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3 reasons an LLC may not be the best entity for a startup

On Behalf of | Nov 12, 2023 | Business Formation |

A limited liability company (LLC) offers benefits like some protection from liability and flexible management. It is a popular option for many new business owners. However, it may not be the best choice for every situation or company.

A critical early step when forming a startup is determining which business structure will provide the most advantages and fewest disadvantages. If the factors below play a role in your circumstances, you may want to learn more about LLCs and consider other options.

You plan to go public

An LLC may not be suitable if your ultimate goal is to become a publicly traded company. Unlike corporations, LLCs cannot issue shares of stock to raise capital or attract investors. Consider forming a corporation or plan to convert your LLC later if you want to go public.

You may operate in multiple states

An LLC is formed under the laws of a specific state, and each one may have different rules and regulations. Operating an LLC across state lines is complicated and generally paperwork-intensive. A corporation may provide more uniformity and simplicity if you expect to run your business in multiple states.

You want to attract specific investors

Some entities or individuals, such as banks, credit unions, angel investors and venture capitalists, may prefer to invest in corporations rather than LLCs. A corporation may offer more tax advantages, and most investors are more familiar with corporations than LLCs.

Of course, there are many other factors to consider when choosing a business entity, such as your industry and growth plans. Legal guidance can offer you valuable support through every step and help you learn more about crucial Georgia business laws.