Why don’t I use a Limited Liability Company (“LLC”) since it is cheaper to start?

Friday, October 19, 2007

Fred Greguras, Fenwick & West, http://www.fenwick.com/

An LLC is often used for consulting and smaller businesses, but not often for an operating business that will seek venture capital. You can decide whether to be taxed as a corporation or partnership when your business organization is an LLC. Losses and gains of the business flow through to the shareholders individual 1040 tax return when taxed as a partnership. Venture capitalists won’t invest in an LLC, you can’t grant stock options to employees and other service providers in an LLC, and an LLC can’t be acquired tax-free in a stock acquisition exit.

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