Legal Questions: Why should I incorporate as a C Corporation instead of an LLC?
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.
Get in touch to learn more about Capbase or schedule a call to setup your brand new Delaware C Corp on Capbase! Do you already have a company incorporated elsewhere? Not a problem, send us a bit more info and we'll chat more about your specific needs!
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