That’s a pretty common question for startups.
Just to preface, I’ve had success starting 2 businesses in law school along with spending A LOT of time navigating the legal hurdles through different stages of the companies (incorporating, stock options, employee contracts, IP, etc…)
Currently I’m helping thousands of startups incorporate their companies at.
Okay, now that we have some credibility out of the way, lets it on.
There are 3 main types of entities that founders consider: 1) LLC 2) C-Corp and 3) S-Corp
In this answer, I’ll focus on LLCs.
An LLC is quite cheap and fast to set up. You determine who the member are and how much each member owns as a percentage. The great thing is you don’t have to deal with the regulatory stuff that C-corps have to adhere to.
- Advantages: 1) you’re not responsible for the debts of the business unless there is a veil piercing 2) flexibility in management rules 3) several forms which you can tailor for your startup 4) flow through tax treatment where you’re taxed once instead of twice like corps)
- Disadvantages: 1)easier to veil-pierce than corps because the law isn’t as well established and 2) state franchise taxes may be applicable
If you plan on raising money relatively soon then it might be worth discuss doing a C-Corp with your lawyer as that structure provides some benefits to investors.
Anyways, if you’re looking for affordable price quotes to get your LLC done from an experienced group of startup lawyers then check out. We use technology to make our legal services more cost-effective than traditional law firms.
Let me know if I can personally help you out in any way. Best of luck with the venture 🙂