NYCPHP Meetup

[inforequest]

Brian O'Connor gatzby3jr-at-gmail.com |nyphp MAIN ONE dev/internal group 
use| wrote:
> Hey guys, I hope this isn't too off-topic, as I'm sure there's a few 
> people here who are in the self-employment arena that can shed some 
> advice.
>  
> As a prefix, I'm going to assume no one is a lawyer and such won't 
> hold you accountable (unless you otherwise say I can).
>  
> I've been doing some side web development over the past 6 months with 
> a designer and things are going great, and we seem to be getting 
> clients at a great pace.  Obviously, the question is arising as to 
> whether or not we should LLC our "group" and make things official and 
> to prevent losing everything we own, and to look more professional.  
> However, I've heard conflicting things about what to do. 
>  
> I was always under the impression that LLC was the way to go, but now 
> I might not be so sure.  What are the rules to getting an LLC?  Do I 
> need an address in the state I registered the LLC in for it to work?  
> Does the LLC need an official bank account in order for the checks to 
> be cashed / money to be transferred?
> How do the taxes work if there's 2 members of the LLC?
>  
> I'm very curious about how this all works!
>  
> Thanks in advance,
> Brian O'Connor
> -- 
> Brian O'Connor
Your specific questions are indeed OT but the topic (addressing the 
issue) is not.

I am not a lawyer, but here's my advice:

1. don't take advice from a list or forum. Read it if you like, as a 
means of gaining perspective from peers, but don't follow any of it. 
Including this part ;-)

2. use this group activity (your first "company") to advance your self 
in this regard. You all need to learn, and education costs money. But, 
if you think education is expensive, you need to check the cost of 
ignorance. Resolving this issue AS A GROUP achieves a number of PERSNAL 
gains for you:

a. you get to see how your group makes decisions about expenses and risk 
management (important for future)
b. you get to see how your group collaborates on tough issues outside of 
scope (who will be the CEO anyway?)
c. you get to see how your partnership values intangible expenses (like 
your own time and effort put into finding a good accountant or lawyer)
d. you get the group to cover the costs of education (your personal cost 
is 1/n of the total cost...which saves you money later)
e. Any individuals who actually worked hard and paid attention, like you 
hopefully, walk away with personal knowledge of how to do it right next 
time (more cheaply)

Note that this is why someone gets to be "CEO"... she takes the 
responsibility for managing the decision process, and later gets the 
credit for having managed it.

3.  Interview several accountants and several lawyers, for free. If you 
can't accomplish that, you're not ready to represent your group and 
incur a bill from one. If the group can't allocate attention to that, 
reconsider your planned organization. It might be best for ONE of you to 
form an entity that employs the others or otherwise manages the 
business. After all, the rewards need to follow the risk.

4. Remember that besides the part about limiting liability and buying 
insurance, there is no correct answer to the question. The proper answer 
from ANY lawyer or accountant is that it depends on how YOU want to 
structure things. How will an individual quit the group? How will you 
all decide what to do with profits earned? How often will that be 
addressed? How to invest more money into the enterprise? How to take on 
another partner? How will each account for the income on taxes (each 
person is in a unique situation in that regard) ? What happens if one 
person doesn't uphold responsibilities?

ANY suggestion from anyone else is just that : a suggestion of how that 
accountant or lawyer might doing it, knowing (probably) less than you do 
about your group and its business. Following the recommended advice 
should not sound like a good idea to you... because it is not. YOU need 
to know what is best for YOU.  Worst case, it is a suggestion of how 
that lawyer or accountant can make the most in fees for the least amount 
of work. Interviewing a few should tell you which ones are mostly 
interested in earning your incorporation fees, and which ones would 
rather get that part going a.s.a.p. so they can help you make and keep 
your $$$, so they get lots more business from you as you grow and need 
more services. Again, is it getting clearer why one person is CEO while 
another is CTO or CFO?

IMHO the bottom line is to do SOMETHING now, without investing $2000, 
and have expert advice FROM THAT POINT FORWARD so you can manage your 
situation properly (legally, efficiently). As you learn and grow, the 
reasons for making specific changes will become apparent; they provide 
the justification you all need to make the decision to change something 
in the future. Nothing going forward should be a guess. That's why you 
pay professionals for their expertise - so you don't have to guess. If 
you ever see that you have a bill from your professional, yet have to 
make what seems like a best guess decision, take that as a clue you need 
a different professional.

I hope that helps ;-)

-=john