My answer to How can I register a startup as an LLC, that I’m starting with two of my friends?
Answer by Raad Ahmed:
Hi there – I’m not so sure that a limited liability company (LLC) would be the right choice. Forming a limited liability company (LLC) can be very valuable for a company. Here’s a few reasons why:
- Easy and cheap to set up, as well as maintain
- Not taxed as an entity [aka not subject to double taxation]
- Protects your personal liability
The best part about an LLC is you’re not subject to all the regulatory stuff like disclosures, costly accounting and yet you still get the personal liability protection. Therefore, it’s ideal for small businesses with a few people.
However, it is not ideal for companies that want to scale and make a ton of money. Why? Because the structure doesn’t bode well for outside investors. A standard corporation called a C-Corp would be the right choice for a tech app that could potentially seek outside funding down the road. Also – the initial decision for which business entity to go with is important because it’s difficult to convert from an LLC to a C-Corp.
Hope that helps clear up some stuff. Starting a business on the side is a very exciting time period, but it’s a decision you should take seriously. If you’re looking for a quick way to find out if your proceeding in the most advantageous way for your business – visit. Our legal platform offers free initial consultations and no obligation price quotes from experienced startup attorneys. Good luck w/ the venture!