I’m sorry but what? Was this in the US? Because the intro was “oppressive regime,” and then you gave an example of an oppressive regime, and now I’m realizing you might very well be in the US.

I’m just shocked; never considered this could happen. Was this related to your employer, and… Well, I should just ask rather than guess :) thank you for sharing, and I’m really sorry that happened.

One of the best decisions I’ve made recently is to set up a company for myself. More specifically, I set up a non profit “for the world” (mostly as an intellectual exercise of “how hard would it be to mimic what openai originally set out to do? Turns out, it’s not hard!) which then put me in a position where I knew exactly how to set up an LLC for myself for consulting, and how to set up a bank account (use https://www.mercury.com — don’t use anything else).

The takeaway is that, if you’re in the US, you can have protection from exactly this sort of thing, for roughly zero cost — in Missouri the filing fee for an LLC was a whopping $50. That’s how much it cost me to set everything up, start to finish.

I now have a business banking account, quickbooks takes care of the taxes (admittedly $24/mo isn’t “totally free” but it’s also “pretty cheap” relatively speaking) — which means that yes, someone could freeze my LLC (hello IRS) or freeze my personal account (hello US Bank, you suck) but it’s highly unlikely both will ever be frozen simultaneously, unless both the business and my personal accounts are under scrutiny simultaneously.

The cure for that is very simple, as long as you’re rigorous: income comes in to your Mercury account; it flows out into your personal account, by paying yourself a salary. Never use the Mercury account for anything else. Congratulations, your LLC is almost impervious from problems. (My famous last words; the fact is, I have no idea what I’m talking about, and this is what I’m expecting to be true as t approaches infinity).

So yes. Bitcoin: good solution. LLC: also good solution. Wish I’d taken advantage of it sooner.

Unsure about outside of the US though, sadly. Though I’ve often toyed with the idea of making a company specializing in setting up one of those offshore bank tax havens, and offering a product like Stripe whose sole purpose is to automate that. :) Then everybody gets the loophole, rather than a rich few.

Anyway, thanks again for sharing that very unexpected story; I hope it never happens to you again!

Yeah, it was the US. Funnily enough, I never found out why it happened. Everyone claimed to not know, have no access to it, and the people who were supposed to be in touch with me never were. A week earlier I did send a reasonable amount of money to someone in country that is most well known for it's illegal drug industry. Although I have nothing to do with drugs or anything illegal, and no way of knowing if that was even related or not (no one even asked me about it, so hard to tell if it was a coincidence or not)

If you want to protect your money, wouldn't it be easier to open an account in another country and transfer the money there? In Europe we can do it very simple with Revolut or Monese.

When you have money in the Revolut account you can spend them in any country and it would be very difficult for some entity to block your funds.

That's a good point! I don't know anything about that. I assumed it was difficult for a US resident to open a long term bank account in Europe without having to reside in Europe. But that assumption is probably wrong.

Thanks for the hint about Revolut and Monese. Now I'm curious what their requirements are...

I’ve thought of doing this, but how would it work if you have a normal day job? Can you have your job pay you through the LLC?

That’s sadly the catch. I’m sorry — I completely forgot to mention that this works for me because I’m consulting, so businesses pay my LLC rather than me.

However, I will say that one business wanted to hire me full time, and I refused and asked for a higher consulting rate, which they agreed to. So it’s not impossible for your next job to end up similarly.

But then you don’t get benefits (my wife’s health insurance covers us both), sick days, and you probably have to log hours (to my surprise). So even if it’s more lucrative for me right now, there are definite reasons this path isn’t suitable for everyone.

Definitely consider it if you can swing it though. And also, you can simply invoice yourself for services rendered from your LLC, which effectively transfers money from your personal account to the LLC. I’ve had to do this to bootstrap funds into the account (since your balance starts with $0, which is useless).

The problem is tax. There are two issues. One is that an LLC is a pass-through entity. That means all profits are expected to pass through immediately to your personal account, or used immediately on business expenses. If you try to maintain a $20k balance for a year, for example, you’ll discover that this balance counts against your deductions for that tax year (effectively a negative $20k deduction). Or at least that’s my understanding so far.

Therefore, as with most things, you should ask an accountant for advice. But that’s an unsatisfying answer. My answer was going to be, therefore, you can create a C Corp instead of an LLC, and transfer some of your personal funds into that (by invoicing yourself).

The problem (argh, they never end) is that the income will be taxed for the Corp, and then taxed again when you pay from the Corp back to yourself. This is precisely the “double taxation” problem that LLCs were designed to solve!

The reason it still might make sense is because of all the incredible benefits of setting up your own company. For example, merely opening a Mercury account at all means you can redeem $5k of aws credits. $5k! I’ve done this! To my surprise, it happened!

And that’s just one of like 80 Mercury perks. There are so many, and it’s been so much fun window shopping through them all. It’s how I wound up using quickbooks for example.

Plus you’ll have an account that people can wire money to. Mercury has a nice little PDF with all your wire transfer details. It feels like driving a Tesla, whereas US Bank was like not having a car at all. (It was truly one of the worst business banking experiences imaginable. They even managed to lose an incoming $10k wire transfer. Nonsense like that simply doesn’t happen with Mercury.)

