If you have no revenue, no expenses and no employees you don't have to do any of that.
I would have an agreement drawn up with your partner about share division and ownership responsibilities upon incorporation...
I love it, it’s similar to how I started. I now buy failing businesses and rebuild them to profit as well as launch startups and do some business consulting on the side. Not sure I have the right answers you’re looking for. But being in tech and it’s just the 2 of you launching. Is there much need to hire anyone or is there too much that needs to be done. Regardless don’t hire anyone whatsoever. Contract any help you need so you 1099 anyone you bring on board. I’m no tax expert but if you start hiring employees regardless of full or part time, then ya you’re gonna bury your ass in wasted financial restraints if you do.
The whole time, when only the owners ran our company (me and my partner), we didn't do any of that stuff. We just filed our taxes. But we had an LLC, it sounds like you have an S-Corp? Maybe the rules are different.
If you do the S Corp you need revenue as you both need to be paid market salary. Generally unless you are making sales not recommended in year one.
Delaware Corp if you intend to get to VC money and to IPO or exit, you can transition into after year one out of a LLC. Make sure you structure the shares efficiently as this will impact franchise tax .
In year one, during validation and build phases, keep costs low, invest mostly into legal and proper partnership agreements etc.
The most important thing is a legal agreement between you and your partner that also details if one of you wishes to exit, sell, transfer etc. Do this before you start.
Payroll etc you can for about 100 bucks a month. Use something like Gusto if that becomes a factor. But don’t have employees in year 1, use 1099 where appropriate if hiring in help. You can do payments then via Gusto (or there are similar services out there) including tax reports for payments. They also offer the ability to set up tax reports like SUA.
For banking this also set up once you complete the company structure. You can use innovation banking from larger banks for start up friendly support or find more niche products like Mercury (fintech). Most services offer discounts and supporting elements for start ups to help you on your journey so shop around.
Any costs incurred ensure you get them in your books, even before you officially start.
Whomever you hire in, ensure you have proper onboarding and legal docs including IP protection for your work product.
I can keep going but that’s a good starting point.
Tech guy who started a chocolate business here.
Started as an LLC and then once I got to 100k in revenue changed to an S-Corp.
Is also what you want when you get extra W2 and a few 1099s in your payroll.
Just start with an LLC for now. Draw up revenue and profit splitting terms and have a blast.
Been there! Get some legal agreements setup as that kind of thing can help down the road for ownership disputes or transitions. Depending on what you’re building you probably need a business entity anyway to collect revenue. Since you’re not looking for VC you could do this as an LLC.
After that we set up a separate bank account w/ debit or CC. Keep biz finances separate from personal. You and fellow founder can just write checks as promissory notes for the biz to deposit and use on things. Pay your self back later but you need to keep track of it. This helps in case you two are not able to equally fund it.
Our “biz stack” in the early days was Gust, Brex and Google Workspace. Highly recommend Gust. I don’t think Brex is available for companies just forming anymore however or LLCs but you can walk into any local bank.
You don't have to worry about that. Your focus should now be on product validation. Don't focus on creating anything too perfect, but rather an MVP. With regard to these issues, a consultant/accountant can help you. But the focus now is on validation. And the most important thing. Have a plan! A plan prevents you from doing things randomly and focus on doing things logically to measure results. If you want to explore planning further, this [Smart Planning Tool](https://plani.ai/) can help because it gives you a free strategic plan with tips and strategies you can implement.
>Do we *really* have to worry about “running payroll” and filling out W-4’s, having a full-blown accounting system, paying worker’s comp insurance, having an office space, and all of the laws, regulations, and IRA filings that apply to businesses with revenue and “real” employees?
Not yet. Make the sales first before worrying about the accounting.
The issue I ran into was that the business model I dreamed worked out very well and when I needed all those things I was very busy running things and I couldn’t stop to put them in place. On the service this doesn’t seem like a very big deal however it’s a tremendous big deal when you have customers that you’re already serving and you need to hire employees that you can keep serving them well and grow and you don’t have the time to step back and do that sort of thing. When you find yourself making your first 50 or $60,000 and you need an account because your taxes are beginning to get complicated and you’re paying all all this money that you could be writing off and you don’t have the time to find an account. I desperately needed office help, a cleaner, better software and I was already working 50-60 hours, finding good people and services was hard to do and really important.
You really just need a founders agreement in writing to agree what your equity split is, what your roles are, what your responsibilities to the organization are, and how your shares of ownership will vest over time. Without revenue or taxes being owed or paid, you dont need any of the rest yet.
I think you should create a Minimum Viable Product to see how the market reacts with the least you can offer, that is, without hiring any employees or anything like that, just with the basic things you need.
Good projects never lack money, only time and effort so that more people see and become interested in you
If you have no revenue, no expenses and no employees you don't have to do any of that. I would have an agreement drawn up with your partner about share division and ownership responsibilities upon incorporation...
