|
|
|
|
|
|
by xq3000
2513 days ago
|
|
|
I personally would make a different suggestion here:
1) set up a new corp as soon as possible to be able to track business expenses right away, issue stock, etc
2) use an S-CORP instead of an LLC. All those additional “processes” people usually mention are really just “good business,” not that difficult to keep up with, and ultimately will only add security especially if you will have cofounders / investors.
3) use ONE corp for all your MVPs, track per-product costs nicely for each of them (Xero does it well), and only maybe spin them off into separate companies if/when they succeed |
|
|
One key consideration most people don't know or consider too is if you are a sole founder and in a state that disregards sole LLC membership then most people would consider the S corp to be superior. An S-corp in this case will provide greater protection to the founder's and corporations assets in case of litigation to either the founder or the company. Multi-member LLC's don't have this issue.
That said, LLC's are still easier for most people to manage, deal with taxes and avoid common pitfalls. Most attorney's I have talked to and seen do talks will push people more towards an LLC because they know people will screw up the corporation or do something that adds preventable risk if they don't have experience or professional management/guidance. Obviously this is more geared towards the majority of new businesses that aren't seeking millions of dollars in VC/Angel deals. Once you take outside money the rules and expectations are different.
Speaking of investment though, people many times point out Corp vs LLC under the guise of fundraising, saying you can't take an investment if you are an LLC. If you want to take VC dollars it is true that it is nearly mandatory to be a C-Corp and you need professional legal advice to do this properly. Conversion from an LLC to a Corp is possible, but not always good -- however there are things you can do in the operating agreement and articles for an LLC to make a conversion event nearly tax neutral. But it is false that you cannot take an investment into an LLC and it is false people won't invest in an LLC. Many high net worth people will individually invest in LLC's, just not a structured VC fund where the tax implications and investment thesis may prevent such an investment.