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September 21, 2021

St. Louis Inno Partnership: Choosing the Right Startup Entity Structure Before Fundraising

Before startups begin the capital raising process, it’s vital to select the right entity structure to set up the founders and incoming investors for success. Some founders strike out in investor conversations with the inappropriate structure for their stage. Without proper guidance in this key area, many companies, founders, and investors miss out big on both short-term and long-term tax benefits from the appropriate entity structure. Dave M. Finklang, CPA/CGMA, MBA, Partner + Tax at Anders shares his insight and considerations for startups deciding between an LLC or C-corp in the St. Louis Business Journal’s St. Louis Inno platform.

Anders is a proud founding partner of St. Louis Inno, a digital media platform that will serve as the region’s portal for news, profiles and insight into the region’s burgeoning innovation ecosystem. Learn more about St. Louis Inno.

In the article, Dave compares the LLC structure to the C-corp structure for several tax scenarios, including who pays tax once the startup becomes profitable. Dave explains, “In an LLC, just as the owners benefit from the tax losses from the LLC, they are also responsible for paying the tax on the company’s taxable income for the year. Most owners are shocked to hear this, as why would they have to pay the tax on the company profit?”

Read Dave’s explanation in Raising capital? Startups should ask themselves these entity questions before starting their fundraising round.

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About Dave Finklang

As a tax partner and leader of the firm’s startup practice, Dave Finklang particularly enjoys working with entrepreneurs and emerging companies by helping them raise capital, structure their businesses, implement accounting systems, and minimize their tax burdens. Dave has wide-ranging, specialized experience in tax planning and compliance, startup services and consulting, and accounting services. 

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