🚀LLC vs C-corp
Should I form an LLC or a C Corp?
Here is Subhan Law's recommendation on the things you should consider when deciding on whether to form an LLC or C Corporation:
If you are looking for ease of use, to avoid double taxation, and liability protection, then an LLC is a great choice for new businesses. LLCs are considered easier to start and maintain.
If you are currently raising or will need to raise capital, and take a company public a C Corporation is a great choice. US investors prefer a C Corporation to invest venture capital.
At the end of the day: it's your business, your choice!
What are the Advantages of an LLC?
Limited personal liability
Less formalities and paperwork - no annual meetings required
Tax advantages - LLCs avoid double taxation; "pass-through" entity
Flexibility - add owners or manager, choose tax classification, and decide on distributions
Ease to Maintain - less record keeping, lower cost administration and upkeep
What are the Advantages of a C-corporation?
Limited personal liability
Attractive to investors when raising capital from angels or venture capitalists
Tax advantage in certain cases - corporate federal tax rate of 21% and Qualified Small Business Stock (QSBS) under Section 1202 may be able to exclude up to $10 million in taxes
Reasonable compensation to officers and fringe benefits are deductible
Ability to take the company public on a U.S. stock market/financial securities exchange
What's the best state to form my company?
We recommend a Wyoming LLC for businesses that are providing products or services online. Unless, you're going to raise capital, then we recommend Wyoming. You can always convert an LLC to a corporation later, if needed. U.S. LLCs are flexible and offer many advantages.
Should I form my LLC in Wyoming or Delaware?
We are frequently asked by our clients if they should form a U.S. LLC in Wyoming or Delaware. Here is our recommendation:
We recommend Delaware only if you have plans to in the future convert your LLC to a C Corp (to raise venture capital from U.S. investors) or you really want the "prestige" of saying your company is from Delaware. Some customers say this matters to them and if it does, it is your business, your choice!
Otherwise, we recommend Wyoming. Why? Wyoming is the most popular state for non-citizens who want an easy and simple way to form and manage an online, ecommerce, real estate holding company, or other business. It's the most popular state among Subhan Law clients because it has some of the lowest startup costs and annual renewal fees and it was the first state to do all of the following: (a) to create the LLC, (b) recognize a "decentralized autonomous organization," (c) define a "utility token" as a separate asset class different from a security or commodity, and (d) Protects single-member limited liability companies by statute. Lastly, Wyoming has a friendly business environment and has even been called "The Switzerland of the Rocky Mountains" and the U.S. version of Switzerland's "Crypto Valley."
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