4 ms·
Why no mention of S-Corp?
by n0us 10y ago
Why no mention of S-Corp?
- edoceo 10y agoS-Corp is a pass-thru, so not acceptable to take outside money. The investor wants a C-corp. But home State or Deleware is debatable. I chose home State vs Delaware for tax reasons
- zekevermillion 10y agoLLC's are also passthrough by default, though you can elect another tax treatment easily enough. The problem with s-corps is that a valid s-election requires that all stockholders are humans. The presence of a business entity stockholder would void your s-corp status. Keep in mind that an s-corp is not a different kind of entity, it is just a corporation that has a valid election for passthrough taxation under subchapter s and equivalent state income tax provisions.
- edoceo 10y agoYes. And sometimes the investment round you take is from a group of investors that have formed their own LLC - this one LLC takes smaller monies from investors and then, as the LLC becomes an investor in your Corp. So, their LLC need you to be a C-Corp. Or add each of the dozen+ LLC members to your own cap table, what a mess.
- andrew_gust 10y agoIANAL, but I'd imagine being limited to one class of stock would really shoot you in the foot for fundraising (no preferred stock for investors, etc.)