How much more complex is a C-Corp vs. LLC?
I've been researching this a lot and I understand the difference between the two, but I'm having difficulty determining if my use case warrants one over the other.
I have been building out the product here and there for 2 years, but only decided to try and make it into a business in the last 6 months. I have a decent MVP (it's more like a medium viable product). I am going to launch the private beta in a couple weeks, so no users/revenue at this point.
I'm considering bringing on a couple partners, who I've worked with in the past for some equity, but they haven't put in any work yet. I feel like putting them on a vesting schedule is an good way to ensure that I'm getting value out of giving away equity
I also am trying to convince an industry leader who I trust, to be my advisor for a little equity.
I don't plan to raise money any time soon, but wouldn't be opposed to selling the company down the road.
My gut is telling me to create a C-Corp with Stripe Atlas because I trust them, but I'm wondering if I'm adding unnecessary tax and money complexity by not going with an LLC (which Atlas no longer offers) at this early point.
I'm wondering if any fellow IndieHackers have wisdom or perspective they could lend me. Thank you in advance.
If you ever plan to raise venture capital, definitely go with a Delaware C-Corp. Most major firms will make you change your structure if it isn't already setup that way. It can also be a red flag during due diligence and make the whole process much more challenging.
If not, I'll defer to the other answers 😄 I've only setup C-Corps, but I think there may be tax benefits to an LLC
Hi John,
I owned a California LLC and a Delaware C Corp at some point. Here is my checklist to decide between LLC or C-Corp: http://djaodjin.com/blog/boutique-entrepreneur-llc-or-corp.blog.html
Assuming all your partners are US citizens (otherwise LLC is somewhat out of the question), the choice boils down to how flexible you want to be able to take money out of the business on a month to month basis, and how often do you want to "sell pieces" of the company to attract capital, employees, etc.
It is usually straightforward to turn a LLC into a Corporation when needed as long as it is done in the same State.
Thank you, Sebastien! That's really helpful. Reading through your checklist now.
You are welcome. I realized the actual expenses between LLC or C-Corp are in a different post - http://djaodjin.com/blog/breaking-the-curse-of-negative-cashflow-in-saas.blog.html - at the end under "Expenses".