Disclaimer(s): this is not legal advice, I have no clue what I’m doing, you are responsible for thinking it was a good idea to listen to me to begin with, etc etc (I’m going to get a tattoo of this?). This post may at some point include affiliate links, to fulfill my capitalist moral obligation to drain the corporations I find useful of as much money as possible so that I can economically stimulate the bakers of artisanal breads and, mostly, California landlords. With that out of the way:
Earlier this year, I’ve decided that it would be nice to have an LLC to do software contracting work through when the opportunity arises. A few months and a few thousand doll hairs later, I’ve got both a usable LLC and am convinced that attorneys are spending an inordinate amount of time and money to obscure the process of setting up an LLC and that I probably should have just paid one — to this I say: can you dig it? Hopefully, I can coalesce most of what you might need here, so that you wonderful millennials don’t need to use the primary purpose for which your cell phone was birthed to find a lawyer. While many of the benefits of an LLC for contracting work are possible — and much cheaper and simpler — to attain as a sole proprietor (business credit cards, tax deductions for health care and business expenses, etc), there are a couple that stand out, namely, limiting personal liability / separation from personal assets and the ability to file as S-Corp should things start to go well.
Getting an LLC set up was not as hard as I originally thought it was going to be, it was just a lot of figuring things out from sources that are spread out across the internet. Hence, this post saying as much should the Google index overlords be so benevolent towards you. There is, however, a good deal of waiting involved, and the ordering below is in a particular order to attempt to reduce that as much as possible (you are so welcome!). Without further ado:
- Possibly the hardest or easiest part: pick a name!
- Get GSuite with your domain name and set up email — they’re still evil for free accounts, this is different; let’s not get into it! I only wish I had done this first, highly recommended to get all comms in one place separate from personal stuff early on. They also have the cheapest VoIP service available in Voice it seems, and it’s nice to have a separate number, too.
- Register your LLC. I’ve used https://www.northwestregisteredagent.com/ and found them compliant with their “not annoying” slogan, unlike some “zippier” services. My LLC was registered the next day in Wyoming, anonymously, to boot. This was doubly nice to then register as a foreign LLC in California anonymously (a state that does not allow anonymous LLCs). I spent an inordinate amount of time figuring out which state to register in and with whom and how to be anonymous, no regrets yet. Northwest Registered Agent also provides a mailbox with a web app to view the mail digitally, has services to maintain legal compliance for you, some handy Operating Agreement templates you’ll need in the next step, they can get an EIN for you (you’ll also want this in the next step), maybe they’ll even make you a sandwich I don’t know, it can’t hurt to ask. Note that you could replace this step with an attorney or yourself, and depending on how misplaced your self trust is that might work out okay and save some $ but you won’t be anonymous if you do it yourself (ie your name and possibly address will be on public record tied to your business).
- Open a bank account. I walked down the street to Chase and opened a business checking account, passed go, and collected a free $200. You will need to have your documents in order before accomplishing this, here is a nice (but of course, hard to find!) outline of requirements. Maybe one day this step will be more millennial friendly, but if you have a Chase branch in town then this is easy enough, I don’t plan to have to go over there again, there just isn’t an online only option to set up an account [yet]. While I was over there, I got myself a shiny new Ink Business Preferred card, too, and a bit later collected my free 80,000 points to fund underprivileged island nations’ service workers’ children’s educations. As for maintaining that limited liability, it’s a very important step to have separate finances from your personal stuff, this could easily but should not be overlooked (again, I’m not a lawyer, I’m just speaking on behalf of the inimitable internet here). After this step I also went and updated Gmail and Northwest Registered Agent to use this for payment rather than my personal card. Chase seemed like the best option for me mostly because of the credit card and having everything in one place, being an established bank I’m familiar with using and there’s no fees if you keep $1500 in there.
- Pick some accounting software. I’m using QuickBooks because I’ve used it before, it’s pretty cheap, they have invoicing and cheap bank payments, it handles importing my Chase transactions automatically, it has a nice mobile app to upload my receipt photos and tell me I’m out of money on the go, it’s easy to get into TurboTax and it’s also easy to integrate with lots of payroll software should you ever need that (S-Corp). It may be wise to get an accountant at this step, too, but if you’re just filing as a disregarded entity and not an S-Corp (like me) then taxes may also not be too hard to manage.
- Pay the tax men. I’ve had to pay taxes to both the state of California (ow) as well as the city of San Francisco ahead of the annual April aid program, before I’d even earned a dollar. This will be different depending on where you’re based out of and I can’t provide too many handy links here, but this is important to do before beginning any operations to be in compliance.
Ta da! You now have an operationally ready LLC (maybe only if you’re a freelance software person!). The other thing mentioned here, but that I’ve omitted most of the details of, is filing as an S-Corp. I did a lot of research about this, as well, and decided that for me right now this isn’t worth it, it’s a lot of additional paperwork (you have to run payroll, file as a corporation instead of a disregarded entity, etc). From what I can tell, this gets to be worth it if you start making significantly more than an average salary, you can [and maybe have a moral obligation to] save some taxes by taking some distributions instead. Obviously, I’m not there, so don’t hack me bro it’s not worth it.
Two things that weren’t mentioned but probably deserve to be mentioned are getting a Solo 401k set up if you start making some money — these are way better than the corporate ones except that the match is your money — as well as getting some liability insurance. I did some research on insurance and found a reasonably priced plan for Errors and Omissions insurance through Hiscox, which seems a pretty reputable company. If I were a bit wiser, I could probably be convinced that I should have just done a sole proprietorship and bought some liability insurance, it would be a lot cheaper and easier and probably get me about the same protection should I write a bug into somebody’s Death Star. I would love to hear that the LLC is actually worth it, should you know so, dear reader. In any case, I’m content with the LLC for now and am glad I managed to figure all of this out.
A couple of weeks after I started this process, a post on Hacker News also got some pretty good comments that may provide more information than I have, as well as corroborate most of what’s here (see disclaimer) with more brevity than I’ve managed. I wish I would have tracked some of the more useful sources when researching to post here, as well; lesson learned. I hope this was useful in any event. Best of luck!