{ "media_type": "text", "post_content": "My wife and I started an llc for a software service in 2019. We filed a joint form 1040 where we included our business expenses related to llc as it is permitted under irs guidance not to make a partnership/corp election for a married couple. The llc is still in a developmental phase but we plan to release in 2021 and raise capital from investors, go for IPO and issue stock in a distant future. Do we must convert to corporation and if yes, when? We filed all legal docs for llc in 2019.", "post_id": "5ff130cd39b85b002280d4bc", "reply_count": 8, "vote_count": 1, "bowl_id": "5b0ec788cf11a800139f9490", "bowl_name": "Startup and Entrepreneurship" }

My wife and I started an llc for a software service in 2019. We filed a joint form 1040 where we included our business expenses related to llc as it is permitted under irs guidance not to make a partnership/corp election for a married couple. The llc is still in a developmental phase but we plan to release in 2021 and raise capital from investors, go for IPO and issue stock in a distant future. Do we must convert to corporation and if yes, when? We filed all legal docs for llc in 2019.

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Um, this all sounds a bit speculative. You will need to convert but it can be later. Also, you'd sell stock in multiple venture rounds typically before you'd go public. I'd talk to a good Valley lawyer--lmk if you need recs. The only software LLC that's gone public in semi-recent memory is Gigamon.

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To clarify, it's relatively rare for venture investors to invest in an llc. It's a turnoff. The NVCA forms are based on corp status. It is likely you'd need to convert prior to your A round, and you should talk with a good accountant as well as an experienced emerging companies attorney.

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Focus on the business. You can fix the legal status when the time comes. We did the same thing. Not worried about c Corp till it’s worth the time. If I’m successful it won’t be expensive to transfer.

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Agree with the above. I'm an attorney that focuses exclusively on emerging growth and venture capital transactions. It's pretty common for founders to get started with the simplicity and reduced costs of an LLC. I'll regularly wait and handle the conversion days before a VC raise, when the "hood is up" on the company - it saves more time/cost. Investors will require a corporate structure before investment occurs, but it doesn't stop you from raising a Seed round with a SAFE or convertible note with the expectation of converting to a corporation before your priced round.

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You plan to IPO without having tested your business model? You need to run these questions past a tax attorney or CPA.

My answer remains the same, you’re welcome.

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