Why can’t (or won’t) outside investors fund an LLC?

Typically, LLC’s are not great for tech startups looking to raise outside capital for a few reasons: (1) VC’s really don’t like pass-through entities; (2) the tax partnership rules are super complicated; (3) it doesn’t allow for stock option plans, convertible notes, etc., (4) it gets more expensive and complicated down the road.

That said, if you’re already an LLC it isn’t that difficult to convert into something like a C-Corp down the road when you’re raising. An LLC is cheaper and faster to set up so your converting costs might be offset by the initial benefits of starting off as an LLC.

Check out LawTrades for competitive pricing on company formation as well as converting corporate entities when you’re ready to make the switch.

Feel free to reach out if I can answer any other questions directly 🙂