Choice of Entity: Is An LLC OK? | Startup Law Blog
I am frequently asked by entrepreneurs starting technology companies what type of entity they should form. And I usually advise startups to form as either a C corporation or an S corporation for the following reasons: If you plan to grant stock options to employees or contractors, it is much easier to do this through a corporation than an LLC taxed as a partnership. If you plan to raise funds from third parties in the future, investors typically don't want to invest in a pass through company and receive a Form K-1, and so it typically makes sense to start as a corporation (and if you elect S corporation status, terminating it prior to a fund raise is easier than converting an LLC to a C corporation prior to a fund raise). I think the advice is pretty typical of what startup entrepreneurs hear. In fact, I think the mantra from organizations around town is to form a corporation for your new business. However, it is not always the case that an LLC is a bad choice. I met with an