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Software contractors and entrepreneurs: Do you have a business entity?

ben profile image Ben Halpern ・1 min read

Do you have an LLC or other legal status? What is the standard in your country?

Discussion (19)

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Dylan Anthony

I had an LLC, but the tax laws in my town made it too expensive to keep so I closed it. Now I do contract work as just plain ol’ me.

I strongly recommend doing research on the laws in your local area, I had to pay property taxes on anything the business used even if it wasn’t purchased/owned by said business.

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Ben Halpern Author

I had to pay property taxes on anything the business used even if it wasn’t purchased/owned by said business.

What are some examples of things that require "property tax"? I've always thought of that as just a real estate thing.

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Dylan Anthony • Edited

Where I lived you were taxed on the depreciated value of literally everything used for business purposes. Your computer and accessories, desk, pens and paper, literally everything. There was a massive form to fill out every year with different areas for different types of items.

I had to start paying property taxes every year on a desk I’d gotten for free 10 years earlier. That’s how I knew I had to either move or close the LLC. Turns out I did both 😅.

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Kostja

Yes. LLC.
And the accountant does the accounting so no big deal. Yes, there are expenses on taxes and pretty noticeable, but other than that – happy.

I guess another question here should be this:
"If you are working directly, not thru upwork-type of thing, do you write proper contracts?"

I got burned by that a big-time back in the day. Then our contract was 57 pages including NDA + actual task description. No problems since then. As a bonus - sh%tty clients that wanted to trick contractors from the start didn't bother us.

So, LLC + contract + high enough price – you get somewhat calm business when you can worry about software, not your ass on the line.

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Matt Ellen

I was what is known as a "Sole Trader" in UK accounting speak. It's is easier to run than a limited company, but clients are often reluctant to work with you because because of a tax law called IR35.

Making a limited company is easy, but it does require you to file more paper work, each year, than if you're a sole trader, which is what put me off. My gross income was low so hiring an accountant to look after that side would have been more money than it was worth.

(I'm a regular employee now, so I don't think about it anymore.)

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Francis.B

Hi Matt,
Don't let paper work put you off, I still have my limited company and I have an accountant that look after all my taxes. Having said that, I still ensure that I am involved in what is filed and my expenses as a limited company. I will advise that you find a good accounting company and they deal with your paper works and taxes base on what you submitted. Good luck!

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Matt Ellen

Thanks for the encouragement, but free lancing wasn't for me. I prefer knowing where my next paycheque is coming from. 😁

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Paweł Ludwiczak

Yeap, I have a sole proprietorship registered in my country of residence (Poland 🇵🇱). It's a standard here and I actually think it's the most popular way "of doing things" in tech industry in my country.

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StarfleetEngineer

Yes, I have an LLC for one business/project venture. I am working on a second for another business/project venture.

In general, I advise the following steps for software entrepreneurs, software consultants, and web developers in the United States:

  1. Write a business plan. This will include writing a marketing plan.

  2. File an LLC with your state government. An LLC will provide many benefits and protections.

  3. Open a banking account. Your bank will want a copy of your business plan and LLC documentation.

These three steps, I would argue, are best business practices in general, no matter the country or region. There are also valuable books and resources to help guide a person through the process.

Let me know if you have questions.

Matt

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Vicente G. Reyes

I registered myself as a tech studio in the Department of Trade and Industry in the Philippines. I believe this is the standard way of starting a business in our country.

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edA‑qa mort‑ora‑y

I had a GmbH (Corporation) in Germany. It saves on taxes, but the accounting rates are so high here that overall it doesn't likely help. It's not a small business friendly climate in Germany.

I'm also registered as a sole proprietorship.

My next proper company will likely be foreign, like an Estonian one, or perhaps some other small nation.

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Peter Harrison

I run my own LLC, and although the paperwork and tax obligations are a hassle a bit it opens doors to possibilities that are just closed to other options. There is a separation between my private finances and company finances. Ideally aiming to expand things, and had several employees a few years back. Really depends on your regional laws, the costs, benefits and what you want to accomplish.

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Joe Sweeney

I feel like I should get an LLC, but I haven't yet since I currently work with a tight group of clients that I trust. This leads to a less stressful situation from both a business and workload perspective.

If I were to launch a product (such as a SaaS), I would definitely get an LLC registered.

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ImTheDeveloper

Yes in the UK.
LTD - limited liability company. It's no biggie at all being registered, I pay an accountant to handle the majority of the returns needed.

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Médéric Burlet

We are a registered Private Limited (Pte Ltd ) for Singapore.
pixiumdigital.com

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Giorgos Kontopoulos 👀

Freelancer with Registered individual legal entity in Greece

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Lewis Cowles

I have an LTD, but I prefer to use my sole-traded unless I'm approaching a lot of revenue, in which case I'd take time off or go in-house. Not one for too much paperwork.

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Greg Thomas

Corporation all the way, helps with taxes and buying things like training and materials that get charged to the corporation.