Articles Tagged with startup company

Many considerations go into deciding which legal entity to choose when starting a business. In some cases, as the business grows, it may even want to convert into a different entity type. For example, if it began as an LLC and the owner now plans on seeking angel investment, he/she may consider converting to a corporation. In these situations (formations or conversions), one critical factor to consider is meeting the formalities required for different legal entities.

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When a California business is considering converting its entity type, it should not do so without consulting with an experienced California corporate attorney. In addition to filing conversion documents, there are many internal factors that should be considered and discussed before transitioning (the company’s management structure and capitalization structure, as well as any special voting considerations, are only a few examples).

Now, we will look at some of the similarities and the differences in formalities required for limited liability companies (LLCs) and corporations.

Venture capital financing can be an extremely important asset to startups that do not have access to other types of traditional business financing, such as bank loans or the public markets. There can be many benefits to venture capital financing for entrepreneurs, including the following:

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  • Venture capital involves equity capital, so it does not leave a startup with substantial debt from the start;
  • Venture capitalists often take greater risks on young and unestablished companies because they see the potential for extensive growth and, therefore, higher returns;