In deciding which of the options work best for your startup. It is important to understand the differences and possibly the similarities between both options. It is important that an informed decision is made and this can only be made being knowledgeable on both structures. The decision whether to go with a Delaware C corp or LLC can potentially save you loads of time, efforts and wards of cash.
Delaware C corp
A Delaware C corp is not just a corporate entity, it is a tax entity classification. This type of corporation is named after the subchapter of the Internal Revenue Code—subchapter "C"—under which its tax designation is described.
Delaware Limited Liability Company
A LLC is a business vehicle with a legal existence separate and distinct from its owners. The owners and managers of a Delaware LLC are not personally liable for the company's debts and obligations. A Delaware LLC has the ability to be treated as a pass-through entity for tax purposes
Differences and similarities between Delaware C-Corporation and Delaware Limited Liability
| Category | LLC | C-Corporation |
|---|---|---|
| 1. Limitation of liability | Members of the organization are not responsible | Shareholders are not responsible |
| 2. Share Capital | The company does not have a share capital | The corporation can issue stock |
| 3. Fund Raising | Company cannot issue stock to investors for equity | Corporation can sell it's shares to raise money |
| 4.Shareholders | No shareholders, only members | Unlimited amount of shareholders |
| 5. Transfer of ownership | Entity is dissolved when a member leaves | Owners can easily transfer shares |
| 7. Paperwork | Minimal Paperwork | Increased documentation procedure |
| 8. Profits | Profits cannot be reinvested in the business | Profits can be reinvested |
| 9. Taxation | Passthrough entity, single layer of taxation | Double taxation – entity and shareholder level |
| 10. Investor Preference | Institutional investors will not invest | Yes, Investor friendly |
| 11. Requisite filing | Articles of organization filled with the Secretary of secretary of state | Articles of Association filled with the Secretary of secretary of state |
| 12. Annual Report | Filing is not required | Filing is required |
C Corp Requirements
- It should have at least one shareholder.
- It should have at least one director. ...
- It must have a registered agent.
- The corporation should have an officer secretary responsible for signing legal papers and recording meeting minutes
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
