Reading: When to Form an LLC: A Quick Checklist for First-Time Entrepreneurs

When to Form an LLC: A Quick Checklist for First-Time Entrepreneurs

Three essential things to consider

Jennifer Sheridan

Jennifer Sheridan is the founder of the StartUp Business Law Bootcamp for Entrepreneurs–an online course and website specifically for small business owners who cannot afford a private attorney. Here she outlines the top things a first-time entrepreneur should consider when deciding whether or not to become an LLC.


1. Risk profile
Do you have personal assets at risk, house, investment accounts, etc?


2. Your services 
Are you selling products or services to businesses and/or the public?
Sources of lawsuits/fines:
* disgruntled customers
* IP (patent and trademark) lawsuits
* regulatory authorities: privacy law violations and more


3. Future funding
If you are trying to attract VC capital, forming a legal entity and ensuring all the IP is assigned to the entity will show investors that you know what to do to protect assets of the company. If there is a chance of getting VC investment in next year then start with a C corp. If not then start with a LLC, and convert to a C corp when you have the VC term sheet.


Need more legal advice? Read Jenny’s top 5 tips for first-time entrepreneurs.


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