This material was prepared by a CTAN Board Member working with several of the nation’s leading attorneys with deep subject matter knowledge in these areas. This group of individuals has many years of experience working with large companies, and two of the authors oversaw the Tax Departments of two Fortune 500 Companies. They also spent large amounts of time involved in mergers and acquisitions – and have worked on numerous acquisitions of smaller companies. Thus, they bring an acquirer’s view to the startup space, not only a seller’s view.
Until recently, this group of individuals spent little time with startup companies. One of them joined CTAN a few years ago, and another has a son who started a company in NYC several years ago. Yet another recently started advising a Private Equity firm on the East Coast. Having worked with each other over the last 30 years in various capacities, by chance they started discussing how startup companies appeared to be sub-optimizing their economics by forming as C Corps rather than LLC’s taxed as partnerships. In the startup space, it appeared that standard approaches which would be employed by the largest companies and Private Equity firms, were not being utilized.
Further, they noticed that much of the information posted in blogs and on various internet sites, was rather anecdotal and superficial in many cases, often appearing to lack a deep understanding of the tax laws and related economic effects. Many of the posts are simply lists of Pro’s and Con’s with no quantification of each item. Thus, a reader has no idea how to evaluate the total picture and assess what is best for them overall, as items of little economic significance are intermingled with items of great economic consequence.
Thus, they embarked on a mission to share some of their experiences and insights with the startup community, and to also try to provide a very comprehensive analysis of the reasoning. Their hope is that the analysis on this site is sufficiently comprehensive and detailed, to allow readers to understand the entire picture and the economic trade-offs at hand.
Below are links to further background information for those involved in this project:
All materials have been prepared for information purposes only. Fact patterns can vary, and changes in law and other authorities may occur over time. You should consult with your accounting/legal advisors before implementing any legal/tax structure.