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Why your startup should be a Delaware C-Corp, not an LLC

launch.gust.com

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Re: Why your startup should be a Delaware C-Corp, not an LLC

#91

Post by saycheese »

andrew_gust wrote: post #84
austenallred wrote: post #68

Earlier quoted context omitted.

100% agreed. I have multiple LLCs, one of which I hope to grow into a potentially venture-back-able startup one day. If we get to that point we can create a C corp then. The amount of hassle and money you save now is well worth the headache of fixing things later.

It's actually pretty easy and the difference in cost between LLC and C-Corp isn't substantial (if you use Gust Launch it's all included in the $199-$239 monthly) but either way, since the double-taxation mostly doesn’t apply to high-growth businesses that reinvest capital instead of paying it out, there isn’t actually much difference in tax burden, and what there is is significantly outweighed by cost of converting t…

A past comment from your profile included "Andrew from Gust" within it on a submission about Gust. [1]

Please update your HN profile to disclose any affiliations you have with Gust.

[1] https://news.ycombinator.com/item?id=13196766

Re: Why your startup should be a Delaware C-Corp, not an LLC

#93

Post by StClaire »

jawns wrote: post #77
StClaire wrote: post #10

Fun thing about Delaware: they have an equity court run by the state that functions as a secret arbitration panel. But instead of ruling in line with the law, they rule in line with what's deemed "fair," hence the name "equity court." Unfortunately we don't know how they rule so we can't run statistics on it. But if anyone would like to leak a data set, feel free to leave me a message in this thread

You're talking about Chancery Court: http://courts.delaware.gov/Chancery/ I'm not sure what you mean by secret. Here are some of its recent opinions: http://courts.delaware.gov/opinions/index.aspx?ag=court%20of...

I got two things confused. They had secret arbitration as part of the Chancery court and but apparently it was shut down by the federal courts

Thanks for pointing that out

http://articles.chicagotribune.com/2014-03-24/news/sns-rt-us...

Re: Why your startup should be a Delaware C-Corp, not an LLC

#94

Post by Pyxl101 »

StClaire wrote: post #93
jawns wrote: post #77

Earlier quoted context omitted.

You're talking about Chancery Court: http://courts.delaware.gov/Chancery/ I'm not sure what you mean by secret. Here are some of its recent opinions: http://courts.delaware.gov/opinions/index.aspx?ag=court%20of...

I got two things confused. They had secret arbitration as part of the Chancery court and but apparently it was shut down by the federal courts Thanks for pointing that out http://articles.chicagotribune.com/2014-03-24/news/sns-rt-us...

Arbitration proceedings are normally private and confidential, by consent of both parties, so the fact that it was "secret arbitration" isn't surprising. It looks like the news media were describing this as "secret courts", which seems a little sensationalist.

It seems to have been a way for standing court judges to decide arbitration cases. Without knowing anything about the circumstances, that seems better than having other people who are not judges decide arbitration cases, no? What was the problem with it?

This page seems to have more detail: http://apps.americanbar.org/litigation/committees/commercial... - since it was a government-sponsored program, the public has the right of access because courts have a tradition of accessibility.

Re: Why your startup should be a Delaware C-Corp, not an LLC

#95

Post by icedchai »

saycheese wrote: post #91
andrew_gust wrote: post #84

Earlier quoted context omitted.

It's actually pretty easy and the difference in cost between LLC and C-Corp isn't substantial (if you use Gust Launch it's all included in the $199-$239 monthly) but either way, since the double-taxation mostly doesn’t apply to high-growth businesses that reinvest capital instead of paying it out, there isn’t actually much difference in tax burden, and what there is is significantly outweighed by cost of converting t…

A past comment from your profile included "Andrew from Gust" within it on a submission about Gust. [1] Please update your HN profile to disclose any affiliations you have with Gust. [1] https://news.ycombinator.com/item?id=13196766

Why bother? It's right in his username.

Re: Why your startup should be a Delaware C-Corp, not an LLC

#96

Post by saycheese »

icedchai wrote: post #95
saycheese wrote: post #91

Earlier quoted context omitted.

A past comment from your profile included "Andrew from Gust" within it on a submission about Gust. [1] Please update your HN profile to disclose any affiliations you have with Gust. [1] https://news.ycombinator.com/item?id=13196766

Why bother? It's right in his username.

"Andrew Gust" is a real name, there's zero reason not to disclose the affiliation, and the fact he himself has disclosed it before points to him understanding it's potientally not obvious.

Re: Why your startup should be a Delaware C-Corp, not an LLC

#97

Post by joeax »

> Incorporating as a C-Corporation in Delaware is the gold standard for high growth startups

Not every business is designed to be a "high growth startup". Consulting firms, bootstrapped startups, small micro-ventures, self-published presses, all of these benefit from the ease and simplicity of an LLC. Unless an investor is cutting you a check for $1mil+ I would lean toward an LLC.

Re: Why your startup should be a Delaware C-Corp, not an LLC

#98

Post by Nullabillity »

andrew_gust wrote: post #86
tptacek wrote: post #72

Earlier quoted context omitted.

... which is roughly how much money it'll cost to have a good lawyer carefully set up a C-Corp for you.

This is exactly the part of the process that the first iteration of Gust Launch solved. All the paperwork for incorporation and company formation are streamlined and pretty easy to fill out, and included in the monthly cost. So conversion is much, much more expensive.

So it's "a few thousand" when/if the need arises vs, at a minimum, $2.4k/yr definitely.

That doesn't sound clear-cut at all.

Re: Why your startup should be a Delaware C-Corp, not an LLC

#99

Post by mmckelvy »

The information in this post is not entirely accurate.

You can certainly issue incentive equity, divide up ownership, AND take money from outside investors with an LLC. We did it frequently at the private equity fund I worked for a few years back.

Little known fact -- if you structure your employee's incentive equity as LLC profit interests, the ultimate payout is treated as capital gains as opposed to ordinary income (which is the case for vanilla options) for tax purposes. It does take a little more structuring but definitely worth the hefty payoff in my opinion.

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