Not going to earn from it(for now) - Do I need to create a company?


3

I am launching a used book buy/selling platform website for students where they can buy/sell from each other (direct buy/sell no commissions to the website).

  • I don't have ads on my websites as of now cause I feel the website would be taken more
    seriously that way.
Monetizing this project is not at the very top of my priorities right now. I would rather see it grow, add more features for students, create a community and then later think about monetizing it.

My question is,

If I don't make money, or don't intend to make money(in the near future).

  • Do I need to create a company in such a case?
  • I am open to monetizing & options such as VC/Angel funding as the site gains features and momentum.

If I have a large number of users(all US based), probably hundreds of thousands -- Would you suggest it would be advisable to create a company even if I don't have any source of income from it?

From other similar questions, LLC seems to be the way to go, if I create a company.

  • What kind of fixed taxes/charges would I need to pay to the government on a yearly basis if I am making no money, but just have the company in place?

Company Tax Regulation

asked Nov 13 '11 at 23:21
Blank
D Min
116 points
  • Keep in mind that investors generally want a business registered in their jurisdiction. Therefore an offshore company may scare investors away - and equally scare away those considering suing you. Choose based upon what's more important to you. – Fobo 9 years ago

2 Answers


3

You don't need to create a company now or even after you start marking money from the website as you could run the business as a DBA or a sole proprietorship. If you went that route, you may need to register the business with your local or state government but the fees, if any, should be minimal.

The better question is whether you should form a company to limit any liability to you.

CONS

  • Will likely cost you on the order of several hundred dollars per year to register with your state
  • You will need to do research if there are any other documents or tax returns that you will need to file, which may cost you time and money.

PROS

  • If someone sues you, then they may not be able to get at your personal assets. No guarantees here, but this generally works if you set up the company in the right way.
My feeling is that it is not worth it to set up a company if you are not making money. To protect yourself, you need to state very clearly on the web site that you are not responsible if the buyer or seller rips you off. Even if someone does come after you, which seems very unlikely, the damages would seem to be no more than the cost of a book which is less than the cost of your annual company registration fee (even for pricey college textbooks).
answered Nov 14 '11 at 01:02
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Kekito
1,936 points

2

The only advantage to forming a company now (at least that I see) is to protect yourself from personal liability if someone says you stole their idea. Barring that, there is no real advantage until you start making money or get investors.

Typically, VC/Angel investors will want to see a C-corp structure formed in Delaware. You can certainly form an LLC now and move it over if you get investment.

C-Corp fees typically run $800-$1000 per year (if you make no money). LLC's are different depending on the state. If you have no revenue, then there is a minimal fee similar to a C-Corp (again, it varies state to state).

answered Nov 14 '11 at 01:01
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Jarie Bolander
11,421 points

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Company Tax Regulation