united-states, llc, business-registrationThis Wikipedia section lists several possible disadvantages which I have summarized below:
Now assume the following:
Given these constraints, are there additional compelling reasons I would not want to register as an LLC?
I would sometimes recommend using an LLC for a software startup.
We had chosen to use an S-Corp, and I think it may have not been the right decision for one reason - taxes. One of our lead investors was very hesitant to invest, although we ended up convincing him that it could be taxed similarly to an LLC, after getting his lawyer together with our lawyer.
Regardless, if you think your company is going to grow quickly, and take on a very high number of investors, it may be wiser to use an S-Corp, since you can easily transfer to a C-Corp if you ever get to the point of taking on lots of investors.
Just trying to weigh the pros and cons here. It really does depend on your intent to scale and monetize. Hope that helps.
No, If you do not see youreself raising funds then you should be fine.
But in your case the question you need to ask if you go with an LLC is what are you doing with company profits? At the end of the year do you see the 4 of you deciding to split it equally in proportion to your % of ownership? Then you will want to look at an S corp election to take advantage of the single pass through tax.
Or do you see re-investing it back into the company and taking say a pay check? In that case you may want to elect a C corporation status with the IRS so you are not personally taxed for the full amount of revenue the company brings in. I would follow up with a CPA on this one.
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