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Legal Questions: Why should I incorporate as a C Corporation instead of an LLC?


Nancy Thanki

Updated 01 September 2022

A C Corp is a better option than an LLC for a few (very good) reasons:

  • 99% of the time, VCs and investors *strongly* favor investing in C Corporations. Learn why most startups file their incorporation paperwork in Delaware.

  • Due diligence on LLCs can be challenging, which drives up costs and delays in closing fundraising deals.

  • Although LLCs permit owner income to be taxed as pass-through income, startup founders will rarely be able to take advantage of this tax treatment in practice.

  • Because they don't turn a profit for many years after formation, the majority of early-stage startups do not pay corporate tax on their income.

  • As long as the company stock qualifies as Qualified Small Business Stock (QSBS) at the time of purchase, the proceeds from selling founder stock in C Corporations can be completely tax-exempt from federal income taxes.

Learn why C-Corps are the preferred structure over LLCs.

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