An overview on LLCs for independent developers

1. LLCs for the indie developer
An introduction to what they are
...and why they matter.
Iowa Corridor iPhone Developers Group
March 2011
Wednesday, March 2, 2011

2. Before we begin...
• Read the obligatory big fat disclaimer
• I am not a lawyer, so don’t sue me
This briefing is intended to provide very general and high level information
on the subject matter covered and is offered with the understanding that
the presenter is not engaged in rendering legal, financial or tax advice. If
legal advice or other professional assistance is required, do not hesitate to
contact your appropriate legal, financial or tax professional. The presenter
is in no way liable to you for damages. Your viewing of this briefing serves
as your consent and agreement to this disclaimer.
Wednesday, March 2, 2011

3. In the beginning
• It’s just you, some ideas, and a bag of chips
• Tendency to focus on development
• The carrot
Wednesday, March 2, 2011

4. Eventually
• Assets will accumulate
• Acquire more liability
• Bad people tend to take notice
Wednesday, March 2, 2011

5. The potential for risk grows
• Someone may “claim” you are at “fault”
• It could be for anything ...even stupid things
- you stole something from them
- you hurt or damaged someone
Wednesday, March 2, 2011

6. Fault == Liability
• is this a legit claim vs. ploy for settlement?
• If you are found to be at fault, you are liable
• But hey, what if I’m not at fault ! ?
• The burden of proof alone costs time and $
Wednesday, March 2, 2011

7. Limiting the liability to
things we care about
• Your time as a developer
• Savings or investments
• Personal assets
• Future income
Wednesday, March 2, 2011

8. Options to reducing exposure
• Don’t be shady in the first place
• Use EULA’s, SLAs, NDAs, and contracts
• Operate as a business entity (not yourself)
• Acquire good liability insurance early
• Acquire good legal counsel early
Wednesday, March 2, 2011

9. Types of formation
Legally Financially Tax
Type
Responsible Responsible Liability
You (no formation) You You You
Sole Proprietorship / You /
You You
Partnership Partners
Limited Liability
LLC LLC You
Company (LLC)
Limited Liability
LLP LLP Parnters
Partnership (LLP)
C
Company Company Company
Corporation
Subchapter S Shared between Owners
Company Company
Corporation and Company
Wednesday, March 2, 2011

10. Benefits of an LLC
• Creates a separate legal entity
• Liability protection of a corporation
• PNL’s are “passed through” for taxation
• Deduct certain expenses
• Establish business credit
• Survivable
Wednesday, March 2, 2011

11. But what if I’m lazy?
• LLC’s are NOT required to file annual
reports. (except in Iowa LLCs are Biennial)
• !Shares == !Shareholders
• Officers, Directors, et al are NOT required
• LLC’s don’t file corporate taxes
Wednesday, March 2, 2011

12. Where do I start?
Options Duration Rough Cost PITA Meter
File yourself 1-2 Months $50
Online
> 1 Month 200 - 300
Service
Attorney > 1 Month 200 - 1200
Wednesday, March 2, 2011

13. High level steps
1. Clear you business name with the state
2. File “Articles of Organization” with the state
3. Draft an “Operating Agreement”
4. Hold your first “Organizational Meeting”
5. Obtain a Federal Employer ID # (FEIN)
6. Fund a separate bank account for the LLC
Wednesday, March 2, 2011

14. 2011 Iowa Code for LLCs
http://search.legis.state.ia.us/NXT/gateway.dll?f=templates&fn=default.htm
• Iowa Code
• Statutes
• Title XII Business Entities
• Subtitle 2
• Chapter 489
Wednesday, March 2, 2011

15. Clear your business name
Iowa Department of State database
http://www.sos.state.ia.us/Search/corp/corp_search.aspx
US Patent and Trademark Office database
http://www.uspto.gov/trademarks/index.jsp
While your at it...
• domain name registrar
• social media sites
Wednesday, March 2, 2011

16. Articles of Organization
You will need:
• Your business name
• Registered Agent name
• Physical street addr of registered agent
You will receive:
• Certificate of Organization
Wednesday, March 2, 2011

17. Filing Services
DIY
your attorney
www.incorporate.com
www.MyNewCompany.com
www.northwestregisteredagent.com (local)
... others, but do shop around and compare!
Wednesday, March 2, 2011

18. While True Do
✓Be thorough and consistent
✓Keep your finances separate from LLC
✓Document major activities
✓File biennial report to state of IA
✓Accurately carry through PNLs on taxes
✓Consider E&O and general liability insurance
Wednesday, March 2, 2011

19. More Resources
http://www.sos.state.ia.us/business/handbookintro.html
http://www.sos.state.ia.us/Search/corp/corp_search.aspx
https://www.iowa.gov/business/default.aspx
http://www.iowa.gov/tax/business/newbus.html
http://www.iowalifechanging.com/business/startup.aspx
Wednesday, March 2, 2011

20. Questions ?
Wednesday, March 2, 2011