Nicole Berry, Vice President and Assistant General Counsel at JPMorgan Chase, suggests for early-stage founders to figure out the structure of their business before they gain momentum, take on investments, and become too busy to focus on the legal framework needed to protect their company. Here are three decisions early-stage founders need to consider when launching their business:
For Profit or Nonprofit
Aligning your business model with the company’s income stream could help determine if it needs to be for profit or nonprofit. Once you determine whether a for-profit or nonprofit structure is most appropriate, consider that nonprofits must be organized as trusts, corporations or associations, to qualify for 501(c)3 tax exemption. On the other hand, for profit businesses have access to a wider array of corporate organizational structures.
Limited Liability Company or S-Corp
If you are choosing to go the for-profit route, two options many small business owners consider are a Limited Liability Company (LLC) or an S Corporation (S-Corp). According to Berry, the two entities have many similarities which include: However, there are also some differences to consider. LLCs allow flexible member management, with recommended corporate formalities, while S-Corps require extensive corporate formalities, such as separate corporate fund accounts, annual meetings of the board of directors and keeping corporate minutes.
Grants or Seed
Every startup is looking for cash to continue building their dream. However, before you head over to your friends and family, there are options to apply for free money and save you from some uncomfortable questions at Thanksgiving dinner. Entrepreneurship programs are blossoming around the country and more local governments are finding ways to help launch more startups and create jobs through grant programs. Other organizations such as the Small Business Administration, provides information about which businesses might be eligible for startup grants as well as the nonprofit Foundation Center, gives guidance on fundraising and grant proposal writing. At the end of the day, it’s always important to weigh all your options to learn what’s best for your company. This article is part of a Startup Week content series brought to you by CHASE for BUSINESS. Startup Week is celebration of entrepreneurs in cities around the globe. CHASE for BUSINESS is everything a business needs in one place, from expert advice to valuable products and services. Find business news, stories, insights and expert tips all in one place at Chase.com/forbusiness. Read the rest of our Startup Week series.
