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What small business structure attracts good investors?

On Behalf of | Sep 4, 2022 | Business Formation |

You have many critical decisions to make before you open the doors of your new small business to the public. If you are still forming your company and have not yet chosen its legal structure, take some time to consider all your options.

Those looking to one day obtain investment capital to expand and grow their operations need a structure that attracts investors. Certain business entities are more appealing to potential investors than others are. Learning the differences between all the options at your disposal can help.

A sole proprietorship is unlikely to attract investors

Unfortunately, sole proprietorships rarely appeal to professional investors. They often view this type of business structure as small-time mom-and-pop establishments. However, your friends and family members may be willing to invest in a sole proprietorship.

A limited liability company (LLC) may attract only a few

The LLC structure is good for business owners and offers many tax benefits. However, investing in LLCs poses a risk of tax complications, so most investors generally pass on such opportunities. Further, some may not legally be allowed to invest in an LLC.

A corporation is most likely to attract investors

If raising investment capital is part of your long-term business plans, a corporation could fill your current and future needs. Nearly all types of investors, from venture capitalists to angel investors, are willing to fund both C and S corporations.

What if you’ve already set up your structure?

It is not too hard to convert your company into an entity or structure that best aligns with your business needs and goals. Doing so empowers you to seek the funding needed to grow and expand while protecting your company.

Business laws vary from state to state. If you are creating your company in Georgia, be sure to investigate these laws and requirements.