What Legal Structure Do Most Startups Use
–
Limited Liability Company (LLC)
: Many startups choose an
LLC
for flexibility and personal liability protection.
–
C Corporation
: A
C Corp
is common for startups seeking
venture capital funding
because it allows for easy stock issuance.
–
S Corporation
: Some startups opt for an
S Corp
for
tax benefits
, passing income directly to shareholders to avoid double taxation.
–
Sole Proprietorship
: In the early stages, some startups begin as
sole proprietorships
due to simplicity, though it offers no liability protection.
–
Partnership
:
General or limited partnerships
may be used when two or more founders want to share ownership responsibilities.
Convertible Note Structure
: Startups might use
convertible notes
for early investment, which converts to equity later, often under a C Corp.