Is it better to create an LLC or C corp if you plan to raise Angel or VC money?

 Conversion to LLC to C Corporation is complex. This is a major decision. You will incur compliance costs & also your CPA a will need to close LLC books and handle all tax/payroll compliances.

Also, as a business owner/founder you will later realize that your time will be spent on conversion than focusing on your core business.

The CPA will need to transfer all the assets and liabilities to the new corporation in exchange for outstanding stock of the corporation. The LLC will then need to be closed. There are several ways of handling this but before going into too much detail, it is a complex process.

A better option may be incorporating INC and electing S Corporation. By doing this, subsequently, you can elect C Corporation by just checking a box. Again, this depends on how soon you are going to raise capital through outside investors and there are few other rules etc. that your CPA can help with.

I would recommend consulting a CPA and also your business attorney as needed.

 

** Our response to a question posted on quora.

 

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Posted In: Company Formation

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