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Did you know that some corporate structures better attract investors than others?

Many entrepreneurs are so eager to get their idea out to the masses that they don’t put a lot of thought into how they structure their business. They often go with what appears to be the easiest to set up without thinking of the implications associated with doing so. You may find it interesting to learn that some business formation types make you appear more attractive to potential investors. There are many reasons why that’s the case.

Benefits associated with different corporate structures

Setting up a limited liability company (LLC) has become increasingly popular in recent years. Many entrepreneurs have selected this formation type because they appreciate how it protects them from being held liable for their company’s debts. Entrepreneurs also find this corporate structure ideal as it enables them pass-through tax benefits or an ability to file their business taxes along with their personal ones.

These factors don’t often attract outside investors. A C-corp might, though. This structure offers the personal liability protection that those with LLCs enjoy, plus a way for its owners to establish a documentable hierarchical structure for their operation, including details about ownership stakes in it. It’s that latter part that often attracts venture capitalists to invest in your business. They do so because C-corps must generally have officers and boards of directors. This corporate structure also allows for shareholders, another aspect that investors like.

What you need to know about investor preferences

Investors generally only sink their money into operations that they believe have the strongest potential for success. They generally demand stock shares in exchange for the seed money they put up to justify them taking financial risks. An investor may even request an appointment to a board in exchange for putting up their startup capital.

Setting up your corporation and negotiating with investors

Coming up with an idea for a startup is only the first step to getting your Kentucky company off the ground. A business law attorney can help you decide what structure is best for you, especially if you’re looking to attract investors who want to help your Shelbyville company grow.