EDIT: Before the ink was dry on this post I made some changes. After some research I decided to stick with BrainTree as my gateway/merchant provider–mainly because of their great service and data portability. This choice also forced me to change my billing system from Chargify to Recurly as Chargify doesn't yet support BrainTree's latest software version.
So, I recently decided to pursue some SaaS ideas on the side this year. Since they are completely outside what I'm doing at BIG Folio, I needed my own corporation and new accounts for all the financial stuff. I'm calling it my CMBB stack–feel free to suggest an acronym that rolls off the tongue a little better.
The great thing is, these days you can get almost all this done online with just a few hours of work. Here's what I did as well as some of the other options available.
Corporate Structure
Most online businesses will be choosing between an LLC, an S Corporation, or a C Corporation (maybe a sole proprietorship too). I wont get too deep into this discussion because, frankly, I'm not an expert. You can find some good discussions on Hacker News
here and
here. BizFilings also has a handy
LLC vs S-Corp breakdown here.
What I did: I choose an LLC (California based) because I'm already part-owner of another LLC and thus familiar with the tax process. Plus, I have no desire to deal with shares, officers, or investors. I used
MyCorporation.com to file my LLC as they currently have some discounts available. All told, I spent about $400 with them to get the LLC filed. Most of that was express shipping fees and choosing the
rush option for California (because I didn't want to wait months). As far as turnaround time goes, I filed on July 22 and my LLC was visible on the
Secretary of State's search site on August 4.
Other options: If you're not sure which form your company should take, pay a lawyer to tell you. If you can't afford one, check the links above and make your best guess. There are plenty of options for filing your corporate entity online besides MyCorporation. I've heard good things about
BizFilings.
Merchant Account
If you're going to charge for your online service or sell products, you'll need a merchant account and payment gateway (unless you go the PayPal route). It can be a bit confusing when you try and understand who does what, but usually you can get both a merchant account and a gateway from a single service.
What to look for: Make sure you're getting a decent rate and be sure of all the monthly fees. Expect somewhere between 2 and 2.5% per transaction plus an additional $20 to $75 per month in gateway and other fees. Besides fees, make sure the merchant/gateway option you choose works with the billing service you plan to use (see below) and make sure you can export your data should you move on later.
What I did: I got a merchant/gateway account from
BrainTree Millenium Bankcard. I believe they are an affiliate of PowerPay and Authorize.net who will be providing the actual merchant account and gateway. My contact there was easy to work with and the fees were very competitive.
A note about third-party payment aggregation: we do third-party payment aggregation at NextProof and I get emails from Hacker News users every month or so on how we do this. BrainTree allowed us to do this but our account had to be underwritten by a different company and at a slightly higher rate. Plus, this was 2+ years ago. What I've heard now is that few (or none) merchants are allowing TPPA. From what I hear, BrainTree is approving it on a case-by-case basis.
Billing Services
It's a great time to build web-based subscription software because a handful of great recurring billing providers have emerged to make the process very painless.
What to look for: I think it boils down to price and APIs. Most charge a monthly fee based on the number of subscriptions or transactions. Depending on the language/framework you're using, you might find one service has better APIs, libraries or sample code.
What I did: I went with Recurly
Chargify mainly because I'm using Rails and there's a decent gem available. Plus, they were very helpful when I had some questions.
Banking
You're stilling going to need a good ole fashioned business bank account to deposit your money in and pay your bills.
Here's the catch: you need your bank account before you get your merchant account (they need the info) and you need your corporate paperwork and
EIN number before you get your bank account.
What to look for: maybe I'm wrong but I've come to the conclusion that bank accounts are just commodities and banks are either okay or terrible. Look for one with decent online banking, clear fees and no limits on electronic transfers (at BIG Folio we once got hit with some ridiculous fees because our account had a limit of 50 transfers per month).
What I did: I got a business account at Chase (I affectionately refer to them as "ChaMu" since they gobbled up Washington Mutual). I already have my personal accounts there so I'm familiar with their online banking. Plus, I'm looking forward to using
InDinero (a YC company) and Chase is one of the 8 banks they support at this time.
Other options: you probably don't need my help finding banking options.
Hope the above is helpful to some. If I missed any good options, leave a comment.