Most startup founders form a Delaware C corporation as it is the preferred legal entity of most investors. However, some founders instead form a California LLC when they expect to have losses their first few years and would like for those losses to flow down to schedule C of their individual tax return to offset other income.
Once the company has gained traction and is ready to raise outside venture capital financing, the founder might then convert the LLC to a Delaware corporation by completing the following 10 steps:
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