I’m in the process of incorporating my startup (Website/app). We have 2-4 founding members (depending on how you count, ownership stakes initially would be something like ~(58-40-1-0.1, with some wiggle room left over) and are looking to attract investors for some startup capital, but we have yet to work out exactly how much we’d need. After discussing with an accountant, it seems like our best options for incorporation are either as a multi-member LLC or an S-corp.

So, two things.

  1. Any advice on making the decision between LLC and S-corp?
  2. Initially we were planning on incorporating via Stripe Atlas, but it seems they don’t provide the S-corp option. Is there another service that provides this route, if we choose to go that way?
  • darbywong@alien.topBEnglish
    1·
    1 year ago

    I would strongly discourage relying on accountants for legal advice :) In my experience, very few get it right, at least for startups.

    If you’re raising money, you probably don’t want to be an S corp because of all the restrictions on stockholders there are for S corps. For that reason, S corps are not common at all for startups (the only people that say otherwise are people that think just about any new company is a startup).

    Between LLCs and C corporations, it’s often actually cheaper to go with C corporation because they are more standardized. Even if you were to work with a law firm, the setup you’d get from any reputable startup attorney is going to be highly recognizable to any other reputable startup attorney. With LLCs, everything gets a lot more custom, which means more legal spend.

    IMO the only reason to go with an LLC is if there was a significant chance that you will want to distribute profits to owners. This isn’t the case for most startups (at least as defined by this subreddit) because you’re going to grow and scale quicker by using any profit to hire more people.