If you quit your job during the year (let's say June), then you can deduct your LLC losses the next year, and receive a nice tax refund. You can't do it with an C-Corp.
Why your startup should be a Delaware C-Corp, not an LLC
111–120 of 176 posts
Re: Why your startup should be a Delaware C-Corp, not an LLC
#112Earlier quoted context omitted.
LLCs make perfect sense for startups, too.
If they don't want to grant equity or take investment, sure. But doing one of those two things means the legal costs of starting with an LLC (which aren't standardized) substantially outweigh any tax savings, and almost no startups prior to that point have positive cash-flow anyway so taxed profits aren't much of an issue.
i agree, but it's not just a tax matter - there are also significant organizational and operational implications to be had.
Re: Why your startup should be a Delaware C-Corp, not an LLC
#113Earlier quoted context omitted.
"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.
Figured it was obvious from the username, but I'll put it in my profile as well. Sorry if that was confusing!
[deleted]
Re: Why your startup should be a Delaware C-Corp, not an LLC
#114Reading this made me want to incorporate as an llc... lol
Re: Why your startup should be a Delaware C-Corp, not an LLC
#115Earlier 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
Even though I think they're always meant in good faith, comments like these are virtually never helpful on HN. If you have something interesting to say about someone's affiliation, say it; otherwise, it's probably best to leave it alone.
It was very clear to me and I assume many other people that this user was associated with the article.
Re: Why your startup should be a Delaware C-Corp, not an LLC
#116Earlier quoted context omitted.
I've never done that, but that's not the advice I've gotten from lawyers. In particular, what I've been told is that C-Corp or LLC, there's going to be annoying conversion work at your first VC round.
Why not use Clerky? It's about a grand all-in, and since YCombinator uses them for all their incorporations, it's what all your investors are likely to expect.
Because it generates a Delaware C-Corporation, and a DE C costs more annually to operate than an LLC. Among other things, most small business operators want pass-through taxes.
Re: Why your startup should be a Delaware C-Corp, not an LLC
#117Gust spends no time talking about what happens when you try and sell a C Corp. If it's a stock sale great... if it's an asset sale, incredibly not great... you will have double taxation.
This matters. $10M paid to the company for an asset, turns into $6.5M after 35% corp taxes (using general numbers) and then $6.5M than distributed to shareholders, assume 30%+ (20% + state taxes + AMT (for now)) so $6.5M is now $4.55 after taxes aka 55% paid in taxes.
Given that info just do a stock sale right? Not so easy - not all acquirers want to buy an entire company, that comes with all the liability when sometimes it's just an asset they want with no liability. Often times purchase price is lower for a stock purchase with implied liability, also amortization for the acquisition works differently and an asset purchase again can be more favorable for an acquirer (and sometimes a higher purchase price).
Re: Why your startup should be a Delaware C-Corp, not an LLC
#118You can divide equity and issue incentive equity compensation at an LLC easily --- for less money than it takes to properly incorporate a Delaware C Corporation. We have an LLC with multiple classes of stock and vesting, and it took just a 20 minute call with our lawyer to get there. Our last company, Matasano, was an LLC for its entire lifespan (we eventually filed taxes as an S-Corp, but never reincorporated). LLCs…
> it takes less than an hour to get a Delaware LLC on the Internet
Setting LLC's up is easy (even setting up a C-Corp is considerably easy) but for me the problem is always to maintain it and file taxes and other stuff on time etc. Is there any startup/service that helps me solve that problem?
Re: Why your startup should be a Delaware C-Corp, not an LLC
#119He forgets arguably the most important consideration - taxes. C-corps have double taxation and LLCs do not. For every dollar you pay yourself from your cooperation you'll have to pay on the order of 15% more. If you plan to never make money or just make money by raising money then a C-corps is for you. Other good argument is if you plan on going public. Otherwise strongly consider the tax implications before starting…
If you're raising investment and burning through money, you won't be paying taxes anyway, so it doesn't really matter.
Re: Why your startup should be a Delaware C-Corp, not an LLC
#120I haven’t got a ton of experience in this arena, but what I have done in the past is: 1) incorporate the larger venture as an LLC (“My Company, LLC”); 2) incorporate the specific project as a C-Corp (“My Company’s App, Inc.”) – my partners and I own the LLC, which controls the C-Corp, which holds the assets of the project. Specifically, this makes it easier if we want to sell ”My Company’s App“ to a Facebook- or Goog…
I don't see how this would make it easier? What advantage do you have?