

Legal Checklist for Startups - tzm
http://walkercorporatelaw.com/startup-issues/legal-checklist-for-startups/

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tptacek
I think the LLC advice is questionable.

1\. It's true that institutional VC isn't going to invest in an LLC. It's also
part of the C.W. that institutional VC isn't going to invest in your C
Corporation either; there's going to be thousands of dollars spent in
restructuring your corporation one way or the other. It's probably _not true_
that having an LLC is going to prevent you from getting an investment. If
you're worth a VC round, you'll get a VC round; it's just a question of how
much of that round will go to legal fees.

2\. The tax issues for LLCs aren't particularly complex. In fact, tax
simplicity is one of the reasons LLCs exist. If your LLC is paying you ---
you're post-revenue --- _you need an accountant_. Don't DIY your taxes. I've
done dumb things with taxes before. Learn from my errors: it's not worth the
heartache to blow off your taxes. Just get an accountant.

3\. There are common constructs used to grant equity to LLC employees (I
believe they're formally "restricted stock units", but, ask your lawyer ---
who you certainly needed to engage if you were building a C Corp). The bigger
issue to my mind is the fact that the founders of an LLC, formally
"principals", "owners", or "partners", technically aren't supposed to take W2
income, which makes taxes trickier.

Against all of this complexity just note that an LLC is _way_ easier to set up
than a C Corporation, and if it's between an LLC now and a C Corporation
"sometime soon but not quite yet", please remember that the benefits of
incorporating are significant:

* You are unlikely to lose your house in a contract dispute.

* You can invoice and be invoiced.

* Big companies will have a harder time rolling you into letting them withhold taxes for you when they pay you.

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rprasad
You can always organize as an LLC and "check the box" (make an entity
classification election) within 75 days to have the LLC treated as a
corporation for tax purposes.

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tptacek
I'm pretty sure you can elect for S Corporation treatment any time (I don't
know if it costs more later on, I just know that we did it only within the
last few years).

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porterhaney
Curious on the Delaware part, that's the first I've heard that "all investors"
are going to "require" a Delaware formation.

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DanielRibeiro
This not strictly true: they are not going to _require_ it. But many of them
will be _so_ much more more happy with you.

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mattmanser
Legal Checklist for _American_ Startups.

ftfy.

