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Most investors hate pass-through taxation that is attached to LLC. They, being passive members, are not eligible for tax pass-through but you as an active member are, so it is in effect places money from their pockets into yours.

Delaware incorporation is a superstition. They do come in handy if you plan to litigate on corporate law (e.g. shareholders vs. management) because their case law is much more thorough and their judges are very experienced. However, if you incorporate there as opposed to you home state you will still have to register in your home state as a "foreign corporation", so you will in effect double your paperwork. It also carries risk that you will have to travel over there to appear in court. Not worth it for a small Internet start-up with simple ownership structure.

So with that in mind, talk to a lawyer and an accountant.



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