Stripe Atlas: the first five years and 20k startups
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Atlas does not remove the need for an accountant, or a lawyer, so either budget that in if you're thinking of forming an LLC.
If I ran Stripe I’d acquire CorpNet (and Gusto and TaxAct while we’re at it) to make a complete C Corp package.
Ironically if you go to a typical small town venture lawyer you get copy and pasted docs anyway.
I don’t know if it reassures you but for 99% of people the docs never become an issue. They could be literal chicken scratch and for the most part things will be okay. This is really why the Atlas product works.
The difference is that you never do this with your legal docs for whatever reason.
I thought the idea was to let Atlas do everything?
1. They automate the process of establishing an LLC within the US
2. They provide a lot of boilerplate legal documents (formation documents, tax registration, etc).
3. They partner with banks and legal services to get Atlas customers a discount on auxiliary services (layers, accountants, business bank accounts).
There may be more to it than that, but that's all I've seen of the service thus far. My incorporation needs were pretty simple and I'm already a Stripe customer, which was the main driver for me to try out Atlas.
When it comes to filing yearly accounts the govt site for companies turning over less than around $1m automatically files the accounts for you and works out your tax liability.
1. Acquire a certificate of good standing for my LLC from the Delaware Secretary of State.
2. Register with the California Secretary of State as a foreign LLC (out of state LLC), which required the aforementioned letter of good standing.
3. Acquire a business license from the city my LLC operates in.
4. Pay a franchise fee to the California Franchise Tax board.
5. Figure out what other fees I'm on the hook for. I wasn't able to figure this out on my own and am currently working with an accountant and lawyer I found after incorporated to help me do this correctly.
There's probably going to be a few other odds and ends. I operate out of my home and only employ myself, which saves on a lot of other paperwork and logistics I'd need to sort out otherwise.
not registering your out of state entity basically has no consequences, its a lower consequence than failing to return a book to the library and has the same level of resources set aside to enforce it
reach the same conclusion yourself as this is obviously not condoning anything, but anyone can run circles around you with the same runway and resource prioritization by ignoring these states
you might end up paying the same registration fees eventually just later, and depending on the state you get retroactive limited liability in the courts.
Remember tell things:
1) municipalities are in competition with each other to attract business
2) asking them if a certain level of compliance is necessary is like asking a barber if you need a haircut. It’s like asking the oil changer if they noticed anything else. Learn the consequences yourself and you’ll be able to make objective decisions.
Care to share around when that will come out?
I formed an LLC in Missouri and it was like one or two forms. It was criminally easy. I paid taxes and ran the company for about five years, and last year it was acquired.
So, I say all that to show it ran the full gamut of being a business. What is everyone else doing that's so hard and takes more steps? It due to employees and the like (my LLC only ever had me, to be fair).
1. Hiring any employees in addition to yourself.
2. Incorporating in a state different than the one you operate in.
Things are much simpler if you don't do either of those things.
That being said, Atlas is getting closer and closer to closing all the gaps. Excited to see what they’re able to accomplish in the next 1 - 2 years. The onerous process (easier in the US than others, but still not easy) inhibits innovation and the easier things become the more folks can focus purely on creating value in the economy.
A really big win in the space recently was the temporary approval for electronic submission of 83(b) paperwork. The more things like that occur (and become permanent) the better off we’ll all be.
For example, I want help with a privacy policy and T&C. I made a draft of both after looking at like a dozen similar apps and looking at what they cover, but now I want to find a lawyer to take my rough draft and make it legitimate so I can use it on my website and apps.
FWIW I have no entrepreneurship background in my family so I have to ask around like this even for my dumb questions (thanks).
But also, don't overestimate what a lawyer is going to do. They're not going to make your docs legitimate, but they will spend as much time as you want to pay for working on them and telling you the risks.
They _will_ frequently be able to get you started with docs like that, though. If they've done the work before they'll have a ready to go draft for you.
Appreciate the insight as well.
As an "outsider to law" I... didn't expect that. I thought it would feel "firmer". Just a head's up as you might find yourself getting different advice that you'll have to parse.
I won't post a link here (to avoid self promotion), but if you're still looking for help I'm happy to give you a hand.
Atlas companies are optimized to "receive investments" where it's setup with a high share count which attracts obscenely large Delaware franchise tax bills. If you're not seeking investment you'll want to immediately reduce the count to below 10000 to pay minimal franchise tax. You'll also need to adjust your annual franchise tax as the amount of franchise tax owing that they predict for can be a ludicrous circa ~90k, instead of the ~$500 minimum small companies should expect to pay.
You have to be proactive about adjusting for this on your own, there were no warnings or options provided by Atlas which was surprising from Stripe where the default company structure attracts enormous franchise tax bills.
