Converting LLC to C-Corp and Fundraising: Key Considerations

1. Impact of LLC to C-Corp Conversion

  • Generally, converting from an LLC to a C-corporation does not significantly impact existing lines of credit (LOC) or tax obligations.
  • For detailed information, consult with:
    • Your bank (LOC originator)
    • Your previous year's tax accountant

2. Fundraising for a New C-Corp

  • When raising funds from friends and family, it's recommended to do so against the new C-corporation entity.
  • Common fundraising instruments for C-corps:
    • SAFE (Simple Agreement for Future Equity)
    • Convertible Notes
  • Important: Register the C-corporation as soon as possible to facilitate equity raising.

Key Takeaways:

  • Conversion from LLC to C-corp generally has minimal impact on existing financial arrangements.
  • Always consult with financial and legal professionals for personalized advice.
  • When transitioning to a C-corp, align fundraising efforts with the new entity structure.
  • Timely registration of the C-corp is crucial for smooth fundraising processes.
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