When do we need to become an official company?


2

So I'm starting a new venture with a friend of mine. Basically, we are not going to be looking for seed funding, or really any funding for that matter. We are going to be up fronting the costs to our website on our own, as well as buying things like the domain name, etc. until we receive more traffic and have a better case for funding in the future.

I was going to create a short-form agreement that just says some simple stuff like, "Here are our divided percents, here's some simple things we need to agree on, etc.".

Basically, I know this thing is going to be fine for the time being (just between us to split some stuff up), but say the site started to make money through advertising or sponsorship, would we then be required to register as an LLC or something to take that money and have it be taxed properly? Also, say we entered into an agreement with another company, do we legally need to sign that agreement on behalf of our "company", or can we sign it on behalf of our website name and our names, and worry about becoming official in the future?

If all things point to definitely needing an LLC, we'll wait, save up some extra cash, and just do it, but I'd like to worry about only the hosting fees and domain purchase for the time being, until we can generate some traffic and sponsors.

Thanks.

LLC Tax Website Agreements Sponsorship

asked Aug 30 '11 at 23:09
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Slandau
203 points
Top digital marketing agency for SEO, content marketing, and PR: Demand Roll

1 Answer


1

The least that you need to do is register your company as a DBA (Usually with your local Secretary of State, or courthouse) This makes your company a legal entity, and doesn't really cost much to do. You and your partner are already operating as a partnership as per the definitions of most states, so you should sign a partnership agreement as soon as you can to define ownership stakes and whatnot, otherwise most states will just split the company down the middle.

Registering your company as an entity is good for tax reasons, so if you claim business expenses and get audited, you will have legal proof that you own a business.

At this point, it's probably not necessary to register as an LLC, though if the nature of your business gives you some sort of legal liability to your customers, you would probably look into it. Right now, you and your partner have unlimited liability for anything related to the business. If someone sues you, or if you take on debt that you can’t pay, the plaintiff or debtor can come after your personal assets.

Disclaimer: This information does not constitute legal advice and does not establish an attorney-client relationship

answered Aug 31 '11 at 00:43
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Bwasson
1,162 points
  • We do have a partnership agreement in place already. So as for next steps, is having a DBA setup kind of a necessity, or should we wait until we can validate having an LLC and operate just under the partnership agreement for the meantime? – Slandau 9 years ago
  • If you will be doing business in a name other than your own, a DBA is a requirement, and you should register it as soon as you can. You should also look into getting an EIN (Employer Identification Number) and an FEIN (Federal Employer Identification Number) if you will want to make any hires, or pay yourselves a salary. Because you're a partnership at the moment, you will be taxed on individual basis, but there are other tax advantages. A DBA is pretty cost-free (I think you just have to take an ad in a paper for a week). www.sba.gov has a lot of great information about this. – Bwasson 9 years ago
  • We definitely don't mind doing business against our own names for the time being. We also don't plan on taking any sort of profit until the site gains a lot more traction, and before that even happens, we want to register as an LLC anyway. However, if a DBA is pretty cost free it might be worth it, even if it is just for our own names. – Slandau 9 years ago

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LLC Tax Website Agreements Sponsorship