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This is not true. It's very easy to convert from LLC to C corp but not vice versa. As a general rule it's easy to go from flow-thru entities to tax paying entit
by tvladeck 10y ago
This is not true. It's very easy to convert from LLC to C corp but not vice versa. As a general rule it's easy to go from flow-thru entities to tax paying entities but not vice versa. This asymmetry of irreversibility, combined with the fact that most startup exits are asset, not stock, sales, makes the thesis of your post incorrect.
- pdshrader 10y agoSure, as a general rule, but conversions from LLCs to C corps can get very complicated as well in short order, especially when there have been different types of equity issued to founders/employees (e.g. profits interests, convertible notes, etc.). If the cap table is sufficiently large, it can cause ballooning legal costs pretty quickly. Not outrageously so, but companies can expect at least a few thousand to get added to the bill.
- tptacek 10y ago... which is roughly how much money it'll cost to have a good lawyer carefully set up a C-Corp for you.
- andrew_gust 10y agoThis is exactly the part of the process that the first iteration of Gust Launch solved. All the paperwork for incorporation and company formation are streamlined and pretty easy to fill out, and included in the monthly cost. So conversion is much, much more expensive.
- Nullabillity 10y agoSo it's "a few thousand" when/if the need arises vs, at a minimum, $2.4k/yr definitely. That doesn't sound clear-cut at all.
- andrew_gust 10y agoThe subscription cost isn't for the incorporation and formation. Being a Delaware C-Corp is just a prerequisite for users, so we include it as the first step.
- pdshrader 10y agoYup. Noting also that incorporation costs are generally a fixed ceiling, whereas the conversion costs are a likely minimum. ;)