An LLC does help with getting a proper EIN and DUNS number which helps greatly in establishing trust in a relationship with a new client.. Yes it absolutely helps with accepting payments.. having an EIN is necessary in many cases..
No it doesn't. Sole proprietors can get DUNS numbers just fine. It's literally the first option when you tell them how your business is structured right after telling them your name and email address.
> "Yes it absolutely helps with accepting payments"
A billion people accepting payments in every possible form without being incorporated say that you're wrong. No method of payment processing, from credit cards to memecoins, cares whether you're incorporated.
> "having an EIN is necessary in many cases"
Again, getting an EIN and forming an LLC are completely unrelated.
You can certainly use all of those mediums via consumer fintech, but you will often find yourself limited to products which are designed for consumers, and many B2B service providers may refuse to work with you.
Nobody said consumer fintech? You can just operate as a business. "Sole proprietor" is a real thing that almost every service knows how to deal with, and if one can't there's a competitor willing to right next door.
"Sole proprietor" is a real thing that many B2B services deal with by throwing your application in the trash.
Yes, you can go get a personal loan, or a retail banking account, or a personal payment processing account, but as I said, you're going to be locked out of a lot of B2B products.
Sure. If you absolutely need one of those services then you do the thing. Most of the time there are alternatives, IME.
Example, since you edited to add examples: I have several business bank accounts and far too many Stripe accounts all registered as sole prop. I haven't had to take a loan but I do have a sole prop credit card. My understanding is that even with an LLC a bank is going to require a personal guarantee for a loan.
Forming an LLC doesn't make separating finances any easier. It doesn't help you do it or help you force yourself to to do it. My objection is specifically to the claim that it helps you do anything. It doesn't.
Also, you should separate finances as a sole proprietor too.
Some vendors will only deal with companies (of all types) and refuse sole proprietors as customers, either because they don't know how or because they judge you as unserious. This comment is based on an actual experience I had.
LLCs are great, but you should be aware that single-member LLCs may offer less liability protection than you expect, and in some circumstances it can be easier to pierce the corporate veil.
For all these things I think just having an EIN is simpler.
You don’t even need that to start; you set up Capital One (for example) business accounts using your SSN. The EIN is just to avoid putting your personal SSN on invoices.
LLC matters if you think you’ll have liability risks.
>The EIN is just to avoid putting your personal SSN on invoices.
In order to do that, your LLC has to elect to be taxed as an S-corp, which requires it to file its own return. Worse, certain states and cities will impose a corporation tax on it.
Otherwise, if you retain disregarded entity status, you have to use your personal SSN for invoices. The corporation EIN is then mostly for employment tax purposes.
(Not actual tax advice)
"For example, if a disregarded entity LLC that is owned by an individual is required to provide a Form W-9, Request for Taxpayer Identification Number (TIN) and Certification, the W-9 should provide the owner’s SSN or EIN, not the LLC’s EIN." [0]
You're the best kind of correct, but to be clear, for most income forms submitted to the IRS, the IRS prefers the proprietor file once as an individual and use their SSN.
>>The EIN is just to avoid putting your personal SSN on invoices.
> In order to do that, your LLC has to elect to be taxed as an S-corp, which requires it to file its own return
I think your interpretation is wrong and you have stripped the context on your IRS advice you quoted, changing the meaning. At the start of the paragraph containing your quote, it says "For federal income tax purposes, a single-member LLC classified as a disregarded entity generally must use the owner's social security number (SSN) or employer identification number (EIN) for all information returns and reporting related to income tax."
IMO, this has has to do with how one files their income and/or report to the IRS - as a pass-through entity, the IRS expects the human behind the single-member to file the income under their own own SSN even as after are distributing invoices with their LLC's EIN. IANA(Tax)L
No, you're misreading it. Information returns in most cases is the W-2 you send out to your employees and file a copy with the IRS for their information. I've always said that, for employment tax purposes, you use the LLC's EIN.
The entire quote on the IRS's webpage: "For example, if a disregarded entity LLC that is owned by an individual is required to provide a Form W-9, Request for Taxpayer Identification Number (TIN) and Certification, the W-9 should provide the owner’s SSN or EIN, not the LLC’s EIN.
For certain Employment Tax and Excise Tax requirements discussed below, the EIN of the LLC must be used. An LLC will need an EIN if it has any employees or if it will be required to file any of the excise tax forms listed below."
The original statement was SSN hiding for invoices, that's directly covered in the W-9 example. You can (have to) hide your SSN on W-2s, but not the W-9s you give to customers.
I have an EIN for my Sole Prop consulting business, and no LLC. They are orthogonal concepts.
