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I am developing a subscription-based web app, with free tier, and am getting to the point where I need to have more concrete plans regarding setting up a company (LLC, I think) and protecting my company and web app legally and otherwise.

What are the steps I should take? It would be helpful if steps are in order and tagged as required, recommended, or strictly optional but a good idea.

Some things that might be included are copyrighting, trademarking, business licensing, banking, terms of service, privacy policy, etc.

If I can add anything to my question to help you answer it, please leave a comment.

Answer 11679

Here are my recommendations in order of priority:

  1. Create an LLC in your home state. This is fairly easy to do and you can do it yourself. Just look at publicly available corporate docs for similar companies and use those as a guide. You want to do this in your home state because if you do it in another state, you’ll have to register in your own state anyway so that creates twice as much paperwork and fees.
  2. Set up a bank account for the business, and if needed, PayPal, credit card etc. It is very easy to get a business credit card. IMPORTANT: Completely separate your personal finances from your company finances. This makes accounting and taxes much easier.
  3. Write up Terms of Service and Privacy Policy. If your business is low risk (i.e., very unlikely that customers would ever sue you), then you can do this yourself by looking at docs for similar companies and using them as a guide. If your business has some risk, then find a lawyer to do them for you.
  4. Trademark – You get common law trademark rights just by using it. For many businesses that is enough. For most web apps, you probably don’t need a registered trademark
  5. Patent and copyright – You get copyright rights automatically just by publishing and adding the (C) symbol. Patents are very expensive and the value depends on the amount of novelty in your business.

One of the great things about single-member LLCs is that taxes are really easy. It is called pass-through taxation so you are basically taxed the same way as if you were an employee (but there is an extra self-employment tax). It is just an extra schedule to your annual tax returns so you can do this yourself as well and don’t necessarily need to hire an accountant.

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