4 ms·
Company structure for a solo bootstrapped founder?
Hey everyone, been working on an MVP for the past year and finally getting ready to launch this thing.
As this is my first venture I wanted to check in here for some advice on what the best corp structure to start this thing would be.
This is a bootstrapped venture that I’m launching in a small market as a proof of concept to start with. I’m looking for the best possible setup to be able to grow quickly and possibly look for outside funding for scaling the business faster in the future.
I believe the MVP will bring in some revenue fairly quickly. If it will be attractive enough for outside investment remains to be seen but I guess what I’m trying to say is that once launched I believe there is a decent chance I’ll be working on this for a while.
The dilemma is that every dollar and hour of admin work counts as a single founder that is bootstrapping so I’m looking for the solution that has the least headaches and is the most cost-effective.
Basically, would the best route just be to register as an LLC in my home state (Colorado) and worry about the transformation to a Delaware C corp if any VCs turn out to be interested later?
I was considering just launching the MVP as a sole proprietor but this is a subscription consumer app and I can’t stand the fact that it would be my personal name as the seller in the App Store rather than the company name.
That leaves LLC home state (CO) or C corp Delaware with a tool like clerky.
My concern with C corp is the money and time that will be spent on admin tasks.
The real question I suppose, is how painful is it to transform as an out-of-state LLC to Delaware C corp in the future? Would the fact that I'm a single owner of the business make the conversion easier? Is there a easy way to transform without triggering tax events?
Would love to get some thoughts and appreciate any advice from the community here.
Cheers,
- streetcat1 5y agoYou are correct with your concern. Start with local LLC. Clerky do not tell you , but CPA for a C corp is around 500-1000$ annually, registered agent is around 150$, and Delaware would require you to pay franchise task of min 350$. Also if you have to Delaware C corp you would need to pay foreign company taxes locally (in CO).
- brookelustig 5y agoThanks for the advice, seems like local LLC is the way to go. Do you have any insights on the how heavy of a lift it is to transform a LLC to a c corp without triggering a taxable event and is the conversion to a c corp a prerequisite before pitching outside investors in your opinion? Thank you again
- __d 5y agoThe best reason not to do this as a sole proprietor is that the legal liability falls on you (your house, your family, etc). An LLC not only gives you your AppStore listing, but gives you a legal shield as well if something goes wrong with the business (ie. you don't lose your house).
- brookelustig 5y agoGood point, thanks for your advice.