So there’s a brain dump of pretty much everything I’ve learned over two months of studying this. The takeaway is that if I had a day job, I would set up a C Corp and transfer a few grand to it by invoicing myself. (No, I wouldn’t use stripe atlas. That’s $500. You can do it yourself for $50, and it’s been surprisingly painless. Both Missouri filing and the IRS EIN were entirely online, so you don’t even have to mail anything.)

Just, uh… perhaps consider it a side hobby. This kind of nerdiness is uniquely fun to me. I imagine that it’s incredibly un-fun for most people. Treating it as a hobby helps overcome that pain, and the risk turns out to be minimal. I was surprised by that.

> . If you try to maintain a $20k balance for a year, for example, you’ll discover that this balance counts against your deductions for that tax year (effectively a negative $20k deduction). Or at least that’s my understanding so far.

You don’t get taxed on having a balance; you do get taxed on the income that generated it. (Or am I missing something crazy?)

My notes so far: https://shawwn.notion.site/Business-Taxes-e9f602855f524618b0...

In one of these links, I am quite certain I saw words to the effect of "if you maintain a balance in the business, then the following tax year, it will count as a negative deduction for the shareholders (i.e. you), because the business type is a pass-through entity, and pass-through entities are expected to pass all of their income through to the shareholders."

The fact is, I don't know whether it was an LLC or a sole proprietorship, and I'm now second guessing what I thought I knew. Because yes, it does sound pretty ridiculous that an LLC needs to maintain a $0 balance or else it will penalize the owners of said LLC. That doesn't sound right.

And yet, words to that effect were located in one of these links. (Hunting for it now.)

EDIT: Welp. Can't find it anywhere. At least I admitted from the outset that "ask your accountant, do not trust me" is reasonable advice for anyone thinking of taking business advice from random HN comments.

I'll downshift to "I don't know whether it's a bad thing to maintain a long term balance in an LLC, but I'll be finding out the answer before the end of this tax year."

If there's no disadvantage to keeping a balance in an LLC, then I revert to "Just form an LLC for yourself; it costs $50 to do so. And you can keep as much money in it as you want, as long as you don't mind paying income tax simply for transferring money into your LLC."

It's possible I was thinking of a negative tax basis for an S corporation, if the S corporation has a long term account balance. But a tax basis is certainly not the same thing as a tax deduction, so I throw my hands up in the air and say "I'll be using a portion of my consulting income to clarify these questions with both an accountant and a lawyer; all advice should be considered suspect."

> Because yes, it does sound pretty ridiculous that an LLC needs to maintain a $0 balance or else it will penalize the owners of said LLC. That doesn't sound right.

It's definitely not correct at all. Neither is issuing phantom invoices to yourself to put money into the account.

A bank account is just a vehicle to store business cash, it really has nothing directly to do with the way you should be maintaining your LLC's books. You should be recording things like that as "capital contributions" which increase your "capital account."

Similarly, profits and losses should be booked to your capital account. I would strongly recommend doing some reading on capital account bookkeeping.

Excellent -- thank you very much for the corrections. I was wondering precisely that, when I was initially funding my Mercury account.

I may have given the wrong impression, but to be clear I certainly wasn't recommending using Mercury as your tax accounting software! I was saying that as long as income flows into your LLC's bank account, and out into your personal account, and that you never use your business account for personal expenses, then you have nothing to worry about.

I really appreciate the reference on capital accounts; not knowing how to classify inbound transfers from my personal account was bothering me. That still raises the question of whether there is a tax, and how much the tax is. Are you saying there's no income tax when you transfer your personal funds into an LLC, since capital contributions aren't income?

After pausing and searching for the answer to my own question, https://howtostartanllc.com/form-an-llc/contributions-and-di... -- the answer is probably "no, not even slightly" and also "this is suddenly quite complicated."

https://www.legalzoom.com/articles/how-to-add-capital-contri... seems slightly less complicated:

> If you plan to contribute property, you will need to obtain a market valuation to determine the value of the property you are contributing to the LLC. Capital contributions in the form of property may also attract a number of potential tax consequences, so it's generally a good idea to consult with a tax advisor beforehand.

> You also can make a capital contribution in the form of services. As with property, you will need to obtain a market value for the value of your services. There also are tax consequences, as you will have to treat this value as if it were actual income you earned for your services, meaning you will have to pay personal income taxes on the value of these services. Because of this, services are not as popular a form of capital contribution.

So, yes, you can "invoice for services rendered" (aka services capital contribution, apparently) but it'll be taxed as income. Therefore, you want to contribute property, and the tax consequences are left as an exercise to the reader.

Looks like I'll be completing that exercise, but perhaps not at 2:30am.

Cheers for the tips.

EDIT: Two more useful resources:

- https://www.law.cornell.edu/wex/contribution

> The capital contribution increases the owner or partner's equity interest in the entity. Capital contributions are not considered business income unless given in the form of a loan.

- https://ttlc.intuit.com/community/business-taxes/discussion/...

> For a Single Member LLC (that has not made an election to be taxed as a corporation), the IRS does not recognize the LLC exists (for most purposes). Therefore, you and the LLC are the same. Therefore, there really isn't such thing a Capital Contribution for tax purposes.

Apparently "It's complicated(TM)" is still the final answer, because single member LLCs can't have Capital Contributions. Hmm.

One reason I post openly about this sort of thing is precisely because people like yourself come out and correct my misunderstandings. So again, thank you! This is certainly a reminder that I have lots more reading to do.