Starting "web site business". Need an LLC?

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mojorisin
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Starting "web site business". Need an LLC?

Post by mojorisin » Tue Apr 18, 2017 5:46 pm

Hi all, I'm investing into a developer to assist me with a web site. My accountant told me to keep track of my expenses as they are tax deductible.

My thinking is to spin up an official "business" however I have no idea where to start to register. I've done some internet reading, but in my state (TN) there are a number of options.

Ultimately I will be taking payments (subscription) for the web site and maybe some ad revenue. My accountant referred me to an attorney for the LLC discussion. However I hate to spend $$$ for something I don't need.

Should I just register my business name to use for, well, official business purposes? Sure sounds a lot more official :)

Any help or guidance would be appreciated. Thanks.

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White Coat Investor
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Re: Starting "web site business". Need an LLC?

Post by White Coat Investor » Tue Apr 18, 2017 5:55 pm

Does this business have significant liability? If not, why not start as a sole proprietor? You can always transition to an LLC later if you want.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

Indigorain
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Re: Starting "web site business". Need an LLC?

Post by Indigorain » Tue Apr 18, 2017 7:07 pm

Your accountant should be able to advise you on any registration you need to do with your state. You may need a sales tax license, depending on if anything you sell is taxable (advertising is in some states, not in others). I would highly recommend getting a federal tax identification number. This way you don't have to hand your social security number out to everyone who needs to 1099 you.
I'd go with a sole proprietor business, and wait to see if an llc is needed.

gips
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Re: Starting "web site business". Need an LLC?

Post by gips » Tue Apr 18, 2017 8:13 pm

I've started two businesses, wouldn't have been able to sleep at night without the protection that an LLC (or other corporate structure) offers. One of the businesses was a web-based retail business. i was worried about:
- credit card info being stolen
- personal information being stolen
- lawsuit by someone that misinterpreted the information on our site
- etc.

nothing like this ever happened, they were unlikley to happen, but I didn't want to even consider the possibility of someone suing for our personal assets (like our house).

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sperry8
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Re: Starting "web site business". Need an LLC?

Post by sperry8 » Tue Apr 18, 2017 8:22 pm

gips wrote:I've started two businesses, wouldn't have been able to sleep at night without the protection that an LLC (or other corporate structure) offers. One of the businesses was a web-based retail business. i was worried about:
- credit card info being stolen
- personal information being stolen
- lawsuit by someone that misinterpreted the information on our site
- etc.

nothing like this ever happened, they were unlikley to happen, but I didn't want to even consider the possibility of someone suing for our personal assets (like our house).


+1. I too started up an LLC to protect my web business. The whole point is to limit your liability for an unknown. It may seem like a waste of money now - but it won't if anything comes up later. Think of it as insurance although in the form of a 1x cost.
Certainty is a requirement of ignorance. | Humbling Contest results: | 2016: #121 of 610 | 2015: #18 of 552 | 2014: #225 of 503 | 2013: #383 of 433 | 2012: #366 of 410 | 2011: #113 of 369 | 2010: #53 of 282

mojorisin
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Re: Starting "web site business". Need an LLC?

Post by mojorisin » Tue Apr 18, 2017 8:31 pm

sperry8 wrote:
gips wrote:I've started two businesses, wouldn't have been able to sleep at night without the protection that an LLC (or other corporate structure) offers. One of the businesses was a web-based retail business. i was worried about:
- credit card info being stolen
- personal information being stolen
- lawsuit by someone that misinterpreted the information on our site
- etc.

nothing like this ever happened, they were unlikley to happen, but I didn't want to even consider the possibility of someone suing for our personal assets (like our house).


+1. I too started up an LLC to protect my web business. The whole point is to limit your liability for an unknown. It may seem like a waste of money now - but it won't if anything comes up later. Think of it as insurance although in the form of a 1x cost.


Very helpful info. What you posted matches my situation.

So how did you start an "LLC"? I look at my state's website, I can register online.

Do I do this myself on the website?

Should I hire an attorney?

Or use a site like legalzoom? https://www.legalzoom.com/sem/biz/llc.h ... =321643524

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vitaflo
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Re: Starting "web site business". Need an LLC?

