Which business entity to create that will work for me?

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Which business entity to create that will work for me?

Hello, I’m partnering with a person from Canada to create a software company in VA and trying to figure it out which entity would be best for us. LLC or C corp? Would like to file taxes as S Corp. And later on we will need investors to take it to the market.

Asked on June 6, 2017 under Business Law, Virginia

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

As a practical matter, there is little to chose between with a subchapter-S corporation or an LLC: a C-corp would not be the right choicer, if you want to "file taxes as an S-corp."
As to LLC or S-corp: both provide the same liability protection and let you get the same tax treatment (when setting up the LLC, elect "partnership" or "pass through" tax treatment). Usually, an LLC offers small but real advantages of requiring less formalities and paperwork (e.g. no need for corporate meetings and keeping the minutes thereof), but if you want to later have investors, an S-corp may be better: it is somewhat easier to bring in investors at  a subsequent date by giving or selling them shares of a corporation than by admending or revising an operating agreement for an LLC to make them members. But this is, as with the edge that LLCs have in terms of lack of paperwork, only a small advantage: you could do an LLC or an S-corp and either would serve you well.


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