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    7 Replies Latest reply on Jun 12, 2009 2:48 AM by harmon_smith

    C-Corp or S-Corp - what is better if I will look for VC and investors?

    OceanList Newbie
      Initially I incorporated my company as a C-
      corporation and I was going to transfer it to S-corporation to make it
      easier to maintain small business company with family members as a
      shareholders. I hear from several professionals that venture capital
      and investors usually prefer to invest in corporations as they provide
      the most flexible and consistent procedures for business and
      investment. Is it true? Does it really make such a difference?
        • Re: C-Corp or S-Corp - what is better if I will look for VC and investors?
          CorpCons08 Ranger
          A C and an S Corporation are both corporations.
          I do not know why it would make a difference.
          I have never had a VC argue either way.

          CC08
          • Re: C-Corp or S-Corp - what is better if I will look for VC and investors?
            Lighthouse24 Ranger

            Professionals may have told you that venture capitalists prefer C corporations because (1) all shareholders of an S corporation must be individuals, and therefore potential VC's would have to be individuals (venture capital funds, venture corporations, and institutional investors would be excluded), and (2) investors in the other alternative, an LLC, would run the risk of UBTI (unrelated business tax income). As you noted, it is the most consistently regulated business form from state to state, so most attorneys advise than any business planning to go public or seek investors someday be formed as a C corporation. Hope this helps.
            • Re: C-Corp or S-Corp - what is better if I will look for VC and investors?
              LUCKIEST Guide
              Lighthouse gave you a great answer to your question. Do you want to tell us more??.
              How long have you been in Business?? Do you have an Accountant?? A Lawyer??
              Have you asked either your lawyer and / or your accountant their thoughts on this subject.
              Good luck, LUCKIEST
                • Re: C-Corp or S-Corp - what is better if I will look for VC and investors?
                  OceanList Newbie
                  OceanList.com
                  was launched 2 years ago. Our company has been established since 2004 and initially
                  it was incorporated in NY. I have been working in Online industry for several
                  years and I have 10 years of experience starting, growing and developing small
                  business companies as Operations Director, General manager and
                  I have decided to dedicate my next growth "project" to my own business
                  -OceanList.com because I see great potential and my ability to compete with
                  well-known boats.com, yachts.com and others by integrating new internet
                  strategies, development technologies, and using direct customer interaction,

                  For now we have 4 people in the company and it based on our own investments. I
                  do work with Layer and Accountant on contract-consultation basis, but prefer to
                  look for the "truth" myself :)

                  I will probably leave it as C-corp for now. Thank you all for your advice and
                  support!

                   


                  Anna
                  Islamova

                  www.oceanlist.com
                • Re: C-Corp or S-Corp - what is better if I will look for VC and investors?
                  AmeriLawyer Newbie

                  Business entities typically have limited liability, which shields the investors from the liabilities of the business. For a business entity, the creditor's relief is limited to the assets of the business. But what about creditors of members of a limited liability company or limited partners of a Limited Partnership? Theoretically, non-debtor partners of an LP or members of an LLC may be forced into an involuntary partnership with a creditor of a member of an LLC or the partner of a partnership. Corporations are Not the Optimum

                  What about corporations?

                  Can somebody take advantage of Asset Protection with a corporation? The sad fact is they can't. A judgment against a stockholder of a corporation can result in judicial foreclosure of the stock of the shareholder/debtor, or "reverse piercing" of the corporate veil so that the corporation's assets can be reached to satisfy the claim against the shareholder/debtor. Other types of business entities are not as exposed as the corporation, and can be subject to the protection of a charging order.

                  It's important to read about corps and asset protection: http://www.amerilawyer.com/assetprotection/asset_protection.htm
                  • Re: C-Corp or S-Corp - what is better if I will look for VC and investors?
                    harmon_smith Wayfarer
                    Here is a difference between C corportion and S corporation.
                    An S corporation has all of the same corporate advantages as a C corporation, except that S corporations are taxed differently. Other than tax treatment, an S corporation is operated in the same way as a C corporation. An S corporation must follow the same corporate formalities as a C corporation. Like a C corporation, the directors and officers manage the operations of the S Corporation. Just like with a C corporation, the profits of an S corporation must be distributed per the stock ownership ratio (e.g. a shareholder with 29% of the shares, must get 29% of the profit).
                    Unlike C corporation and LLCs, there are restrictions on who can be a shareholder in an S corporation and how many shareholders an S corporation can have.
                    An S corporation can have no more than 100 shareholders. None of the shareholders can be C corporations or LLCs.

                    For more information check these sites http://www.clickandinc.com/ http://blog.clickandinc.com/