Legal, Tax, & Accounting November 8, 2019

Anyone registered C-corp as a solo founder?

Damon @damon

I am current a solo founder working on some FinTech stuff. My business would be required to have some licenses in order to run legitimately, and those licenses need to have company info like EIN, name and address. I am thinking to get my business incorporated and I own 100%. Has anyone tried that? Thanks!

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    Beware double taxation with a C-Corp. If you are going to pull money out as dividends you will pay two rounds of income tax on those funds. If you are going to be running this solo and pulling cash out, consider an LLC or S-corp. Not legal advice, just a heads up :-)

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    I used to own an LLC and found it perfect for side hustles because I could lose money on starting my LLC and see a tax break against my day job income. Watch out for an IRS concern called hobby loss.

    I later owned a c-corp when I did a roll over business start up with my 401k savings. I found the C-Corp had more boxes to tick but was not a major burden. Having the c-corp scoop up the LLC assets was easy. As a solo founder assuming you have a side hustle, consider going the LLC route to start.

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      Damon, you can focus on building and launching then incorporate and transfer the assets to the corp. I bet LegalZoom can handle it for US $1000, maybe less, if you're US-based.

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        Thanks @seansquared. My business requires to get incorporated first so that to obtain required licenses. Thanks for bringing up LegalZoom as I am also think about it :)

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    The decision of C-Corp vs. S-Corp/LLC can have big impacts on your tax liability when you sell. If executed right, you can avoid tax on the sale of a C-Corp.

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    My recommendation is to use an S-corp. It has pass through taxation (e.g. you incur the taxes for the net income of the business) but has the protections and separation of a C corp. There is some administrative overhead, but it's not too bad, especially if you're working with a CPA. The other major benefit is it's relatively straightforward to convert a S corp to a C corp should that need arise. Good luck.

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    Yes, I incorporated eventOne, Inc. as a Delaware C-Corp. I own 99% (I gave 1% to someone who has advised & helped me a ton).

    I choose C-Corp over LLC largely because I've found that finding information on things like taxes is a lot easier with a C-Corp. But taxes are more expensive with an than LLC. Sorta.

    I'd highly recommend doing research on LLC vs. C-Corp and coming to your own conclusion considering your context.

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    I haven't looked specifically at this issue, but I've been considering going down the Stripe Atlas route.

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    A c-corp is especially useful if you are planning to raise capital - it's supposedly set up to handle shares/equity/fundraising much more easily.

    If you don't want to raise funds ever, I'd go the LLC route, particularly because of taxes. With a c-corp you are essentially double-taxed on your income - once for company profits and once when you pay yourself that money. (Not sure about the details here either, but worth looking into!)

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      Double taxation, while technically true, isn't entirely accurate. If I remember correctly, while you are taxed once on business income and once on personal income, the personal income is deducted from the business income (since it is an expense). So the same money isn't actually taxed twice. That isn't the case with dividends though (I think).

      Also, you don't have to pay social security tax on business income. Only personal. While with an LLC you pay social security on all income (because it's all technically personal income).

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        Very interesting, thanks for clarifying - really need to read up more on this myself

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        I also think it makes more sense that business income will not need to pay social security. But need to double check.