Re:C Corporation vs S Corporation vs LLC
by tptacek on Monday November 10, 2008 @12:20PM
(#359403)
The advantage to going as far as an LLC is that LLCs can be invoiced and can cut PO's. It's also the bare minimum you need if you have cofounders.
Buried in this table is the major difference between LLC, S, and C:
* Any team member who has equity in an LLC is a member, a.k.a. partner, and members can't take W2 wages, only distributions.
* Conversely, employees of LLCs can't technically hold equity.
* Any external investor in an LLC (probably) must be an SEC "accredited investor", meaning that they have $1MM in the bank or several years of income over $200k.
* The major difference between S and C seems to be that C corps can have preferred (ie, VC) stock.
The long and the short of it is that equity is a mess until you're a C corp, and then everything else becomes a mess.
Buried in this table is the major difference between LLC, S, and C:
* Any team member who has equity in an LLC is a member, a.k.a. partner, and members can't take W2 wages, only distributions.
* Conversely, employees of LLCs can't technically hold equity.
* Any external investor in an LLC (probably) must be an SEC "accredited investor", meaning that they have $1MM in the bank or several years of income over $200k.
* The major difference between S and C seems to be that C corps can have preferred (ie, VC) stock.
The long and the short of it is that equity is a mess until you're a C corp, and then everything else becomes a mess.