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This is not legal advice*

I agree with the sentiment of your edit but would like to expand.

The key factor in an early stage company structural organization should be external risk reduction in relation to the founders and seed investors (they are already taking plenty of risk) while providing maximum return and low compliance costs. An LLC provides for this. If "institutional" investors come along then a change to a C-corp is trivial and low cost (when discussing securities sales it is almost non-existent if you are already selling LLC unit securities). The motivation being that the VC/Institutional investors are subject to a different tax structure if they buy units as opposed to shares (due to pass-through). So re-organizing as a result of an offer is completely reasonable in my opinion, just be upfront in discussions. This allows the LLC seed investors to take maximum profit and minimum risk during the pre-VC stage.

If you wish to contribute more to the business while organized as an LLC you can simply increase distribution percentage and have investors (yourself included) buy more Units (this eventuality must be prepared for in the original organization by providing enough units). And yes there is an element of "sales" to this with the current investors but if they bought in once and you paid them they should buy in again.




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