You can now use Stripe Atlas to form an LLC! Got questions? Patrick McKenzie's here to answer them.
Hello IH!
I'm Patrick McKenzie (patio11 on the internet), and I work at Stripe on Stripe Atlas. We just announced that founders can now use Stripe Atlas to form an LLC. The Stripe Atlas LLC has been designed explicitly for founders like the folks in the IH community, so we're excited to share it with you all. You can read more in our blog post or in our guide to choosing an entity, and can request access to the beta here.
I'll be here on May 2 to answer your questions about the Stripe Atlas LLC—ask me anything!
I'm lost as to why one would do this though? Is it better than other sites that form the LLC on your behalf like LegalZoom and other cheaper options?
For the bank account opening for example. As a non-US resident, it's basically almost impossible to open a business bank account without visiting US. With Stripe Atlas, you don't have to.
The Stripe Atlas program does a number of things for you, including formation of your company and getting you a business bank account.
Some highlights:
Access to the community, so that you can speak with likeminded entrepreneurs privately and get expert advice.
Opportunities to participate in things like Q&A sessions with folks like Marc Andreessen, Sam Altman, and other industry heavyweights who you might not be connected with already
Tools that we've built to help administrate your company so that you can spend your time on building things and talking to customers. Examples: we help calculate your state franchise tax fees and can set you up with an appropriate accounting firm for your taxes, at a substantial discount to what the usual market rates are for the service.
Credits from partners like AWS, etc.
Hi Patrick. This is fantastic. One thing I did want to point out as a potential change you might want to consider is on the note made with respect to foreign LLC registration.
For most states, it is indeed straightforward and only requires a fairly modest fee. However, if you have nexus in California, it'll set you back $800 per year, regardless of income, which in my opinion should be called out specifically due to 1) how high it is and 2) how many people live in CA. It would be a bummer to find that out after the fact.
Texas, by comparison, only charges $750 (one-time) to register a foreign LLC. Likewise, starting a Texas LLC in itself will only set you back $300. So there are some hidden costs and hassles here that should be called out for full disclosure.
This is a super good point Dan. That darn $800/yr fee is almost reason enough to not start one until your making a decent amount from your indie business.
For anyone in California, we detailed all the steps it took us to create our LLC with links to the files and description of the fees: https://v3.dixonandmoe.com/writing/how-to-form-an-llc-in-california/
Thanks for sharing Moe. Definitely want to give this a read.
My understanding is that California will, indeed, assess a franchise tax fee of minimally $800 on any LLC, regardless of whether it is formed in California or elsewhere, doing business in California.
We may at some point create a comprehensive guide to local/state taxes like that. We will consider editing the guide to mention the existence of high-tax states.
very true. We operate in CA and they suck for small business and this $800 (or $60/mo) fee is the biggest SaaS application racket out there
What if there are two partners in the LLC, one being in CA. Would this still apply? (Let's say I am not in CA, and we would have our nexus in a non-CA state)
I believe you need to register as a foreign entity in all states your partners live in. :/ It's quite hard to avoid paying $800/yr to Cali for that reason...
Hi Patrick. May I ask you when should we expect an opportunity for Ukrainian founders to use Stripe Atlas? I'm an active member of the local ecosystem and would be more than happy to help if Stripe needs something from our government to start the process.
Thanks.
We want to be available for entrepreneurs everywhere; expanding access to great rails to build businesses on is why Atlas exists. We generally don't announce dates about launches in advance. When I was an entrepreneur, I learned that doing so is always a losing bet: heads you hurt someone who depends on your date (when it slips for reasons potentially beyond your control) and tails it ships when it would have shipped anyhow.
Thanks for your time, but that's a formal reply. What can we do to make this possible?
@patio11 Great news. Most Atlas users are probably non-US residents. And many of them will be happy to use Stripe Atlas LLC for their own bootstrapped SaaS platforms.
What are the common tax implications for non-US residents that operate completely abroad and sell SaaS subscriptions to customers from all over the world (thus including US customers)?
By having the LLC in Delaware and the bank account, will that be counted as a US-source income even if the non-US LLC owner won't be in the US?
It's all good to pay US taxes, but there must be more clarity on what are the rates for NRA (non-resident aliens) owners of LLCs.
For France, it seems that the Delaware is consider as a Tax haven. A local accountant told me that it's illegal for the owner of the company to pay himself from the C-Corp or LLC back to France. For a bigger company, with more people, it's ok but otherwise, it's just consider as a way to bypass France taxes (making revenue in US or in France, moving it US, then moving it back to France without any taxes).
Do you have any feedback about such existing issue with France or other countries? Is there some limitations, or behavior to follow to avoid such issue.
Good point because this might apply to other EU countries. What if you pay regular taxes in US? France and other EU countries has a tax treaty with US. Did you accountant tell you that having a US LLC is for them avoiding to do business in France and avoiding France taxes?