Post by vitaflo » Tue Apr 18, 2017 8:36 pm

Do it yourself. I got an LLC via my state's website and an EIN from the IRS and then opened some business bank accounts. I think my grand total cost was $150. No lawyer needed. It's very easy to get this all set up in most states.

Cuzz35
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Re: Starting "web site business". Need an LLC?

Post by Cuzz35 » Tue Apr 18, 2017 8:40 pm

I would talk to your attorney/accountant and have him explain how taxation of LLC's work in Tennessee. While a single member LLC is disregarded for federal income tax purposes, they are taxable to Tennessee and have to pay a franchise and excise tax.

Might still be the best option but may need to consider that.

Tamarind
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Re: Starting "web site business". Need an LLC?

Post by Tamarind » Tue Apr 18, 2017 8:43 pm

Personally I wouldn't start an LLC for a business like that, but I did start one for a business where my clients faced unlikely risk of serious physical injury. The business also carried liability insurance.

However, sounds like you need to do a LOT of reading and learning, OP. It has rarely happened that "web businesses", referral & ad revenue, etc, have landed their proprietors in jail for fraud due to failure to understand rules regarding advertising, bots, and business reporting. At least check out a library book on how to start a business before you begin operations.

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saltycaper
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Re: Starting "web site business". Need an LLC?

Post by saltycaper » Tue Apr 18, 2017 8:57 pm

IANAL, but beware the actual limits of liability offered by an LLC are not all-encompassing, especially as relates to personal liability. It is not difficult in my state to set up your own LLC without a lawyer, but that does not mean you don't need legal advice. I was going to set up an LLC before I realized it would have protected me from very few of the most likely legal actions I could imagine. It might be more relevant for your business.
"I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said." --Alan Greenspan

mojorisin
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Re: Starting "web site business". Need an LLC?

Post by mojorisin » Tue Apr 18, 2017 9:22 pm

Agreed. I have some research to do.

Let me ask this: can I start work (paying) my web developer to start the project and pay him out of my personal checking, etc.

Its going to take a few months. It gives me time to get the project under development. Then go "live" after I figure out my LLC, etc.

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White Coat Investor
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Re: Starting "web site business". Need an LLC?

Post by White Coat Investor » Tue Apr 18, 2017 9:54 pm

mojorisin wrote:Agreed. I have some research to do.

Let me ask this: can I start work (paying) my web developer to start the project and pay him out of my personal checking, etc.

Its going to take a few months. It gives me time to get the project under development. Then go "live" after I figure out my LLC, etc.


You can, but I wouldn't.

Open up a separate bank account, throw some of your money in that and use it for all business stuff.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

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White Coat Investor
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Re: Starting "web site business". Need an LLC?

Post by White Coat Investor » Tue Apr 18, 2017 9:56 pm

And I second the people who point out how cheap and easy it is to set up an LLC.

In my state it's about 10 minutes online and $70 initially, then $15 a year.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

CFM300
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Re: Starting "web site business". Need an LLC?

Post by CFM300 » Wed Apr 19, 2017 12:33 am

Are you going to have employees? If not, an LLC may be unnecessary. Read more here:

viewtopic.php?t=175668#p2655350

gips
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Re: Starting "web site business". Need an LLC?

Post by gips » Wed Apr 19, 2017 10:07 am

CFM300 wrote:Are you going to have employees? If not, an LLC may be unnecessary. Read more here:

viewtopic.php?t=175668#p2655350


the nolo link is very good but I'm not sure how you came to that conclusion. While it's true the llc can't protect you from negligence, my experience is that the only limit on the subject of a lawsuit is the creativity of the person bringing the lawsuit and their lawyer.

I consulted with a lawyer in my state and had him create the LLC for me. the cost was about $800. Once you start a corporate structure, you have to act like a corporation. I bought a book about it and occasionally consulted with my lawyer if I had questions. The $800 was an easy spend since I was guaranteed revenue (there was a multi-million dollar brick and mortar business). If I was less sure of revenue, I might have gone the diy route. I believe the cost of establishing an LLC was a deductible business expense (check with your accountant), so the real cost was discounted based on my tax bracket.

