HACKER Q&A
📣 elamje

Advice on single-member LLC for consulting or SaaS business?


Disclaimer: I will not, and you should not, use information in this thread to make decisions. This only serves a starting point for getting information, not a replacement for, legal and tax advice.

With that out of the way, how do you, as a single-member LLC run your SaaS or consulting business? I’m trying to compile information on how to bill clients (give EIN or SSN), how to do accounting, or any crucial tips you have for running a software related LLC.

Any and all tips are appreciated!

  👤 davismwfl Accepted Answer ✓
A lot depends on the state in which the LLC is formed and in which state are you operating. For example, single member LLC's in some states are not as protected as a multi-member (or standard corporations C or S), but in other states they are equal. In IRS terms generally they are no different, but the operating agreement is critical.

The LLC's Operating Agreement is likely the single most important document to create, manage and maintain. So much is based on the operating agreement that without a properly defined one, I'd argue the LLC isn't really valid. If you don't have one, you need one and you need it to be specific to the state law that you are formed and also operating under.

EIN's are generally not obtained by an LLC unless you are a multi-member or employ a person that is not an owner of the LLC. Either one of those is typically the reason to file for an EIN, even if it is just the intent is to employ people in the next 12 months or whatever, usually you obtain an EIN. This dictates how you fill out tax forms for companies during billing.

Running consulting out of an LLC is a great way to go, I built 2 successful consulting agencies using the LLC structure even taking in some outside money in one of them to help us scale a product. LLC's are super flexible and while pretty easy to manage there are a few things to look out for, the operating agreement being the most critical piece IMO. The OA literally defines how you distribute funds, assets, allocations, voting, adding members, removing members, managing the business, dissolution etc. So without it the company isn't really legit in my mind. Most states don't require you file an OA and so people don't understand that it is so critical and without it you are subject to court interpretation and weird defaults depending on the state etc. Some banks require you to show them the OA before they will open an account in the businesses name, not super common, but not rare either.

Also, for any LLC or company, make sure you get your DUNS number and setup a couple of small credit accounts (even for tiny amounts) just so you build the credit as early as possible. This can literally help save your business later.