Legal, Tax, and Accounting January 6, 2020

Looking for recommendation registering an LLC, getting a bank account, etc.

Eric Turner @CodeOfTheProgrammer

I'm ready to register an LLC and set up a bank account (I'm in the US). It'll be a couple of months before I'll have anything worth taking money for, but at that point I expect I'll use Stripe. Anyone have a recommendation for registering the LLC? I could handle it all myself or use a service. I'd like to avoid using my home address so I don't get a ton of junk mail in my mailbox. Should I set up the LLC first, then the bank account?

  1. 4

    With stripe atlas be careful about the fees:

    If you incorporate with them keep in mind you’ll need to pay US Federal taxes yearly, Delaware state taxes, and Delaware franchise tax (~$300/yr). Dissolving a corporation after you’ve created it is a $200+ activity (plus all owed taxes), if you don't dissolve, taxes will still accrue. You may also have to register as a foreign agent in your state ($200-800(?) per year depending on state).

    Its a hard (and can be expensive) question. Try to stay a self proprietorship as long as possible, (until you start having revenue numbers at least), and then pay a startup lawyer $500 to help you set something up to your specific use case. There is, unfortunately, a lot of nuance and you really don't want to fuck up here.

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      To be fair, all of this is true no matter how or where you incorporate. Not just Stripe Atlas, but even doing it by hand creating a company is an investment and a serious bet that this company will continue in some capacity for an extended period of time.

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        True, but Stripe Atlas makes it so easy to sign up, that people do it without knowing the full repercussions of the decision their making, a mistake that could cost thousands, a huge headache, and lost time.

        A majority of the time the best and easiest solution, especially if foreign agent fees are applicable to your state and you don't see immediate tax advantages, is a sole-prop or local LLC. You can always, once it starts to matter, covert to Delaware or Wyoming or something, but until then its really not worth the headache/risk.

        1. 1

          Strong agree - I left a comment to that point below since that's pretty much exactly what I did.

  2. 4

    Hi Eric!

    To answer your question, Yes you will need to open the LLC prior to opening the bank account. Most banks will require an EIN (Employer ID number - U.S. tax id for the business entity) for the LLC to open/apply for the bank account.

    Check out https://Blook.io

    We help setup the LLC , appoint the registered agent, get the EIN, US Bank account and a U.S address so you won't get all that junk mail. You can even do it from your phone :)

  3. 3

    Creating a company is a bit of a headache if you're early enough in that you might dissolve it soon. Plus, if you make it a standalone entity (rather than a passthrough entity for yourself), you'll wind up getting into all sorts of weird tax situations.

    However, since I also wanted protection for my assets, let me tell you what I did:

    1. Made one passthrough (or "disregarded entity") LLC for all my side-hustles and freelance work. If ever a hustle gets to the point where I will want it to have its own bank account (edit: so that it has its own, protected income/expense stream from the other hustles), or employees, or do business in another state, my plan is to incorporate it separately and pass the assets over to the new company. The goal for this LLC is to live as long as I do, basically, so it has my name rather than any fancy brand name.

    2. I used Stellar Formation (an Atlas competitor that supports NYC LLC's with passthrough, exactly what I needed). If you're making a passthrough, you should register it in your home state. You can use your own address (the spam isn't horrible), or you can get a Virtual Address somewhere (I have since got one at a local Regus).

    3. After you have the LLC, open a business bank account in the LLC's name. You have to do it in this order, since the LLC is the entity that has to own the account, so it has to exist first. LLC's only protect your assets if you can show there is some separation between your money and the company's, so be sure to deposit all company earnings into the business's bank account and keep records of money in and out, even if it's paying yourself.

    Feel free to reply with questions - I did a ton of research on this and have knowledge to share even though, obvi, I AM NOT A LAWYER OR TAX ACCOUNTANT AND YOU SHOULD GET ONE.

  4. 2

    Short answer: https://www.legalzoom.com/

    Long answer: I have no idea what your business is or how big it is, and I am not a legal expert, but from my experience/opinion I can tell you that you may not need an LLC yet. You mentioned the mailbox and junk issue, to solve this you can get a p.o. box and use it for business purposes. For liability purposes you can get a liability insurance to cover yourself and they are not expensive if you are in tech (vs medical services /lawyers /restaurant). For your bank account just set up a separate account and designate it as (Doing Business As company name)
    when your business gets larger and you feel that you are becoming a target this is when you know it is time for an LLC.

    Good luck,
    JM

    1. 3

      100% agree.

      Remember those who advise you to use their service have skin in the game. Just ask "Is this right for me ... at this time ?"

      Fun fact, UK billionaire Mike Ashley remained as a sole trader for 15+ years when building up his empire (opening shops during the period, etc).

      https://en.wikipedia.org/wiki/Mike_Ashley_(businessman)

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        My main concern is that here in the US we hand out lawsuits like candy. I own a home, and an LLC offers asset protection.

        1. 2

          Worth noting that they only provide asset protection if you keep their assets separate from your own and keep fastidious records of that separation.

        2. 1

          Sounds like your mind is made up as it would give you peace of mind. I don't know what you are doing but from the statement "It'll be a couple of months before I'll have anything worth taking money for" it still sounds a little horse-before-cart, but no great shakes.

          Best of luck !

  5. 1

    Hi @CodeOfTheProgrammer,

    I'm a CPA. To answer your question you would need to register an LLC first before you can open a bank account under the LLC since you would need the LLC‘s EIN and Article of Formation.

    Depending on your situation, you might not want to register in Delaware like most online registration companies suggest. I wrote a blog post about it, link here: https://www.meeta4e.com/2020/01/07/should-i-register-my-business-in-delaware/

    I've helped many founders set up their businesses, and I've also seen and fixed many mistakes when it comes to LLC formation. When it comes to business formation, just want to let you be aware that not all businesses are suitable for being a LLC and not every business should register in Delaware.

    If you have any questions, feel free to DM me. Hope this helps!

  6. 1

    I did the LLC paperwork myself in Virginia. I'm a one person company, so it was super easy. I use Azlo for my business account. No fees, got a debit card, also super easy.

    Stripe Atlas wasn't a thing back when I first setup my company, but I would've likely opted for it.

  7. 1

    Stripe Atlas seems perfect for you. I used it for a bank account, LLC and payment processing for my SaaS. Cannot say enough good things about it.

  8. 1

    ZenBusiness is great

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