Exactly, just answer a bit more detailed on the comment below, but the issue is about being paid as a French freelancers without paying the taxes in France, but being a French resident, and working 100% in France, with a business outside France.
When you establish an invoice to some countries outside EU, there is tax to pay. I've been working 2 years for the Canada, without paying any French taxes on the invoices. The reason is that the company was not mine. If it's your company outside France, it's just a way to avoid paying taxes, which is the definition of Tax haven :)
I am unfortunately neither an accountant nor a French accountant, and am not qualified to determine whether you have received accurate advice. I would suggest that you confirm it with an accountant or your government directly.
It is not possible for me to give blanket advice on how to interact with Atlas which will be correct for all situations in all countries. If we ever figure out how to do that, we'll be very vocal about it, but as one entrepreneur to another, just know that it's highly non-trivial.
I don't see why it'd be illegal. What prevents you from paying you in France (e.g. dividends), declaring them, and paying taxes (social tax, income tax, etc)?
That's the feedback I get from a local accountant, so I'm asking :)
On the Atlas LLC guide, there is section mentioning very complex tax situations (https://stripe.com/atlas/guides/llc-vs-c-corp#international-owners).
Perhaps it's specific to some situation, but in my case, I'm the owner of a structure in France as freelance, and co-founder of a structure using Atlas for a C-Corp. It seems that if I generate a facturation for services from the C-Corp to my French company, it will be considered as tax haven...
I also heard that a company created in Atlas as a C-Corp had to rollback and create a structure in France in order for the owners to be able to get paid in France properly.
Happy to here the feedback on this by @patio11 :)
It always depends from where you have your tax residency. As far as I know, as long as you are a French tax resident, you will pay your personal income tax in France.
The question is: what if France has a tax treaty with US and you will already pay your income taxes there? Do you still have to pay taxes in France too? Hopefully @patio11 will say something more about the tax for NRA who will launch SaaS backed by the Delaware LLC.
AFAIU the situation is complex because LLCs seem to be to be some kind of French EURL equivalent, which makes it weird since they are "person-company"s. A C corporation AFAIU is a more "regular" company.
If you have a company in France and can bill your C company abroad, you will have to declare those revenues in your French company and pay taxes on your benefits, like any other company you'd invoice. I don't see why there would be a difference. If you don't do that it's not tax-heaven, it's just regular fraud.
Last point, if you want to "get paid in France" that really can mean different things. Did they want to be employee? That sounds like it'd be really hard to do.
I agree that this kind of situation would be nice to clear, but I have little hope – there's so many countries out there and it's unlikely a problem Stripe wants to solve (too complex and too dangerous to be wrong). :(
Hey @patio11 ,
What would my tax liability be as a single person, non-resident alien? Which I think is most likely the kind of person Stripe Atlas would really appeal to.
What are the advantages/disadvantages of an LLC compared to just a sole proprietorship?
Also
Theoretically, if I already have a Stripe account and now my project is making enough revenue to want to sign up for Stripe Atlas so that I can form a new entity, get a tax ID, and business bank accounts, do I have to open a new Stripe account when I sign up for Stripe Atlas?
I asked them the same question. Here's the answer:
Lol, beat me to it Corey! I just asked the same exact question seconds ago :)
Great minds think a like! (or something)
Awesome - I can't wait to try out Stripe Atlas soon with my next company.
Having been through the process a few times manually in different countries, this is a godsend.
I'm not one to fawn sycophantically over tech startups and their 'missions', but Stripe is one of those really rare companies where it genuinely feels like they really care about me and making my (professional) life easier.
Thanks.
Are there any benefits in forming LLC in Delaware to other states such as NY? I heard that it makes sense to form C-corp in Delaware if you plan on having investors, but are there any benefits to form LLC in Delaware if you are the only owner and don't plan on having investors?
Quoting the Orrick legal guide:
Additionally, we can service a Stripe Atlas LLC, doing things like e.g. assisting you in calculating your franchise taxes, matching you with an appropriate accountant (if you wish) for tax preparation, and engaging a registered agent (we cover the first year's fee), with more enhancements to come.
Heey, what about Brazil? :-)
Good read! One question - do we need an invite or if we fill out the Atlas beta form will we get an invite relatively soon? Thanks!
What's the benefit of Delaware LLC over incorporating let's say in Ireland where I currently reside? Incorporating, account information fees and taxes all seems more expensive. I would consider Delaware if I wanted to raise funds but would probably use C-Corp for that. Not an accountant so feel free to correct me...
The situation for international ownership of an LLC is complex, and I'm not qualified to speculate on it with regards to your situation in Ireland. I'd recommend speaking with an accountant about it.
Hi Patrick. Can you give any additional information on the bank options for LLC creation? I understand the monthly free for the C corp, but I'm interested in the options for LLC as we may have little money coming in as we get going.