It’s really easy to get an EIN online without forming an LLC. This is sufficient for any sole proprietor business where you don’t need liability protection or employees.
No, it's not orthogonal. You don't get that benefit for an LLC. It's written on the W-9 form itself. Thus it's a reason why _not_ to have an LLC.
"If you are a sole proprietor and you have an EIN, you may enter either your SSN or EIN.
If you are a single-member LLC that is disregarded as an entity
separate from its owner, enter the owner’s SSN (or EIN, if the owner has
one). If the LLC is classified as a corporation or partnership, enter the
entity’s EIN" [0]
I feel like a lot of people (not holman) are looking for permission, as if having an LLC is a marker that says "I am a serious business doing serious business things." You don't need permission. You can just do things.
A formal business structure is good (but not required!) if you have employees and/or business partners, or if your attorney tells you you need one. IME as a solo entrepreneur an LLC (or two, in my case) just invited more paperwork into my life.
You know what actually functionally limits liability as a solo business? Good contracts backed up with business insurance.
Seeming serious is often needed for others to do business with you. E.g. I believe ARIN and APNIC will only let companies hold internet number resources (while RIPE will also allow sole proprietors, but that's only relevant if you're in Europe). Enterprise B2B companies just don't have their systems set up to deal with sole proprietorships.
Sure. If you find yourself needing ARIN services and that's what they need to move forward then that's what you have to do. All I'm saying is that it's not a thing to set up preemptively.
There are all sorts of circumstances you will find that having and LLC is a chance to go through the easier/faster door. The whole article starts off with a painful javajoke and the punchline is sometimes you need to go really fast. That's what already having an LLC handy for helps with.
Recent personal discovery about an LLC, useful for gaining PDK access to proprietary fabs, so I can finally try touching lower process nodes again that are not open source, despite being out of university and not having a job that gives me the PDK access.
As someone living in Taiwan, can I set up an LLC and get all the benefits of it?
I now have a Singapore entity that helps me out for getting a Stripe account mainly.
Depends on what's your goal. Privacy and the least amount of paperwork? Probably a place like Wyoming, where your annual report is a single page saying "yeah I'm still alive". But an LLC will usually need to be parallel-registered in the state it's doing business in, so if it's a pain-in-the-butt state like California, might as well register it here - you're not escaping their fees and paperwork either way.
If you live in California, you likely have to register in California. So you really only have one option, unless you want to register in two places. You’ll also have to pay at least $800/year for the pleasure.
The follow-up question then is... what are the legal workarounds to avoid having to also register it in one's home state, e.g. California? Surely there are some.
I agree that if you're engaging in the tech business you should have an umbrella llc. I have been asked multiple times to do projects for people and it's always easier to invoice as an llc with everything already set up.
However most software engineers don't engage in the tech business at all outside of regular employment. It's not useful for them
>Cost-wise it’s maybe $500 a year, all in (unless you have the pleasure of living in California, in which case you have to add their inane $800 on top). But that’s pretty reasonable considering the optionality it gives you to just… build shit these days.
You don't need an LLC to build things and sell things. And you also get the downsides of needing to stay at an office to be able to be served or having to have your active home address be publicly viewable.
You don't have to actually be physically present at your registered address, but they do need to be able to serve legal papers there. Any incorporation agent you use will be able to accept them on your behalf.
additionally many RAs offer mail forwarding/virtual offices (that can even accept deliveries) for pretty affordable , eg northwest registered agent offering seemingly millions of sheridan wy suites
> "An LLC will help you force a separation of personal and work finances"
No it won't.
> "it’ll help you accept payments"
No it won't.
> "or sign up for a bank account"
No it won't.
An LLC doesn't make those things any easier than they already are (very easy) as a sole proprietor.
An LLC only does the liability thing. And that's fine. Just don't make other things up. You don't need to.
An LLC does help with getting a proper EIN and DUNS number which helps greatly in establishing trust in a relationship with a new client.. Yes it absolutely helps with accepting payments.. having an EIN is necessary in many cases..
> "An LLC does help with getting a proper EIN"
No it doesn't. Sole proprietors get EINs just fine. It's literally the first option on the first page of the application. https://sa.www4.irs.gov/applyein/legalStructure
> "and DUNS number"
No it doesn't. Sole proprietors can get DUNS numbers just fine. It's literally the first option when you tell them how your business is structured right after telling them your name and email address.
> "Yes it absolutely helps with accepting payments"
A billion people accepting payments in every possible form without being incorporated say that you're wrong. No method of payment processing, from credit cards to memecoins, cares whether you're incorporated.
> "having an EIN is necessary in many cases"
Again, getting an EIN and forming an LLC are completely unrelated.
There are many financial products which require business incorporation.
