abanoub-ashraf/indie-business-ops

Indie Business Operations Skill

Business operations framework for indie iOS/macOS developers. Use this skill when the user wants to understand business structures (LLC, sole proprietorship), tax implications, bookkeeping, legal considerations, or operational aspects of running an indie app business.

When to Use This Skill

Trigger on phrases like "LLC", "business structure", "taxes", "self-employment tax", "S-corp", "bookkeeping", "track expenses", "business account", "tax deductions", "should I form a company", or any questions about the business side of indie app development.

Important Note: This skill provides educational information, not legal or tax advice. The user's situation may vary significantly based on location, revenue, and personal circumstances. Always recommend consulting a CPA or attorney for specific decisions.

Business Structure Decision Framework

Sole Proprietorship (Default)

When you earn money from your app without forming a legal entity, you're automatically a sole proprietor.

Characteristics:

• No formal registration required (except business license in some jurisdictions)
• Personal name appears as seller in App Store
• All income reported on personal tax return (Schedule C)
• No liability protection—personal assets at risk

Best for:

• Just starting out, validating ideas
• Revenue under $1,000/month
• Minimal legal risk
• Keeping things simple

App Store Implications: Apple allows individual/sole proprietor accounts. Your personal name shows as the "seller."

Limited Liability Company (LLC)

A separate legal entity that provides liability protection while maintaining tax simplicity.

Advantages:

• Limited liability: Personal assets protected from business debts/lawsuits
• Credibility: Company name appears in App Store
• Tax flexibility: Can elect different tax treatments
• Relatively simple to maintain

Disadvantages:

• Formation costs: $50-500+ depending on state
• Annual fees: Many states charge annual registration fees
• More recordkeeping required
• May need registered agent service ($50-300/year)

When to Consider LLC:

• Consistent revenue over $1,000/month
• Customer-facing products with potential liability
• Want company name in App Store
• Peace of mind about personal asset protection

S-Corporation Election

Not a business structure—it's a tax election that an LLC (or corporation) can make with the IRS.

How It Works:

• Business owners pay themselves a "reasonable salary"
• Remaining profits distributed as dividends
• Dividends not subject to self-employment tax (15.3%)

Example: LLC generates $120,000/year profit:

• Without S-Corp: ~$18,000 in self-employment tax
• With S-Corp (paying $70,000 salary): ~$10,700 in payroll taxes
• Potential savings: ~$7,000+

When S-Corp Makes Sense:

• Consistent profits above $50,000-60,000/year after expenses
• Below this threshold, added complexity rarely justifies savings
• Requires paying yourself a "reasonable salary" (IRS scrutinizes)
• Additional payroll administration

Added Complexity:

• Must run payroll (even just for yourself)
• Quarterly payroll tax filings
• Annual S-Corp return (Form 1120-S)
• Accounting costs increase

C-Corporation

Full corporate structure with separate taxation.

Characteristics:

• Corporation pays corporate income tax
• Shareholders pay tax on dividends ("double taxation")
• Most complex structure

When Relevant:

• Planning to raise venture capital
• Going public someday
• Rarely appropriate for indie developers

Decision Flowchart

Are you making consistent revenue?
├─ No → Sole proprietorship (keep it simple)
└─ Yes → Do you want liability protection?
    ├─ No → Sole proprietorship
    └─ Yes → Form an LLC
        └─ Are profits > $50k/year?
            ├─ No → Stay as standard LLC
            └─ Yes → Consult CPA about S-Corp election

Tax Fundamentals

Income Tax

Revenue minus legitimate business expenses equals taxable income.

Example:

• Revenue: $50,000
• Expenses (software, hardware, services): $10,000
• Taxable income: $40,000

You pay income tax based on your tax bracket on this amount.

Self-Employment Tax (US)

Sole proprietors and LLC members pay both employer and employee portions of Social Security and Medicare.

Rate: 15.3% (12.4% Social Security + 2.9% Medicare) on net profit

Example: $40,000 net profit = ~$6,120 in self-employment tax (in addition to income tax)

This is why S-Corp election becomes attractive at higher profit levels.

Quarterly Estimated Taxes

Unlike employees who have taxes withheld, self-employed individuals must pay estimated taxes quarterly.

Due Dates (US):

• Q1: April 15
• Q2: June 15
• Q3: September 15
• Q4: January 15

Penalty Avoidance: Pay at least 100% of last year's tax liability (110% if high income) or 90% of current year's liability.

Common Deductible Expenses

Definitely Deductible:

• Apple Developer Program fee ($99/year)
• Software subscriptions (development tools, design software, analytics)
• Hardware purchased for development
• Cloud hosting and services
• Professional services (accounting, legal)
• Business portion of home office
• Business internet and phone
• Continuing education (courses, books, conferences)

Partially Deductible:

• Computer used for both personal and business
• Home office (if dedicated space meets IRS requirements)
• Internet/phone (business use percentage)

Startup Costs:

• IRS allows up to $5,000 deduction in first year (if total startup costs under $50,000)
• Remainder amortized over 15 years

International Considerations

If you're not in the US, tax treatment varies significantly by country. Key considerations:

VAT/GST: Many countries require collecting and remitting value-added tax. Apple handles this for App Store purchases but not for other revenue sources.

Digital Services Taxes: Some jurisdictions have specific taxes on digital services.

Tax Treaties: May affect how income is taxed across borders.

