The question, “should I form an LLC or Corporation,” will come down to a handful of factors. These factors include your short & long term goals, business model, and potential tax liability.
When wearing the hat of a high-tech startup attorney, we typically advise clients to form C-Corps. C-Corps can issue large amounts of stock (equity) which allows investors to have a passive role in the day-to-day. LLCs have membership interests and are a relatively new type of legal entity, which makes them less enticing for venture capitalists. Corporations have been around for over 100 years, so the legal precedent and protections afforded to stockholders, officers, and directors, are generally set in stone (depending on the state).
When the small business lawyer hat is on, and it’s been established that you’re short-medium term plans don’t include venture capital funding, an LLC might be a great fit because they offer pass-through taxation and have less operational red-tape than Corporations.
It’s also possible to start out as one entity and switch to another (harder in some states than others). Both entities have pros and cons, and each matter requires a separate analysis of the facts in order to determine which entity is a better fit. Contact the Law Office of Elliott J. Brown to discuss whether an LLC or Corporation is better for your future plans and goals.