

Ask HN: LLC to c-corp? - zaidf

I'm about to form an LLC for my startup so we can sign our first contract with a client. Right now I am not leaning towards raising $. There is probably a 25% chance that I will seek funding in the near future. Does anyone know how much of a headache it would be to change from LLC to a c-corp in the future? Are you looking at hundreds or thousands more in lawyer fee for the change?
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hga
How much depends on where you are and if the incorporation is out of state,
i.e. in Delaware.

However, why would you need a c-corp to accept investment? An LLC provides a
lot more flexibility and you'd just have to redo you Operating Agreement.

That flexibility comes at a price, an investor can and likely will insist on
modifications that provide him greater protections/rights/whatever that he
would have been able to get with an investment in a c-corp. I've worked for
one promising company who's life was cut short when its devil investors abused
various provisions they had put in the Operating Agreement to gain complete
control (all of nothing, we all resigned, but they didn't seem to mind).

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zaidf
It would be in Delaware.

Investors would almost certainly want vesting terms. I'm not sure that is
possible under LLC.

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hga
It was in Virginia in 1996, or at least the lawyers who drafted it believed
so. Then again, no one knows what's in an Operating Agreement and whether it's
really valid until and unless you go to court, but I don't see why that
couldn't be part of one and have it stand. But it will LLCs where pretty new
for most states back in the mid-90s).

I think you need to talk to a lawyer in your state who's familiar with LLCs
and out of state c-corps to know what's possible and what it will likely cost
(unless you live in Missouri, in which case I can ask my father).

Note also that a less flexible c-corp might turn off savvy investors (the type
you want).

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Scott_MacGregor
Probably thousands. Most attorney things seem to always involve thousands. Why
not just set it up as a corporation right off the bat. By the way, you will
not set up as a C-Corp, only a corporation. The C vs. S thing is a tax
treatment under IRS tax law that you can choose once the entity is formed.

Since you might want to raise money, to me it seems like the most intelligent
thing to do would be to set up a Delaware corporation and operate as a C-Corp.
After that if you decide later that you will _NEVER_ want to raise money then
flip it to an LLC on advice from your business tax person.