Their choice for using SVB as your companies preferred no-frills bank for accepting Stripe payments is also puzzling, it's slow, has a horrible UX, never improves, constant planned maintenance downtimes, etc. Basically the opposite you'd expect from a Stripe UX or Service. SVB's phone support was good and its primary banking feature of sending wire transfers does work, but their mobile and Web App looks like is being maintained by a single developer. I'm assuming SVB will remain the default until Stripe becomes their own bank and switches to using that instead.
But yeah, I remember the pit in my stomach the first time I did franchise taxes and the first method came out to some obscenely high number.
As another has pointed out, Delaware has an alternate way of calculating this tax which requires no adjustment of your share count. And no business entity is tied to any bank.
Yes, you should be aware of it. Yes, it would be nice if Atlas made you aware of it. I'm just not sure what the expectation is.
To me, forming business entities is easier than using the internet, and all the lawyers involved are for people that would also have trouble using the internet. This is a reductive analogy as I don't mean "the internet" as helping you find the answers, only in the sense that technophobes would also need hand holding in other areas like business formation.
I don't find it to be Atlas' role in helping this here, it can, it's just puzzling to me that there is an audience for that. But again, they could patch this.
* “Document Vault”. As a small business, it’s difficult to keep up with various vendor contracts I’ve signed or other important legal documents. Would be great if there was a corporate document vault service (for the lack of a better term) where I can store/label/file away important legal documents. Could be as simple as me emailing doc-vault@stripe.com and anything in the email I put becomes metadata. And a search web interface.
* Merchant of Record like service. As mentioned in another comment of mine. Would be great if Stripe Tax was connect to the tax agencies to make my payments on my behalf (including corporate taxes).
* Payroll services. Huge topic but would be great if I could pay my employees, vendors, etc from Stripe
* Expense Reporting. Think Expensify. And if this could be also tied into actually paying off my credit card once an expense is approved - even better.
* CRM. Self explanatory.
* Book Keeping. Think Intuit but better.
Just my 2 cents.
This is an interesting stat. I realize the math isn't this simple ... but that implies the average revenue one of these businesses generated over the course of the last 5 years is $150,000.
Average probably is not it, because of the distribution of startups along the power law and the mix in the Atlas userbase between companies which are aiming for that trajectory and those that are aiming for profits/predictable revenue growth.
Also, FWIW, since half of Atlas companies are post-covid the naive calculation of revenue run rate is a bit understated.
For folks who geek out on this sort of thing, we're hiring and my dashboard could very much use an update, plus there is much more important work to be done as we ship an ambitious roadmap for this coming year and beyond. jweinstein@stripe.com if you'd like to discuss; Jeff runs the group Atlas is in.
But still impressive none the less!
Are there other types of company in other countries that may be better fits for certain reasons? Are there countries/types that would work better for say, non profits, charities, or financial institutions? I wonder if Stripe is building or considering a more diverse range of options for Atlas.
We're always on the lookout for more ways to support the growth of the Internet economy, and have been looking in detail at which entity types and "hubs" would unlock the most opportunity for our users and for people who we talk to. As always, we'll announce our work here when/if it is ready to be used.
My # one needs isn't related to Atlas per se (but I can see how all Atlas users need this), I love you're acquisition of TaxJar and release of Stripe Tax. But it only solves 1/2 the problem. I need an easy way to make tax payments to the appropriate regulator (e.g. Merchant of Record service). Hope that is in the works.
Me again. I posted my Atlas wish list here.
https://news.ycombinator.com/item?id=27706864
Happy to email/talk 1:1 if you’d like to dive into this more.
I'd like to reiterate that this is a relatively uncharitable take, and would welcome alternate perspectives on this issue.
One of my favorite Atlas users, Meitre in South America, has this tagline on their site: "Proudly born in Uruguay. Made with love in California" Much of their business is in South America; they went on (after incorporation) to through YC, raised from A16Z, etc. I think their experience is a userful counter to the standard narrative about brain drains, because that business is very thoroughly South American and also a first-class participant in the SV ecosystem.
Anecdotally speaking, a lot of the Atlas companies I'm aware of which raised money raised it either primarily locally, a mix of local and Silicon Valley, or "extremely widely distributed."
Ultimately, if you make things harder for entrepreneurs, they will find an alternative. Atlas makes things easy & actively looks for more way to remove obstacles. It’s a no-brainer for people wanting to focus on building and not tax entity structure.
* excluding embargoed countries etc.
So I formed through another company, which was cheaper with more features. 500$ for Atlas, and you still have to do a lot of stuff and pay more to move forward.
Even they are not providing services in Turkey, and no intention to fight for this equality, they like to use Turkish founders in marketing materials, videos as you can see in this Atlas campaign. Not feel right.