Starting a tech company? One of your first big decisions is choosing the right legal structure. This choice affects your taxes, liability, and how you handle equity and investors.
Think of it like choosing the right architecture for your software - it needs to match what you're building and where you're heading.
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Can you think of a tech company you've seen with "Inc" or "LLC" in its name?
A legal structure is simply the official way your startup exists in the eyes of the law. It's like your company's legal identity.
Just like you have a name and Social Security number, your startup needs its own legal identity too.
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What do you think happens if you don't pick any structure at all?
If you don't choose a structure, you automatically become a "Sole Proprietorship" - the simplest form. You and your startup are legally the same person.
This works great for many solo developers and early-stage founders, but it's not always the best choice as you scale or seek funding.
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Can you think of any downsides to being personally responsible for everything your startup does?
The main structures are: Sole Proprietorship, Partnership, LLC, and Corporation. Each offers different levels of protection, equity flexibility, and investor appeal.
The key is matching your choice to your specific situation - your funding plans, number of co-founders, and growth trajectory.
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Which sounds more important to you: simplicity or investor readiness?
Here's a quick example: A solo developer building a mobile app might start with Sole Proprietorship for simplicity. But someone launching a SaaS platform seeking venture capital would choose C-Corp for equity and investor compatibility.
Same principle, different needs.
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