"Financial products" is vague, so what if we just go down the list of payment methods and see which ones require being incorporated.
Credit card? No. ACH? No. Wire transfer? No. Cash? No. Crypto? No. Check? No. IOU on a napkin? No. Pokemon card? No. Sex? Weirdly illegal in most places, but still no.
...uh...which ones did I miss?
You can certainly use all of those mediums via consumer fintech, but you will often find yourself limited to products which are designed for consumers, and many B2B service providers may refuse to work with you.
Nobody said consumer fintech? You can just operate as a business. "Sole proprietor" is a real thing that almost every service knows how to deal with, and if one can't there's a competitor willing to right next door.
"Sole proprietor" is a real thing that many B2B services deal with by throwing your application in the trash.
Yes, you can go get a personal loan, or a retail banking account, or a personal payment processing account, but as I said, you're going to be locked out of a lot of B2B products.
Sure. If you absolutely need one of those services then you do the thing. Most of the time there are alternatives, IME.
Example, since you edited to add examples: I have several business bank accounts and far too many Stripe accounts all registered as sole prop. I haven't had to take a loan but I do have a sole prop credit card. My understanding is that even with an LLC a bank is going to require a personal guarantee for a loan.
It doesn't force you to do anything, same as a sole proprietor.
What it does do is that since it provides a rigid structure, it compels law abiding citizens to do those actions, not forcing still.
You would have a hard time proving liability if you didn't have separated finances.
Forming an LLC doesn't make separating finances any easier. It doesn't help you do it or help you force yourself to to do it. My objection is specifically to the claim that it helps you do anything. It doesn't.
Also, you should separate finances as a sole proprietor too.
Some vendors will only deal with companies (of all types) and refuse sole proprietors as customers, either because they don't know how or because they judge you as unserious. This comment is based on an actual experience I had.
LLCs are great, but you should be aware that single-member LLCs may offer less liability protection than you expect, and in some circumstances it can be easier to pierce the corporate veil.
If you're worried about piercing corporate veils, you're probably not trying to get your lil' side project off the ground.
Single-member LLCs may reincorporate as any other type of corporation to meet growth, or other needs.
For all these things I think just having an EIN is simpler.
You don’t even need that to start; you set up Capital One (for example) business accounts using your SSN. The EIN is just to avoid putting your personal SSN on invoices.
LLC matters if you think you’ll have liability risks.
>The EIN is just to avoid putting your personal SSN on invoices.
In order to do that, your LLC has to elect to be taxed as an S-corp, which requires it to file its own return. Worse, certain states and cities will impose a corporation tax on it.
Otherwise, if you retain disregarded entity status, you have to use your personal SSN for invoices. The corporation EIN is then mostly for employment tax purposes.
(Not actual tax advice)
"For example, if a disregarded entity LLC that is owned by an individual is required to provide a Form W-9, Request for Taxpayer Identification Number (TIN) and Certification, the W-9 should provide the owner’s SSN or EIN, not the LLC’s EIN." [0]
[0] https://www.irs.gov/businesses/small-businesses-self-employe...
> or EIN
Anyone can get an EIN for their sole proprietorship business (just one, though) and use it on tax forms.
You're the best kind of correct, but to be clear, for most income forms submitted to the IRS, the IRS prefers the proprietor file once as an individual and use their SSN.
>>The EIN is just to avoid putting your personal SSN on invoices.
> In order to do that, your LLC has to elect to be taxed as an S-corp, which requires it to file its own return
I think your interpretation is wrong and you have stripped the context on your IRS advice you quoted, changing the meaning. At the start of the paragraph containing your quote, it says "For federal income tax purposes, a single-member LLC classified as a disregarded entity generally must use the owner's social security number (SSN) or employer identification number (EIN) for all information returns and reporting related to income tax."
IMO, this has has to do with how one files their income and/or report to the IRS - as a pass-through entity, the IRS expects the human behind the single-member to file the income under their own own SSN even as after are distributing invoices with their LLC's EIN. IANA(Tax)L
No, you're misreading it. Information returns in most cases is the W-2 you send out to your employees and file a copy with the IRS for their information. I've always said that, for employment tax purposes, you use the LLC's EIN.
The entire quote on the IRS's webpage: "For example, if a disregarded entity LLC that is owned by an individual is required to provide a Form W-9, Request for Taxpayer Identification Number (TIN) and Certification, the W-9 should provide the owner’s SSN or EIN, not the LLC’s EIN.
For certain Employment Tax and Excise Tax requirements discussed below, the EIN of the LLC must be used. An LLC will need an EIN if it has any employees or if it will be required to file any of the excise tax forms listed below."
