Should I set up LLC or INC?
We have quite a lot of questions here at Incparadise about people should start LLC, Corp C or Corp S. Since this questions very complex it is very difficult to answer the question. While answering this question, it doesn’t really tell you which entity you should set up. I will try to give you a few hints when and how you should make a decision.
Limited Liability Company
LLCs are structured as managers and members. Managers are responsible for the company decision and members are the owners.
LLC provides legal asset protection.
Taxation: You pay taxes at the personal level so whatever you earn, it will be regarded as personal taxation.
Investors will always prefer that you set up a C corporation because you can issue your investors’ common shares or more likely preferred shares.
You can not distribute shares to employees. Meaning, LLCs do not give you an option to set up Employees Stock Options (ESO).
Since the company doesn’t have shares, you would have to mention in the Articles of Association the percentage of the ownership of each member.
LLCs are mostly much cheaper to maintain with regard to yearly fees. For example, if you set up a company in Nevada or in Wyoming, you will likely pay very little.
LLCs are very good for owning properties or small businesses.
S Corporation
You convert your C corporation to S corporation. An S corporation functions as an LLC legal entity from the tax point of view.
An S corporation provides legal asset protection.
Before you convert C corp to S corp, make sure that you understand the consequences. The issue might be that the conversion might be costly and you might realize that it was a wrong decision in which case, you will have to convert the S corp back to C corp.
C Corporation
This is my favorite entity. And I would say that 99% of all Silicon Valley startups go for C corp preferably incorporated in Delaware (Why Delaware? This is for another topic).
C corporations provide legal asset protection.
You have directors and shareholders. Directors are the responsible bodies for company decisions. They pass any important resolution into effect.
Shareholders are the owners of the company and elect the directors.
C Corporations have several features which can be used for any startup.
The company has 2 types of shares: Preferred and Common.
- Preferred shares are mostly issued to Investors (They have many preferred rights over common shares)
- Common shares are mostly issued to founders. The founders also create the Employees Stock Options (ESO). If you issue ESO, you would need to set up the striking price, vesting schedule and year cliff.
When you are issuing new shares or looking for investors, there are also many new terms you should study:
- KISS (Keep It Simple Security) – released by 500 Startups (open source document). It is a debt interest. The key is to keep the fees low so you can use it whenever you feel you don’t need a lawyer
- SAFE (Simple Agreement for Future Equity) – it is similar to KISS (open source document). Released by Y-Combinator. It is not a debt and has no maturity date or interest. Investors give a money today for the future equity.
- Warrant – It is like an option. However, there are differences; it is issued by the company.
- Convertible Notes – short-term debt issued by a company to the investor. Convertible notes are usually converted into equity.
Incparadise has also many questions; if any US-based bank opens a bank account remotely for startups, the answer is no. All banks require you to come to the US and open the bank account in person. There might be some exceptions such as Silicon Valley Bank but your business case must be strictly high-tech as SVB is based in the Bay Area; it is quite obvious who the typical clients are, mostly high-tech and IT startups. When I was talking to one of the Bank representatives, I was told they also offer financing and have great connections to Venture Capital.
8,444 responses to “Should I set up LLC or INC?”
Leave a Reply
You must be logged in to post a comment.
naik vespa keliling kota
[…]Here are a number of the internet sites we advise for our visitors[…]
wisata hutan pinus kediri
[…]although web sites we backlink to beneath are considerably not connected to ours, we feel they may be really worth a go by, so possess a look[…]
background tempat wisata
[…]please take a look at the internet sites we adhere to, including this one, as it represents our picks from the web[…]
Yes, it was in the “half life of facts” discussion which is on their YouTube channel.
Заказать еду с доставкой на дом или в офис https://www.pinterest.com/dostavkaedi/ Мы тщательно выбираем рестораны, чтобы предложить вам достойный сервис
variant4
Should I set up LLC or INC? – Tomas Milar
https://p4tkpertanian.kemdikbud.go.id/program-pengembangan-produk-kreatif-bbppmpv-pertanian/
Woah! I’m really enjoying the template/theme of this blog. It’s simple, yet effective. A lot of times it’s difficult to get that “perfect balance” between superb usability and appearance. I must say you’ve done a great job with this. Additionally, the blog loads extremely quick for me on Opera. Exceptional Blog!
They did. Alan came away with like a thousand extra points.
What about Phill Jupitus? I think the sun was there.
I’m extremely impressed with your writing skills and also with the layout on your weblog. Is this a paid theme or did you customize it yourself? Either way keep up the excellent quality writing, it is rare to see a nice blog like this one these days..
What i do not understood is actually how you’re no longer actually a lot more well-favored than you may be now. You are very intelligent. You realize thus significantly in the case of this matter, produced me in my view believe it from so many numerous angles. Its like men and women are not involved except it’s one thing to do with Woman gaga! Your own stuffs excellent. At all times care for it up!
Howdy, i read your blog occasionally and i own a similar one and i was just wondering if you get a lot of spam responses? If so how do you protect against it, any plugin or anything you can suggest? I get so much lately it’s driving me insane so any help is very much appreciated.
I’ll right away grab your rss feed as I can not find your email subscription link or e-newsletter service. Do you have any? Please let me know so that I could subscribe. Thanks.
Youre so cool! I dont suppose Ive read anything like this before. So good to seek out somebody with some original thoughts on this subject. realy thank you for starting this up. this web site is something that’s wanted on the internet, someone with just a little originality. helpful job for bringing one thing new to the internet!
With havin so much written content do you ever run into any problems of plagorism or copyright violation? My site has a lot of unique content I’ve either written myself or outsourced but it appears a lot of it is popping it up all over the internet without my authorization. Do you know any solutions to help stop content from being stolen? I’d truly appreciate it.
Its like you read my mind! You appear to know a lot about this, like you wrote the book in it or something. I think that you could do with a few pics to drive the message home a bit, but other than that, this is great blog. An excellent read. I will definitely be back.
Woah! I’m really loving the template/theme of this blog. It’s simple, yet effective. A lot of times it’s tough to get that “perfect balance” between user friendliness and visual appeal. I must say you have done a amazing job with this. Additionally, the blog loads super quick for me on Firefox. Excellent Blog!
Should I set up LLC or INC? – Tomas Milar
https://decorgallery.net/decor-art-gallery-3rd-ave/
Should I set up LLC or INC? – Tomas Milar
https://libertygroupmcr.com/blog-post-with-gallery/
Should I set up LLC or INC? – Tomas Milar
http://liberte-de-reflechir.fr/forums/topic/buy-cytotec-in-india-523076/