Apr 6, 2021

When to Incorporate - Bite-Sized Legal #1

By Bite-Sized Legal • Issue #1 • View online

Hello,

Welcome to the first issue of the Bite-Sized Legal Newsletter.

In the very first issue, you’ll learn when does it make sense to incorporate.

This is one of the most common questions I get from indie hackers and freelancers.

And the short and simple answer is - it depends on where you are from because of banking.

Indie makers and freelancers from developed countries have access to world-class banking.

Those from not-so-developed countries have not. Payment options such as PayPal, Stripe, Braintree, and others are not accessible to every talented creator on this planet.

That’s why we need to draw a line between these two groups.

Makers and freelancers with access to world-class banking

If you are lucky to have access to world-class banking options, including access to Stripe, PayPal, and similar services, use the following framework to understand whether you need to incorporate yet or not:

Start your project and try to make money.
Do not incorporate until it makes you money.
Incorporate once the project starts making money and you expect to keep it that way.
You can start with an LLC. Solo founders do not need a C-Corp until they onboard co-founders or raise VC money.
It is wise to think about incorporating abroad due to taxation issues (particularly if you are from a country with a high corporate tax rate), but you can optimize for that later.

Makers and freelancers without access to world-class banking and payment processors

I feel your situation. I’ve been there, done that.

It is best to incorporate abroad as soon as there is a possibility to make some money online.

Although I have no specific business at the moment of writing this email, I have a single-member LLC in Wyoming that saves me from shitty payment processors and allows me access to a US bank account, PayPal, Stripe, Wise, and others. I use them to receive payments for my freelancing work.

If some of my side projects make it, I have an up and running company and don’t need to think of incorporation.

In the meantime, running the Wyoming LLC is very simple and very cheap.

So, if receiving payments bother you, incorporating abroad is a no-brainer. For non-US solopreneurs, Wyoming LLC and New Mexico LLC are the best options. More on that in some of the next issues.

Let me know if you have any questions. I’ll be happy to respond.

Also, if you anyone who would benefit from a newsletter like this, forward them this issue and this link.

Stay safe,

Petar

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Legal for makers and freelancers, weekly, for free.

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