The original statement was SSN hiding for invoices, that's directly covered in the W-9 example. You can (have to) hide your SSN on W-2s, but not the W-9s you give to customers.
> your LLC
I have an EIN for my Sole Prop consulting business, and no LLC. They are orthogonal concepts.
It’s really easy to get an EIN online without forming an LLC. This is sufficient for any sole proprietor business where you don’t need liability protection or employees.
No, it's not orthogonal. You don't get that benefit for an LLC. It's written on the W-9 form itself. Thus it's a reason why _not_ to have an LLC.
"If you are a sole proprietor and you have an EIN, you may enter either your SSN or EIN.
If you are a single-member LLC that is disregarded as an entity separate from its owner, enter the owner’s SSN (or EIN, if the owner has one). If the LLC is classified as a corporation or partnership, enter the entity’s EIN" [0]
[0] https://www.irs.gov/pub/irs-pdf/fw9.pdf
I have no idea why you’re talking about LLC requirements in response to my Sole Prop non-LLC suggestion, sorry.
I feel like a lot of people (not holman) are looking for permission, as if having an LLC is a marker that says "I am a serious business doing serious business things." You don't need permission. You can just do things.
A formal business structure is good (but not required!) if you have employees and/or business partners, or if your attorney tells you you need one. IME as a solo entrepreneur an LLC (or two, in my case) just invited more paperwork into my life.
You know what actually functionally limits liability as a solo business? Good contracts backed up with business insurance.
Seeming serious is often needed for others to do business with you. E.g. I believe ARIN and APNIC will only let companies hold internet number resources (while RIPE will also allow sole proprietors, but that's only relevant if you're in Europe). Enterprise B2B companies just don't have their systems set up to deal with sole proprietorships.
Sure. If you find yourself needing ARIN services and that's what they need to move forward then that's what you have to do. All I'm saying is that it's not a thing to set up preemptively.
ARIN isn't the only vendor who is like this.
There are all sorts of circumstances you will find that having and LLC is a chance to go through the easier/faster door. The whole article starts off with a painful javajoke and the punchline is sometimes you need to go really fast. That's what already having an LLC handy for helps with.
Recent personal discovery about an LLC, useful for gaining PDK access to proprietary fabs, so I can finally try touching lower process nodes again that are not open source, despite being out of university and not having a job that gives me the PDK access.
As someone living in Taiwan, can I set up an LLC and get all the benefits of it? I now have a Singapore entity that helps me out for getting a Stripe account mainly.
A question is: where do you register one? Should it be Caymans or Panama or South Dakota or Texas or Delaware or your home state?
Also, what type of LLC should it be?
Depends on what's your goal. Privacy and the least amount of paperwork? Probably a place like Wyoming, where your annual report is a single page saying "yeah I'm still alive". But an LLC will usually need to be parallel-registered in the state it's doing business in, so if it's a pain-in-the-butt state like California, might as well register it here - you're not escaping their fees and paperwork either way.
Delaware is for big companies.
If you live in California, you likely have to register in California. So you really only have one option, unless you want to register in two places. You’ll also have to pay at least $800/year for the pleasure.
The follow-up question then is... what are the legal workarounds to avoid having to also register it in one's home state, e.g. California? Surely there are some.
This is kind of California specific. There isn’t really a work around if you’re “doing business” in California.
Well if nothing else I feel a bit better having an llc sitting around doing nothing.
I agree that if you're engaging in the tech business you should have an umbrella llc. I have been asked multiple times to do projects for people and it's always easier to invoice as an llc with everything already set up.
However most software engineers don't engage in the tech business at all outside of regular employment. It's not useful for them
hello from an old TotalSpore-head :)
>Cost-wise it’s maybe $500 a year, all in (unless you have the pleasure of living in California, in which case you have to add their inane $800 on top). But that’s pretty reasonable considering the optionality it gives you to just… build shit these days.
You don't need an LLC to build things and sell things. And you also get the downsides of needing to stay at an office to be able to be served or having to have your active home address be publicly viewable.
That's specifically the $100 of the $500/year fee; you pay for a registered agent to handle all that for you (and shield your address).
You don't have to actually be physically present at your registered address, but they do need to be able to serve legal papers there. Any incorporation agent you use will be able to accept them on your behalf.
additionally many RAs offer mail forwarding/virtual offices (that can even accept deliveries) for pretty affordable , eg northwest registered agent offering seemingly millions of sheridan wy suites
whats the uk equiv?
A ‘Registered Limited Company’, as in ‘Widgets Ltd.’. Per the ‘Limited Liability Companies Act’ of 1855.
Why does everything need to make money so bad, this is terrible advice
"Everything" doesn't need to make money so bad. But if you're interested in making money on the internet, this is good advice.
because we live in capitalism?