4 ms·
That if you're looking to raise funding, being an LLC will be a continued point of annoyance that will become worse as the level of funding rises. You'll be for
by reasonattlm 17y ago
That if you're looking to raise funding, being an LLC will be a continued point of annoyance that will become worse as the level of funding rises. You'll be forced to convert to an S corp as soon as any experienced angels or VCs become involved beause they simply won't do deals with you otherwise - which can be a big headache, legal expense, and drain on time.
- fatdog789 17y agoAn S-Corp is actually worse from the VC standpoint than an LLC, b/c S-Corps don't require incorporation (DBA's can apply for and receive S-Corp status). This means it's easier to take the money and run. Some VCs prefer LLCs because it gives them the risk-minimizing benefits of a corporation, while at the same time giving them a hand in managing the business (a la partnership form). HOWEVER, many VCs, especially the smaller ones, are unfamiliar with LLC law, and avoid it b/c they don't know about it. Some VCs prefer S-Corp because it ideally gives them access to the founders' personal assets, but in practice, a bankruptcy court will try very hard to deny this benefit.