How is forming a corporation or LLC important for attracting investors?

You have a great idea and can do the work, but you’re wondering, “How can I get investors for my business?” Improve your odds. Restructure your business as a corporation or LLC. Learn why these companies have the advantage and how to attract investors to fund your project.

What Investors Value

Investors want to put their money towards projects offering good returns with best chance of success. Their funds are typically limited and there is competition. While there might be several worthy projects, the business positioned to succeed often wins support over firms offering higher interest rates.

Advantages for Corporations and LLCs

There are plenty of excellent sole proprietorships and partnerships, but these structures lack fundamental advantages inherent to corporations and LLCs:

  •    Corporations may issue stocks and LLCs provide memberships
  •    Business is shielded from financial risks introduced through the personal lives of the owners
  •    There is a defined organization in the company’s bylaws  
  •    It’s easier to establish business credit and assess risk

The ability to offer stock when seeking investors for business is a prime reason to incorporate. Shares may be purchased, traded, or sold. Stocks also give investors the ability to vote in major decisions and provide direct input into the business’s activities.

An investor in an LLC might also receive membership in the organization. This is very similar to holding stock and offers the same benefit of participating in the decisions of the firm.

The Growth Potential and Double Taxation

Corporations must contend with the issues of double taxation, but this often creates an advantageous arrangement for growing companies. The government taxes the money when the business earns it and again as part of the shareholder’s income. Companies may avoid this tax by simply reinvesting earnings rather than pay dividends. This strategy encourages growth protecting an investor’s long-term interests.

Get Help with Your Filing

If you need to attract investors, consider restructuring your business as a corporation or LLC. GovDocFiling can help. Get started right away and apply for LLC or corporate status today. Update your tax ID with our online EIN application

CHECK ORDER STATUS
Skip to toolbar