Welcome to the Treehouse Community

Want to collaborate on code errors? Have bugs you need feedback on? Looking for an extra set of eyes on your latest project? Get support with fellow developers, designers, and programmers of all backgrounds and skill levels here with the Treehouse Community! While you're at it, check out some resources Treehouse students have shared here.

Looking to learn something new?

Treehouse offers a seven day free trial for new students. Get access to thousands of hours of content and join thousands of Treehouse students and alumni in the community today.

Start your free trial

Business How to Start a Business Next Steps Next Steps

San Francisco
San Francisco
28,373 Points

Types of Corps and single member LLC's

Most (90+%) startups in CA are Delaware C-corps...does anyone know why?

Also, does anyone have good resources on the variations of LLC's, S and C corps, etc.

Also, has anyone heard of debtors or third parties being able to "pierce" the corporate veil of single member LLC's and go after the owners (who should theoretically be protected by the corp structure)

Thanks in advance!

4 Answers

Ken Alger
STAFF
Ken Alger
Treehouse Teacher

For your C-Corp question:

This link, along with this one might offer some insight.

The Corporate Veil can indeed be pierced under the proper circumstances. I would suggest talking with an attorney about specifics.

Ken

Rachelle Wood
Rachelle Wood
15,362 Points

It depends on what you are planning to do. If you are planning to be the only person running the business, you are not concerned about whether it survives you and if you never plan to raise capital from investors, then you don't need a corporation and an LLC will be enough. Ditto if you never plan to leave the United States or move long-term to another state to do business.

If, however, you want to do business in other countries, plan to leave the US to live abroad, or move somewhere else in the US, a corporation might be better. If you plan to raise money or bring other people on board in running the company, then a corporation is better/neccessary. If you want your company to survive you if anything should happen to you, then you will almost certainly need to create a corporation.

Some states will allow you to form an LLC and evolve up to a corporation. If you incorporate though, it is usually not possible to devolve down to an LLC. In fact, dissolving a corporation is not very easy, whereas an LLC is much easier to undo.

Very important: if you are a non-resident of the US, there are a lot of states that will bar you from being able to form an LLC i.e. you have to be a resident of that state (not neccessarily a US citizen though). If you are a Canadian residing in the US, it is better to form a corporation rather than an LLC for tax reasons.

I think the first port of call for any new entrepreneur in the US is the SCORE website, even above the Small Business Association's website. If I remember correctly, there is a breakdown on that site on what an LLC, partnership, corporation is. You can also get a mentor who is usually a retired exec or entrepreneur to give you non-legal advice.

If you wanna go legal way - just buy some international numbers https://www.directphone.net/en and you will be always as LLC cause you could call to another your partners abroad using your Europe number and ofc there are no need in your personal barrister. That is the easiest way how you can solve your problem!

Hope it helps!

It isn't necessary to initially form your company as a DE C-corp. You can form as a single-member LLC in the state you are domiciled in if that's easier for you. However, at the point where you are raising money, your investors will force you to convert to a Delaware C-corp for the reasons mentioned in the articles posted by Ken.

If you don't ever plan on raising money though, no reason to file as DE C-corp. Just go with an LLC in the state where you live.