Professional Advice Essential: International tax is complex—get local professional guidance.

Bookkeeping Basics

Why Bother

Good bookkeeping:

• Makes tax time dramatically easier
• Helps you understand business health
• Required if you want to raise money or sell the business
• Catches problems early

Minimum Viable Bookkeeping

Separate Bank Account: Create a dedicated business checking account. Never mix personal and business funds.

Track All Income:

• App Store sales (download from App Store Connect)
• Other revenue sources (consulting, sponsorships)
• RevenueCat or similar provides detailed reports

Track All Expenses:

• Save receipts (digitally is fine)
• Categorize consistently
• Note business purpose

Monthly Review: Spend 30 minutes monthly reconciling accounts and reviewing numbers.

Bookkeeping Tools

Wave (Free):

• Free accounting software
• Basic invoicing
• Connects to bank accounts
• Good for simple businesses

Xero (Starts ~$12/month):

• More robust features
• 1,000+ integrations
• Better reporting
• Good for growing businesses

QuickBooks (Starts ~$15/month):

• Industry standard
• Extensive features
• Large ecosystem
• Can handle complex needs

Spreadsheet: For very simple businesses, a well-organized spreadsheet works. But dedicated software is better as you grow.

When to Hire Help

Consider professional bookkeeping when:

• Revenue exceeds $50,000-100,000/year
• Multiple income streams
• International customers (VAT complexity)
• You're spending hours on bookkeeping instead of building

Legal Considerations

App Store Compliance

Apple Developer Agreement:

• Read it (seriously)
• Understand prohibited behaviors
• Subscription auto-renewal requirements
• Privacy policy requirements

Privacy Policy: Required for any app that collects data. Must be publicly accessible.

Terms of Service: Recommended for any app with accounts or user-generated content.

Intellectual Property

Your Code: You own code you write. Use version control as evidence of creation.

Open Source: Understand licenses of libraries you use. Some require attribution, some have restrictions on commercial use.

Trademarks: Consider registering your app name if it becomes valuable. At minimum, search existing trademarks before naming.

App Store Screenshots: Using other apps' screenshots or UI may violate their IP.

User Data

GDPR (EU): Applies if you have EU users. Requires consent for data collection, right to deletion, etc.

CCPA (California): Similar requirements for California residents.

Apple's Privacy Nutrition Labels: Must accurately describe data collection in App Store.

Best Practice: Collect minimal data, be transparent about usage, provide deletion mechanism.

Revenue Tracking for App Developers

App Store Revenue

App Store Connect:

• Download financial reports monthly
• Reports show sales, taxes withheld, net payments
• Keep historical data for tax purposes

RevenueCat Dashboard:

• Real-time subscription metrics
• More granular than App Store Connect
• Integrates with analytics

Multi-Country Considerations

Apple handles:

• Currency conversion
• Many local taxes (VAT, GST)
• Payment processing

You receive consolidated USD (or your chosen currency) payments.

Revenue Recognition

Cash Basis (Simpler): Record revenue when received Accrual Basis (More accurate): Record revenue when earned

Most indie developers use cash basis. Switch to accrual if you get serious or need investors.

Getting Started Checklist

Day One

1. Open separate business bank account
2. Start tracking expenses from day one
3. Save receipts digitally (photo apps work)

When You Start Making Money

4. Understand estimated tax requirements
5. Set aside 25-30% of revenue for taxes
6. Consider accounting software

When Revenue Becomes Consistent ($1K+/month)

7. Research LLC formation in your state
8. Consult with CPA about structure
9. Formalize bookkeeping process

When Profits Grow ($50K+/year)

10. Discuss S-Corp election with CPA
11. Consider professional bookkeeping
12. Review business insurance options

Tools Summary

Formation:

• Your state's Secretary of State website (DIY)
• Stripe Atlas ($500, Delaware LLC/C-Corp)
• LegalZoom, Bizee, Northwest Registered Agent (full service)

Bookkeeping:

• Wave (free)
• Xero (~$12/month)
• QuickBooks (~$15/month)

Revenue Tracking:

• RevenueCat (free tier available)
• App Store Connect (free, required)

Tax Preparation:

• TurboTax, H&R Block (consumer)
• CPA for complex situations

Common Mistakes

Mistake: Not separating business and personal finances Fix: Open business bank account immediately

Mistake: Not saving for taxes Fix: Set aside 25-30% of all revenue

Mistake: Forming LLC too early Fix: Wait until you have meaningful revenue

Mistake: Forming LLC in Delaware when you don't need to Fix: Home state is usually simplest unless specific reasons

Mistake: DIY-ing complex tax decisions Fix: $500 for CPA consultation is worth it for S-Corp decisions

Mistake: Over-optimizing for tax savings early Fix: Time is better spent building product than minimizing small tax bills

When to Get Professional Help

CPA/Accountant:

• Revenue exceeds $50,000/year
• Considering S-Corp election
• Multiple income streams
• International customers
• Any confusion about taxes

Attorney:

• LLC formation (optional—many DIY successfully)
• Partnership agreements
• Complex contracts
• IP concerns

Registered Agent:

• Required in most states for LLC
• Receives legal documents on behalf of business
• Services cost $50-300/year

References

• IRS Publication 334: Tax Guide for Small Business
• IRS Publication 535: Business Expenses
• State Secretary of State websites (LLC formation)
• Calmops Indie Hacker Tax Guide
• TRUiC LLC Formation Guide