

Ask HN: I'm building a startup, should I do LLC or C-corp? Why? - genystartup

I am building a startup and want to incorporate it, I was gonna do LLC but someone suggested C-corp. What's the benefit(s) of one over the other for startups specifically and why?
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alphast0rm
Here's an answer from YC partner Gary Tan:

"If you ever want to take outside investment, you'll want to be a Delaware C
corp. It's just standard and investors know how to deal with it. Even Facebook
started as something else, but had to reincorporate.

It's not too difficult to fix, but might as well the avoid the problem in the
first place." [1]

[1] [http://www.quora.com/Y-Combinator/Why-does-Y-Combinator-
reco...](http://www.quora.com/Y-Combinator/Why-does-Y-Combinator-recommend-
against-forming-an-LLC)

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PythonDeveloper
Start it as an LLC. You'll make the Subchapter S adoption for the IRS. It used
to be that VC's would not fund an LLC, but that is not the case anymore.

You can change your LLC into a C-Corp any time, or you can form an LLC and
have it acquire the LLC for tracking purposes if your VC wants a c-corp.

LLC's pay taxes as an S-Corp, which means all the income and expenses pass
through to you, the owner, and taxes get paid on the profit based on your
personal tax rate.

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nanijoe
What benefit does an LLC possess over a C corp? Bear in mind that a C Corp can
also make an S Corp election.

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thejteam
Significantly less paperwork for one. You can form an LLC with a single sheet
of paper in some states. No separate tax forms to file. Any losses pass down
to the members, which is especially beneficial when you are starting since
lots of startups(in fact any new business) will probably have losses. I am not
an accountant, but I think you can also offset income from previous years if
your losses exceed your total income.

Edit: I'm not too familiar with the S-corp election for C corps, so most
likely most of the pass-through benefits apply there as well.

~~~
nanijoe
It took me about 20 minutes to form a C corp in NJ , using the state's
website. I don't know how much easier it can get. BTW, if you have an LLC ,
you still have to file the S corp election form with the IRS. All I can say is
that you should definitely speak with an accountant before deciding what is
best for your situation

