4 ms·
Starting company with no funding–-do I need a C Corp?
Been going back and forth on this for weeks. I’m at the point where I need a legal entity as a liability shield but I’m not about to raise a round so not sure if I should go the full nine yards with Clerky or do an LLC and either get it acquired by a new C Corp or convert it later on when I need funding.
I’ve had a bad experience with big law severely over billing on deferral so I don’t really want to go with them.
Has anyone done this before? Is having a C Corp the expensive pain in the ass that it seems like? Is conversion easy? Would appreciate any advice/experiences.
- bearjaws 3y agoI view C Corp the same way as asking the question "how do I make my infrastructure scale to 1 million users (I have 0 currently)". Make a successful LLC or S Corp, then worry about the structure. Unless you plan to give out equity immediately, LLC is very easy. I personally went with an S Corp since I already have revenue, and it made the paper work lighter than a C corp.
- verdverm 3y agoThis, start with an S corp. It is easy to turn into a C corp if/when the time is right and is much easier for all the legal/accounting things early on
- carnivoroust 3y agoAny recommended services for an S corp? Really don't want to go the big law route again.
- verdverm 3y agoNope, I'd always recommended a lawyer. You'll get what you pay for and going cheap to avoid legal always costs more in the end when you have to clean it up
- bearjaws 3y agoI used inc file, it was pricey but it worked really well.
- codegeek 3y agoWhich state are you in ? If in NY/NJ, I can recommend some CPAs that I have personally worked with.
- ezekg 3y agoWhy not go with a simple LLC and then elect to be taxed as an S-Corp later when it makes sense?
- epc 3y agoOne thing to consider with a C corp in the US is that it could qualify for QSBS tax benefits. Basically if the resulting entity remains under 50MM in assets and you hold the stock for five years, capital gains can be reduced, to 100% in some cases. There's a variety of restrictions, notably it must be a C corp, not an LLC nor an S Corp (unclear to me whether a C corp which converted from an LLC would qualify). Nominally an LLC will give you basic financial liability shielding but I'm finding whatever advantages there were of an LLC wash away if I start having to do multi state (US) business since I have to file for foreign LLC qualification in each state. See: https://www.investopedia.com/terms/q/qsbs-qualified-small-business-stock.asp https://www.investopedia.com/terms/q/qsbs-qualified-small-bu... https://www.sba.gov/blog/qualified-small-business-stock-what-it-how-use-it https://www.sba.gov/blog/qualified-small-business-stock-what... https://carta.com/blog/qsbs/ https://carta.com/blog/qsbs/
- swampthing 3y agoClerky CEO here :) I just wanted to pop in to let you know that we touched on this topic a bit in our handbook on startup incorporation: https://handbooks.clerky.com/startup-incorporation/what-about-llcs#possibility-of-conversion https://handbooks.clerky.com/startup-incorporation/what-abou... https://handbooks.clerky.com/startup-incorporation/what-about-llcs#ease-and-cost-of-operation https://handbooks.clerky.com/startup-incorporation/what-abou...
- brudgers 3y agoNo. The only reason to have a C-corp is because actual investors are actually paying for it. Not potential investors. Not just in case. Good luck.
- nyggsautomation 3y ago[dead]
- lulznews 3y agoDo not form a C Corp unless someone is writing you a 6+ figure check to do so.