We set you up with a bank account which has no monthly maintenance fee if you form an LLC. (You are, of course, welcome to investigate other banking options.)
Could you expand a bit more in the situation of non-us citizens, living in their own countries. What kind of taxes must be filled in the US? what happens with taxes in their own country?
Any plan to add Stripe support for Costa Rica? :-D
I'm not an accountant and, unfortunately, cannot give an answer as to how owning a US LLC would interact with the situations of each possible owner situated in any particular country, to say nothing of all countries. Prospective owners of US companies should probably ask a local accountant about their circumstances, local laws, applicable treaties, and similar.
I hope we can have a simpler answer to this in the future.
I’m thinking of creating an LLC for my app, but thinking of throwing my freelance design business in there while I’m spending the time & money.
Does that make any sense with (or without) Stripe Atlas?
I also ran a consultancy with several product businesses. From the entrepreneurial perspective, the benefits of separating activities are:
Cleaner books (you know which activities are generating profits/loss) which may help you from a management perspective. Ask me about how I was unknowingly subsidizing a particular product one year out of consulting revenue because I only looked at consolidated books.
Clean separation also makes it much easier to sell one business in the future without selling all businesses. When I sold one business which was tightly coupled with another, I had a stressful week of disagregating accounts (financial and SaaS and otherwise), migrating emails, etc etc, and the buyer inspecting my financials hired someone to due diligence them. That professional wanted exhaustive documentation that the financials only reflected the line of business being sold, not e.g. unrelated revenue (which would increase the price of the acquisition, but would not continue under new ownership, against the interests of his employer).
An entrepreneur may have some activity X and be considering adding Y. If the entrepreneur adds Y to the entity conducting X, the risks associated with Y are now shared by X and the risks associated with X are now shared by Y. This may not be desirable. Limited liability of companies doesn't just protect the owner, it can help protect everything else the owner owns.
As for the legal ramifications: talk to a lawyer.
Great answer. What do you think when you do want to subsidize (utilize the loss of product to deduct taxable income from consultancy)?
Suppose a hypothetical entrepreneur in the US is the sole owner of one LLC making a profit and another making a loss. Assuming no complications like the IRS disallowing the loss under the hobby rule, these can be netted against each other for tax purposes, so tax considerations alone do not necessarily break in favor of keeping them in the same LLC in this scenario.
There exist factors which could change this analysis; interested IndieHackers may wish to speak to an accountant.
Hi Patrick. Great product!
I have a question regarding the ownership units.
So how is it different from common stocks for C corps?
Assuming we can't issue or sell the ownership as easily with an LLC as with a C corp, what's a good starting point if you are the solo founder? 8,000,000 for myself and leave some room for potential cofounders and future conversion to C corp?
Also, is it possible to have a founders' agreement separately to work around non-support for vesting of ownership?
Ownership units are not shares, but function similarly to shares. I am afraid I am not a lawyer and cannot describe the exact mechanics, since they may depend on your personal circumstances or the treatment of things that are "shares" in your jurisdiction.
Founders can sign contracts with each other which may impact LLCs which they own together. Depending on circumstances, this may impact our ability to service the LLC with our product. Please speak with a lawyer regarding your options on amending/expanding the Operating Agreement or supplementing it with additional contracts.
So your default setting is allocate 10,000,000 units to the solo founder at the beginning, with no room left?
Hi! Can I use the LLC to open an ecoomerce store?
We have many users of Atlas who operate e-commerce stores. Whether we can support your store depends on factors such as e.g. what you are selling.
Is it possible to reuse existing stripe account? Or how would subscriptions be migrated?
Hi Patrick!
This is terrific news. Quick question: Can you tie your Atlas account to an existing Stripe account, or will you have to create a new Stripe account?
Joining Atlas will result in another Stripe account being created, so that you can e.g. log in and see your Atlas documents. You are welcome to continue using your existing Stripe account. If your existing account is a US account, you can change the ownership of it to be the new entity and set the payout bank account to your new business bank account. (Or not; your call.)
As somebody who had 3 Stripe accounts at one point in active use, one of my favorite features was the account switcher. For example, with accounts X, Y, and Z and the user patio11 (who started as admin of X), I gave patio11 admin permissions on Y and Z, and then when logged in as patio11 I was able to switch between accounts with (if I remember correctly) 2~3 mouse clicks.
I wish my law firm just used this 😂. Since they don't automate things, I have to use the government forms - which are not fun.
Is Stripe Atlas amenable to being used along with an existing law firm? It's not clear from the posts whether I can pick and choose certain services from Stripe Atlas.
In any case, congratulations for the launch @patio11, and thank you for being around.
We always form the businesses using our templated documents which we prepare for you, on our standard forms. We are not amenable at this time to you or your counsel altering the document prior to formation.
After you have formed a company, you're welcome to work with any lawyer or other service provider you wish; it is your company, after all. It is possible that some decisions you make might impact our ability to service your LLC with some of our products.