You should incorporate as early as possible. So if you’re speaking with investors, then thats probably a good indicator to get your incorporation in order.
The LLC legal structure is a common type of startup, but it’s usually not what the investors want. Investors prefer a C-Corporation for a few different reasons.
First let me say, I’ve had some success starting 2 internet startups along with spending countless hours navigating startup legal issues.
Currently, I’m helping 100’s of startups get all their legal stuff done with
Alright, now that we have the experience out of the way, let’s get it on.
First, the C-Corporation is not a pass through entity and the burden of taxes and such are dealt with on a corporate level. Granted, that income is subject to double taxation but investors would rather face that issue that inherit the financial and accounting burdens of the funded venture if it were a pass through entity.
Secondly, it’s much easier for an investor to exit a corporation than it is an LLC. Many investors have their end game in mind way before they ever agree to invest their funds. A C-Corporation usually has to be part of that end game.
Many venture capital funds will have specific stipulations in their own legal documents that prohibit them from making an investment in any legal structure except for a C-Corporation.
If you’re confused about the whole point of even incorporating in the first place, there check out this quick read:
You might also hear that you should probably do your C-Corp in Delaware. Here’s some rationale behind that:
Hope you find this helpful! Feel free to reach out when you’re ready to incorporate or have any further questions.