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A couple gripes: - You will find a number of angel investors happy to invest in LLC's (depending on the stage and complexity of the funding round). While it's
by enjo 16y ago
A couple gripes:
- You will find a number of angel investors happy to invest in LLC's (depending on the stage and complexity of the funding round). While it's true that some investors require a more complex structure, the blanket statement that it's "required" is just wrong. It can also be destructive. There are REAL benefits to an LLC for a pre-revenue startup.
- Place of incorporation. I've never had an investor care about the state we've incorporated in. There are obvious tax implications, but it's often easier and cheaper to just do the paperwork in your state. It really just depends.
Points of emphasis:
83b election: This is SUPREMELY important, and applies to anyone attempting to invest equity (under any legal structure). Without properly handling the 83b you run into incredibly onerous tax issues. Learn about it and do it when you incorporate.
- petesalty 16y agoHave to disagree about place of incorporation. Investors may not care but you should. Delaware should always be your choice. Delaware is very company friendly with laws and procedures that generally make it much easier and cheaper to get things done there (document filings are a prime example). Always, always, incorporate in Delaware.
- walkercorplaw 16y agoI disagree re LLC's: not only won't VC's invest in LLC's, but conversion to a C corp can be extremely complex and expensive. Indeed, it cost one of my clients about $15K to address tax issues relative to such conversion. In addition, issuing "stock options" is a nightmare with LLC's - not to mention the extraordinary complexity of operating agreements, with their complicated layer of partnership tax provisions.
- moolave 16y agoI agree. Youtube was (and still is?) an LLC.