LLC or C-corp for Aliens :)
Hi,
We are about to launch Audicle in early access for paying customers, and naturally, we want to make it available worldwide.
So obviously Stripe would be a perfect payment solution for us, but the only problem is that we are Aliens... (Non-US Citizens)
Stripe Atlas looks like a good solution for aliens, but we need to figure out whether we want to open an LLC or C-Corp.
After some heavy reading around this question, it looks like LLC is by far, less complicated and less expensive to operate.
But, as an LLC the IP is very sensitive from tax perspectives, and it is very hard to take outside investing which is not something that we are currently working on, but we cannot deny it in the future.
On the other hand, C-Corp is the favorite for startups, and it is highly recommended due to its legal structure and the ease of handling IP and bringing in new shareholders.
But, it is more expensive and more complicated from individual tax perspectives.
So, I believe that some of you here were in the same spot as I am right now, What have you chose? And Why?
Any pieces of advice would be incredibly helpful.
Thanks,
Ron
So I have helped a lot of my non-US startups establish their presence here and hire teams. I have done around 9 of them so far. From past experience and feedback from my startups.
Just my 2 cents
we did the same thing, worked great and going from LLC to C-Corp wasn't complicated when the time was right.
Thank you for the advice.
Having a c-corp is not as complex as it seems. Initial costs are higher, but unless you have a complicated ownership structure or (very) high profits at year’s-end, it boils down to a single online form and franchise tax (~300USD) per year.
Speaking from experience of 6 year old C-corp in Delaware as an “alien”.
I have no experience with LLC though.
Thank you,
What about the individual taxation of the owners? you were not required to do so?
Since I am a non-us resident and don't spend any time there, no, not in the US. BUT, I am required to file individual taxation in my home country.
its applicable if distribute the profits. You can choose to keep the profits in your corporation and roll it over to next year. Unless this is your primary means of revenue.
I was on that same spot a few days ago. We're also aliens incorporating in Delaware through stripe atlas.
I also did a lot of research and basically came to the same conclusion you got. This was my reasoning to decide whether to incorporate as a C corp or as an LLC:
We're a small team outside of the US, I don't think VCs are going to take us seriously until we prove our business logic works and we're making above AT LEAST 10k in MRR. Until that point we are completely self-funded so makes sense to us to incorporate as a LLC and avoid getting taxed at the company level + the owners level. When we get to the point where our business logic works and it's appealing to VCs, we SHOULD have enough space to afford the process of converting our LLC to a C Corp. But I don't think we, at this stage, are going to benefit too much from incorporating as a C corp instead of a LLC.
I would say this reasoning could work for any small size, self funded startup at least you're sure you're coming with the next BIG THING.
It would make more sense if we were in the US with more access to VCs but we're not.
Disclaimer: I'm just a coder who made some research by himself, I'm not an expert on Company incorporation, I could be wrong haha.
Thank you for sharing your experience, It is very helpful.
Important to note that the liability protection entity and tax classification are two separate things. You can organize as an LLC (instead of as a corporation) in a particular state to keep things simple, but then you can elect to be taxed as a C Corp at the federal level to keep all tax liability and income within the company (instead of letting if flow through to the individual owners).
More on the distinction here: https://blog.bookandledger.com/topics/business-formation/intro-to-forming-a-business