NewCo Tips
Bomee's tips for hanging a shingle...or two
I'm sharing what I've had to piece together on my own, which I hope will give the next person a head start on figuring things out for themselves :)
Several people have asked me for tips on how to start an independent consultancy in New York. These tips, based on my personal experience, should not substitute for professional consultation with someone who does this for a living, particularly on legal and accounting questions!
How I came to start two companies in one year
The first company I set up is a solo consultancy. It is a New York State LLC. Well before I decided to start a solo consultancy, I received the advice from someone I consider a mentor that it would be a good idea to set up a corporate entity just in case I ever decided to take up independent consulting. She added that I should do it, if possible, about a year before actually consulting full time, as MWBE businesses are required to have operated for a year before registering as such. Well, in hindsight, it was great advice and I should have taken it! As it happens, I didn't actually decide to set up a business until I knew for sure that I would to leave my job, but at that point, at least, I knew that I did want to set up an LLC.
The reasons I wanted to go with an LLC (vs, for example an S Corp or just freelance without a company as I had done before) for my solo consulting business are:
- I want to keep track of my business income and expenses separate from my personal finances, and the LLC requirements impose a structure and discipline (expected to) find useful.
- I don't plan to ever have employees, partners, or investors. So, the tax advantages of S-Corp distributions don't really apply here (IMHO).
- I expected to do work that would require certain types of insurance that (I assumed) are available only to businesses.
- I appreciate the limited liability aspect.
Tax treatment was not much of a consideration because I already knew that I would have the income taxed via my personal income tax, would have to pay both the employer's and employee's portions of the payroll taxes, and, of course, the business-related expenses are deductible for freelancers just as for LLCs.
The second company I set up is a Delaware Public Benefit Corporation. As fate would have it later on in the year, I found myself starting a software company that plans to seek outside investment. It's incorporated in Delaware because, by all accounts, that's the option that the biggest swath of VCs are comfortable with, and it's a PBC because my partner and I want to make sure that the social and climate missions of the company are enshrined from the get-go.
The rest of this document goes through the steps I took in forming a NY LLC and a DE PBC/C-Corp. Keep in mind that the services I provide as a consultant (or that of the startup) aren't related to this content - that means that I don't have anything to compare my particular experiences to, and I won't be keeping on top of changing regulations or processes (If you are inclined to get professional advice, please don't let this be a substitute - it is totally not that).
The three steps I cover are:
- Picking a name and securing a URL
- Forming a business entity (in NY or DE)
- Pulling together tools to make operations easy