This is wrong. You do not have to be a C Corp to accept investments. Not sure where or how this idea got started. There are even advantages to LLCs that some savvy investors prefer as a matter of fact. It more comes down to the source of the actual money in the fund than the fund itself.

Also they are quite easy to setup. Requiring a simple Internet form and a few checks written here and there.

Additionally it is extremely dependent on the LLC in question as to whether switching will be difficult later on in any way. Sole member LLC with no additional equity holders? You can fill out a form.

EDIT: your edit is wrong too. Whether you switch it from "investments" to "VC investments" or provide a source to attempt to backup your falsehoods.

> EDIT: I should have said very unlikely to raise VC investment even though it is technically possible to raise investment with most types of businesses such as LLC. [1]

We should be careful in how we continue to spread this common misinformation. It is not helping people who are actually new to this and trying to learn. The likelihood of landing VC investment has little to nothing to do with you being an LLC or not.

VC attorneys convert LLCs in their sleep. If they want to invest in only C Corps and you're an LLC, between your legal and their legal: it'll get worked out.

Perhaps not to accept but VCs are going to require it. I think that's what is meant.

"VCs" is not some catch-all well-defined term. To say that all venture capitalists "require" you to be a C Corp is incorrect and further reinforces the very issue I'm trying to address here. There are lots of different types of venture capitalists. From large funds, to institutional investors, to individuals, and everything in between.

Some of them require C Corps. Some of them require S Corps. Some of them require a specific C Corp like one in Delaware. Some of them are just fine and dandy for LLCs. Some prefer LLCs. For all cases[1]: there are appropriate methods and paperwork to ensure parties can come to agreements.

Continuing to add comments to this site with phrases that characterize VCs as being a single entity is confusing and not helpful.

New founders have a lot to worry about. Whether they created the right type of company or not, is so far removed from initial worries and so often easily taken care of at later dates. I don't think it's helpful at all to continue to try and convince them that there is a wrong or right way to do things.

[1] - I dont have any examples where a business owner and an investor couldn't come to an agreement when both parties wanted to work together.

There's a reason this Atlas thing supports Delaware C Corps and only Delaware C Corps. I agree that founders have a lot to worry about. So just get the Delaware C Corp and move on.

You can laugh all you want but this is a pretty serious topic that most founders get completely wrong. I am a bit adamant about the correctness of this because I've had to repeat the advice and information to a lot of people.

For some reason you, and a lot of other folks, have gotten ideas in your head like:

- an LLC is somehow a lesser entity than a C Corp

- you can't raise money with an LLC

- you're not as well protected with an LLC

These are all completely false in a lot of very important ways that can make differences that have many commas when it comes time for liquidity events or payouts of any sort.

> You can laugh all you want but this is a pretty serious topic that most founders get completely wrong.

I appreciate your passion and agree it is an important topic. I just found that specific sentence funny.

> an LLC is somehow a lesser entity than a C Corp

Personally, I have never thought that. They are just different.

> you're not as well protected with an LLC

I would have agreed with you until recently. I bought a house and the audit for the home loan was extremely thorough. They wanted tax and financial records for all sorts of things that I wouldn't think would be relevant. Since I am self-employed that included my business tax and financial records. I pushed back because I don't think that is any of their business and they relented only because it is a C corp. I have only bought one house and have one loan. I don't know if it is standard practice to audit the business too, but in my case having a C corp saved me from a business audit.

> you can't raise money with an LLC

Technically correct, but I strongly disagree with the blanket advice that first become LLC and then later become C corp if necessary. Likewise I strongly disagree with the blanket advice to just be a C corp.

I always ask people what the ultimate goal is. If the ultimate goal is to become Google, Facebook, etc (forget likelihood), then I say C corp. Otherwise I usually say LLC.

What being a founder really means is your job is to build confidence. Build confidence with employees that you are a good leader and they can depend on a paycheck from you. Build confidence with customers that you can build a good product and you will support them if they have problems. Build confidence with investors that you will make them money.

One way to build confidence with VCs is to have the business set up as a Delaware C Corp. If your goal is to become like Facebook, Google, etc then you will probably need VC money at some point and you will be forced to become a C corp eventually too. Why not just do it at the beginning and show VCs you are serious and have some knowledge about what it takes to become a big, public company. That isn't the only way to build confidence nor is it the best way, but it is a way. Why start with LLC and make it a question you have to constantly answer?

> You must be a C Corp to accept investment.

This is not true. You can sell membership interest in an LLC the same way you can sell stock in a C corp.

And in my experience it's fairly simple to go LLC to C. I didn't get confused with S corps.

You as an initial member can sell membership interest, but reselling that interest can be difficult or impossible for a VC. They're looking for future liquidity, and an LLC interest just doesn't have the same statutory guarantees that a C corp share has.

That's not really true either. If the operating agreement permits reselling then you can resell. A C corp's operating agreement can also restrict selling to the point that it becomes impossible - if that's what's wanted. It's common for investors to want such restrictions because they don't want to find that the other investors in the business have changed without their agreement, or that one of the founders has sold a share to an investor that they don't approve of.

Will any actual VC firms invest in an LLC? I've never heard of that but then again I've never worked in that world full time.

Most just require that you convert from LLC to C-Corp, which isn't impossible.

private equity firms will.

Generally true when VC is (potentially) involved.