Is an LLC the right legal entity when considering investors in the future?


2

My partner and I want to open a franchise restaurant. I primarily want to incorporate to protect against random lawsuits. We haven't decided between fully funding ourselves or seeking investors. If we were to go down the investors route does an already formed LLC with two shareholders accommodate the giving out of equity at a later point?

LLC Corporate Structure Investors Corporation

asked Jun 23 '11 at 05:33
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Jhlu87
111 points

1 Answer


1

If we were to go down the investors route does an already formed LLC with two shareholders accommodate the giving out of equity at a later point?

No. Professional investors will not invest in an LLC. You need to be a C Corp in order to get external funding.

That said, you could start as an LLC and convert to a C Corp later on, if you decide to raise money. This option will end up being more work for you if you do decide to look for investors, but it will save you the upfront hassle of forming a C Corp unnecessarily.

answered Jun 23 '11 at 05:48
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Zuly Gonzalez
9,194 points

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