In many cases, if your goal is to raise capital through investors, the corporate structure will likely make more sense.

For such investors, the inability to invest through the purchase of shares may be a negative consideration, but other factors may be sufficient to make an investment in an LLC attractive to them. While stocks provide an efficient method of investing in a business for individual investors, they are more likely to take a more flexible, personal approach to evaluating investment opportunities. However, the same may not hold true for the individual, or angel, investor. This means income generated by the LLC flows through the LLC to be taxed in LLC members' hands, which can have potential negative consequences for the institutional investor's tax situation. For both institutional investors and individual investors, investing in the shares of a corporation is usually a far better option than investing money in an LLC.įor institutional investors in particular, investments in LLCs are trickier from a tax perspective, as LLCs are flow-through entities when it comes to taxes. Raising CapitalĪ corporation's ability to issue stock gives it a big advantage when it comes to raising capital.

You may find that, while the ability to issue stock is one path toward meeting your particular need, you might also be able to accomplish your goals through an LLC rather than a corporation. These features can be enticing for startups, so if you're in this position and you're wondering about issuing stock through an LLC, it's important to consider the reasons behind your need for a business structure that can issue stock. For example, LLCs are typically more flexible than a corporation, cost less to start up, and require less paperwork, both initially and on an ongoing basis. Despite this fact, LLCs may have advantages over corporations, depending on your particular business needs and goals.Ĭompared to corporations, LLCs offer entrepreneurs a number of benefits that often make them a more attractive choice for starting a new business. Limited liability companies (LLCs) do not have stock, nor can they issue it.

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