I’m planning on bootstrapping my startup for at least the first six months. However, I do plan to seek investment down the line. Is it easy to switch from an LLC to a C-Corp once I’m ready for investment? What’s the best approach?
Yes. The advantage of having an LLC is the pass through of losses that can offset other income. Thus, many companies do not make the switch until they start to rack up profits. It’s easy to switch. Note that most later stage VCs require a C Corp, but at ff Asset Management we do not.
Take the above as working guidelines, but always seek professional tax advice.
Additional Advice by Founders Space:
An LLC is definitely easier to manage and preferable for most small businesses. However, if you are serious about getting venture funding, at some point you’ll need to convert to a C Corp — usually a Delaware C Corp. That said, it’s not a problem to start as an LLC and see how things develop. Also, many companies convert upon funding. So staying an LLC until you secure a term sheet from a VC shouldn’t be an issue.
Tip: When incorporating, consider using a filing service such as Legal Zoom where they file all the documents with the state, get your record book, and more.