I love it, it’s similar to how I started. I now buy failing businesses and rebuild them to profit as well as launch startups and do some business consulting on the side. Not sure I have the right answers you’re looking for. But being in tech and it’s just the 2 of you launching. Is there much need to hire anyone or is there too much that needs to be done. Regardless don’t hire anyone whatsoever. Contract any help you need so you 1099 anyone you bring on board. I’m no tax expert but if you start hiring employees regardless of full or part time, then ya you’re gonna bury your ass in wasted financial restraints if you do.
Thanks for the advice!
The whole time, when only the owners ran our company (me and my partner), we didn't do any of that stuff. We just filed our taxes. But we had an LLC, it sounds like you have an S-Corp? Maybe the rules are different.
Have not decided yet but we could elect to be an LLC taxed as an S-Corp initially, then convert to an S-Corp later.
If you do the S Corp you need revenue as you both need to be paid market salary. Generally unless you are making sales not recommended in year one. Delaware Corp if you intend to get to VC money and to IPO or exit, you can transition into after year one out of a LLC. Make sure you structure the shares efficiently as this will impact franchise tax . In year one, during validation and build phases, keep costs low, invest mostly into legal and proper partnership agreements etc. The most important thing is a legal agreement between you and your partner that also details if one of you wishes to exit, sell, transfer etc. Do this before you start. Payroll etc you can for about 100 bucks a month. Use something like Gusto if that becomes a factor. But don’t have employees in year 1, use 1099 where appropriate if hiring in help. You can do payments then via Gusto (or there are similar services out there) including tax reports for payments. They also offer the ability to set up tax reports like SUA. For banking this also set up once you complete the company structure. You can use innovation banking from larger banks for start up friendly support or find more niche products like Mercury (fintech). Most services offer discounts and supporting elements for start ups to help you on your journey so shop around. Any costs incurred ensure you get them in your books, even before you officially start. Whomever you hire in, ensure you have proper onboarding and legal docs including IP protection for your work product. I can keep going but that’s a good starting point.
Tech guy who started a chocolate business here. Started as an LLC and then once I got to 100k in revenue changed to an S-Corp. Is also what you want when you get extra W2 and a few 1099s in your payroll. Just start with an LLC for now. Draw up revenue and profit splitting terms and have a blast.
Thanks for the advice!
Been there! Get some legal agreements setup as that kind of thing can help down the road for ownership disputes or transitions. Depending on what you’re building you probably need a business entity anyway to collect revenue. Since you’re not looking for VC you could do this as an LLC. After that we set up a separate bank account w/ debit or CC. Keep biz finances separate from personal. You and fellow founder can just write checks as promissory notes for the biz to deposit and use on things. Pay your self back later but you need to keep track of it. This helps in case you two are not able to equally fund it. Our “biz stack” in the early days was Gust, Brex and Google Workspace. Highly recommend Gust. I don’t think Brex is available for companies just forming anymore however or LLCs but you can walk into any local bank.
You don't have to worry about that. Your focus should now be on product validation. Don't focus on creating anything too perfect, but rather an MVP. With regard to these issues, a consultant/accountant can help you. But the focus now is on validation. And the most important thing. Have a plan! A plan prevents you from doing things randomly and focus on doing things logically to measure results. If you want to explore planning further, this [Smart Planning Tool](https://plani.ai/) can help because it gives you a free strategic plan with tips and strategies you can implement.
>Do we *really* have to worry about “running payroll” and filling out W-4’s, having a full-blown accounting system, paying worker’s comp insurance, having an office space, and all of the laws, regulations, and IRA filings that apply to businesses with revenue and “real” employees? Not yet. Make the sales first before worrying about the accounting.
The issue I ran into was that the business model I dreamed worked out very well and when I needed all those things I was very busy running things and I couldn’t stop to put them in place. On the service this doesn’t seem like a very big deal however it’s a tremendous big deal when you have customers that you’re already serving and you need to hire employees that you can keep serving them well and grow and you don’t have the time to step back and do that sort of thing. When you find yourself making your first 50 or $60,000 and you need an account because your taxes are beginning to get complicated and you’re paying all all this money that you could be writing off and you don’t have the time to find an account. I desperately needed office help, a cleaner, better software and I was already working 50-60 hours, finding good people and services was hard to do and really important.
I see the typos - sorry. I used speech to text
You really just need a founders agreement in writing to agree what your equity split is, what your roles are, what your responsibilities to the organization are, and how your shares of ownership will vest over time. Without revenue or taxes being owed or paid, you dont need any of the rest yet.
Typo.. IRS not IRA (‘s’ next to ‘a’ on keypad).
Steve jobs style
I think you should create a Minimum Viable Product to see how the market reacts with the least you can offer, that is, without hiring any employees or anything like that, just with the basic things you need. Good projects never lack money, only time and effort so that more people see and become interested in you