The time to use an LLC is when you’re probably going after only one round of financing. When you have one or two investors lined up, when the investors want to get the significant tax benefits of the LLC, or when you want to get an LLC as a holding company with subsidiaries underneath it. The decision to use an LLC really needs to be thought through because there are some limitations associated with the LLC. You’ve got an ongoing day-to-day company and there are problems that come up very often that the partnership agreement doesn’t cover. In a corporation, they are more likely to be covered since there has been over 170 years of corporate law in California that has already thought through these issues. LLCs, on the other hand, started in 1996.
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