We frequently help companies in the startup phase of their life cycle and it is often critical when considering the long term goals of companies and the shareholders who start them. Once the decision is made to start a company, the owners quickly find out that there are a myriad of choices when it comes time to actually register the company and legally create the company’s formation.
The first question to answer is whether the company will be private or public. This might sound like an obvious choice as most startups are privately held, however there are many reasons why a company might actually start as public company. If a company does decide to start out as a private entity then they must decide whether to form as a C-Corp, and LLC, a partnership or a Sub-S. The primary differences between the choices can be subtle yet can have a great impact on the long term goals of the shareholders as each of these choices has variations in tax and liability implications for the shareholders of the company.
While we clearly advocate using professional legal and accounting advice when making these choices, our experts can be very helpful in defining the choices and helping entrepreneurs to understand the type of formation that might be in their best long term interest. The most important aspect when forming a company is to understand the desired end game from the beginning. If the goal is to sell the company within ten years vs. creating a long term business to pass down through the family; then this will impact the formation choices. Also companies might start out as private but have a target of becoming public; this will also impact the choices they should make at the onset. A little strategy and planning can save huge amounts of time and money downstream.