our other services, but feel like we should have to win your business by being the best rather than by lock-in. (We even help people get DUNS numbers to facilitate taking payments via app stores, etc.)

Thanks Patrick.

No requirement to use any particular payment processor.

Does Atlas setup vesting for the founders?

(I work at Stripe.)

If one uses the founder stock issuance tool for C corps, it assists in setting up 4 year vesting 1 year cliff for all founders.

For needs other than that, we’d recommend speaking to an attorney.

Yes, it can help you to issue shares to a certain extent. (I am currently waiting for my signed forms to be processed so have only read, not done that part.) You May be interested in this guide [0]. It discusses some of the considerations that go into the default vesting plan.

[0] https://stripe.com/files/atlas/orrick-legal-guide.pdf

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