The second company I co-founded had over 100 employees and we had extensive business insurance. We were sued without merit by an employee. The insurance company took care of the whole thing.

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dollar_elbow
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Re: Starting "web site business". Need an LLC?

Post by dollar_elbow » Wed Apr 19, 2017 10:29 am

For many of you it seems starting an LLC is easy and relatively cheap. What about if you are in a state like New York, which has much more onerous requirements for starting an LLC (including that the business be advertised in specific papers for 6 weeks) and where the initial cost might be thousands of dollars? Would you still advise forming an LLC immediately for a business without a proven income stream? What about an S or C corp for a single owner?

hicabob
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Re: Starting "web site business". Need an LLC?

Post by hicabob » Wed Apr 19, 2017 10:51 am

Incorporation is usually not needed until you are generating revenue which correlates with selling stuff, or if the biz is owned by more than one person. Many startups never get to that point so I would wait until you do. Good luck!

SRenaeP
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Re: Starting "web site business". Need an LLC?

Post by SRenaeP » Wed Apr 19, 2017 11:19 am

gips wrote:
CFM300 wrote:Are you going to have employees? If not, an LLC may be unnecessary. Read more here:

viewtopic.php?t=175668#p2655350


I consulted with a lawyer in my state and had him create the LLC for me. the cost was about $800. Once you start a corporate structure, you have to act like a corporation. I bought a book about it and occasionally consulted with my lawyer if I had questions. The $800 was an easy spend since I was guaranteed revenue (there was a multi-million dollar brick and mortar business). If I was less sure of revenue, I might have gone the diy route. I believe the cost of establishing an LLC was a deductible business expense (check with your accountant), so the real cost was discounted based on my tax bracket.


I can't speak for your state but at least federally, an LLC doesn't have to 'act like a corporation.' A single member LLC can be a disregarded entity. This means a separate business return is not required. All income/expenses would be reported on a Schedule C on your personal return.

-Steph

gips
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Re: Starting "web site business". Need an LLC?

Post by gips » Wed Apr 19, 2017 4:32 pm

I opened an LLC in NY, as mentioned it was $800 via a lawyer. It was many years ago, perhaps the rules have changed.

SRenaeP wrote:
gips wrote:
CFM300 wrote:I can't speak for your state but at least federally, an LLC doesn't have to 'act like a corporation.' A single member LLC can be a disregarded entity. This means a separate business return is not required. All income/expenses would be reported on a Schedule C on your personal return.
-Steph


One acts like a corporation to ensure liability protection. If you act like a sole proprietor, a lawsuit can pierce the corporate veil putting personal assets at risk.

Spirit Rider
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Re: Starting "web site business". Need an LLC?

Post by Spirit Rider » Wed Apr 19, 2017 5:00 pm

gips wrote:I opened an LLC in NY, as mentioned it was $800 via a lawyer. It was many years ago, perhaps the rules have changed.

SRenaeP wrote:
gips wrote:
CFM300 wrote:I can't speak for your state but at least federally, an LLC doesn't have to 'act like a corporation.' A single member LLC can be a disregarded entity. This means a separate business return is not required. All income/expenses would be reported on a Schedule C on your personal return.
-Steph

One acts like a corporation to ensure liability protection. If you act like a sole proprietor, a lawsuit can pierce the corporate veil putting personal assets at risk.

An LLC is not a corporation unless it elects to be treated as an S-Corp. It is a Limited Liability Company.

An LLC does need to act in a manner that the "company" is separate and distinct from the owner. Best practices involve having separate financial accounts and no co-mingling of personal and company assets. Also, no use of personal assets for LLC use and no use of LLC assets for personal use. However, these best practices are really no different than one should use for a sole proprietorship. It is far easier at tax time to keep the business and the personal separate.

Failure to follow these best practices can possibly allow the LLC entity protections to be pieced. There is limited case law in only a few jurisdictions piercing LLC protections.

gips
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Re: Starting "web site business". Need an LLC?

Post by gips » Thu Apr 20, 2017 2:14 pm

In addition to the practices outlined above, my lawyer advised me to conduct annual meetings (with myself) and record minutes.

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