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You must be a C Corp to accept VC investment. It is expensive and time consuming to go from LLC to C Corp. Maybe you mean S Corp which has some similarities wi

by rpedela 11y ago

You must be a C Corp to accept VC investment. It is expensive and time consuming to go from LLC to C Corp. Maybe you mean S Corp which has some similarities with LLC but it is easy to switch to C Corp if you need to. I generally agree they should not offer C Corp though because the paperwork is extremely complicated and cannot be done correctly by an internet form at least in my experience. EDIT: I should have said very unlikely to raise VC investment even though it is technically possible to raise investment with most types of businesses such as LLC. [1] 1. http://www.dividendsandpreferences.com/2009/02/why-dont-venture-capitalists-like.html?m=1 http://www.dividendsandpreferences.com/2009/02/why-dont-vent...

tvladeck 11y ago
> You must be a C Corp to accept investment. This is not true. You can sell membership interest in an LLC the same way you can sell stock in a C corp. And in my experience it's fairly simple to go LLC to C. I didn't get confused with S corps.
- zrail 11y ago
  You as an initial member can sell membership interest, but reselling that interest can be difficult or impossible for a VC. They're looking for future liquidity, and an LLC interest just doesn't have the same statutory guarantees that a C corp share has.
  - jahewson 11y ago
    That's not really true either. If the operating agreement permits reselling then you can resell. A C corp's operating agreement can also restrict selling to the point that it becomes impossible - if that's what's wanted. It's common for investors to want such restrictions because they don't want to find that the other investors in the business have changed without their agreement, or that one of the founders has sold a share to an investor that they don't approve of.
- api 11y ago
  Will any actual VC firms invest in an LLC? I've never heard of that but then again I've never worked in that world full time.
  - beachstartup 11y ago
    private equity firms will.
  - chris_va 11y ago
    Most just require that you convert from LLC to C-Corp, which isn't impossible.
- pbreit 11y ago
  Generally true when VC is (potentially) involved.
  - tvladeck 11y ago
    Right - see my first comment. And you can always go from LLC to C if you're taking VC investment. And you should be able to stay as an LLC if VCs would learn to use blocker corps like PE shops do. VCs don't do that but not for any principled reason as far as I can tell.
randomdrake 11y ago
This is wrong. You do not have to be a C Corp to accept investments. Not sure where or how this idea got started. There are even advantages to LLCs that some savvy investors prefer as a matter of fact. It more comes down to the source of the actual money in the fund than the fund itself. Also they are quite easy to setup. Requiring a simple Internet form and a few checks written here and there. Additionally it is extremely dependent on the LLC in question as to whether switching will be difficult later on in any way. Sole member LLC with no additional equity holders? You can fill out a form. EDIT: your edit is wrong too. Whether you switch it from "investments" to "VC investments" or provide a source to attempt to backup your falsehoods. > EDIT: I should have said very unlikely to raise VC investment even though it is technically possible to raise investment with most types of businesses such as LLC. [1] We should be careful in how we continue to spread this common misinformation. It is not helping people who are actually new to this and trying to learn. The likelihood of landing VC investment has little to nothing to do with you being an LLC or not. VC attorneys convert LLCs in their sleep. If they want to invest in only C Corps and you're an LLC, between your legal and their legal: it'll get worked out.
- rpedela 11y ago
  > Whether you switch it from "investments" to "VC investments" Lol! I noticed I made a typo (missing VC) within one minute of submitting and fixed it. Wow you are fast.
  - randomdrake 11y ago
    You can laugh all you want but this is a pretty serious topic that most founders get completely wrong. I am a bit adamant about the correctness of this because I've had to repeat the advice and information to a lot of people. For some reason you, and a lot of other folks, have gotten ideas in your head like: - an LLC is somehow a lesser entity than a C Corp - you can't raise money with an LLC - you're not as well protected with an LLC These are all completely false in a lot of very important ways that can make differences that have many commas when it comes time for liquidity events or payouts of any sort.
deleted 11y ago
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by rpedela 11y ago

tvladeck 11y ago

> You must be a C Corp to accept investment. This is not true. You can sell membership interest in an LLC the same way you can sell stock in a C corp. And in my experience it's fairly simple to go LLC to C. I didn't get confused with S corps.

zrail 11y ago
You as an initial member can sell membership interest, but reselling that interest can be difficult or impossible for a VC. They're looking for future liquidity, and an LLC interest just doesn't have the same statutory guarantees that a C corp share has.
- jahewson 11y ago
  That's not really true either. If the operating agreement permits reselling then you can resell. A C corp's operating agreement can also restrict selling to the point that it becomes impossible - if that's what's wanted. It's common for investors to want such restrictions because they don't want to find that the other investors in the business have changed without their agreement, or that one of the founders has sold a share to an investor that they don't approve of.
api 11y ago
Will any actual VC firms invest in an LLC? I've never heard of that but then again I've never worked in that world full time.
- beachstartup 11y ago
  private equity firms will.
- chris_va 11y ago
  Most just require that you convert from LLC to C-Corp, which isn't impossible.
pbreit 11y ago
Generally true when VC is (potentially) involved.
- tvladeck 11y ago
  Right - see my first comment. And you can always go from LLC to C if you're taking VC investment. And you should be able to stay as an LLC if VCs would learn to use blocker corps like PE shops do. VCs don't do that but not for any principled reason as far as I can tell.

randomdrake 11y ago

This is wrong. You do not have to be a C Corp to accept investments. Not sure where or how this idea got started. There are even advantages to LLCs that some savvy investors prefer as a matter of fact. It more comes down to the source of the actual money in the fund than the fund itself. Also they are quite easy to setup. Requiring a simple Internet form and a few checks written here and there. Additionally it is extremely dependent on the LLC in question as to whether switching will be difficult later on in any way. Sole member LLC with no additional equity holders? You can fill out a form. EDIT: your edit is wrong too. Whether you switch it from "investments" to "VC investments" or provide a source to attempt to backup your falsehoods. > EDIT: I should have said very unlikely to raise VC investment even though it is technically possible to raise investment with most types of businesses such as LLC. [1] We should be careful in how we continue to spread this common misinformation. It is not helping people who are actually new to this and trying to learn. The likelihood of landing VC investment has little to nothing to do with you being an LLC or not. VC attorneys convert LLCs in their sleep. If they want to invest in only C Corps and you're an LLC, between your legal and their legal: it'll get worked out.

rpedela 11y ago
> Whether you switch it from "investments" to "VC investments" Lol! I noticed I made a typo (missing VC) within one minute of submitting and fixed it. Wow you are fast.
- randomdrake 11y ago
  You can laugh all you want but this is a pretty serious topic that most founders get completely wrong. I am a bit adamant about the correctness of this because I've had to repeat the advice and information to a lot of people. For some reason you, and a lot of other folks, have gotten ideas in your head like: - an LLC is somehow a lesser entity than a C Corp - you can't raise money with an LLC - you're not as well protected with an LLC These are all completely false in a lot of very important ways that can make differences that have many commas when it comes time for liquidity events or payouts of any sort.

deleted 11y ago

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