Did you know that choosing the correct vehicle for your capital journey can increase the likelihood of funding by prospective investors?
There are many factors to consider that can become challenging in selecting the correct entity. Let us show you some of the best impact business structures.
The following factors are necessary to consider:
- Jurisdictional Considerations
- Tax Considerations
- Asset Management/Protection Purposes
- Investor Friendliness
- Administrative Costs
- Impact Orientation
- Exit Strategy
- …and many other factors
Let us give you a general metaphor…
You may ask yourself:
Do I need a vehicle to putter around town or do I need a rocketship to take me to the moon?
For puttering, meaning if you see your business more regional in nature, then a simple structure would be sufficient such as a limited liability company (LLC) or S-Corp.
Impact investors will likely prefer investing in a rocketship and will appreciate a Benefit Corporation but would likely be satisfied with a C-Corp depending on your model. But again, it depends on the journey. The jurisdiction is something to seriously consider as there may be any number of factors that can be costly to your business in both time and money over the course of your company’s life.
The other major factor in selecting your entity type is related to governance structures. Investors tend to prefer corporate structures due to their long standing precedent and case history. For more creative governance structures, the LLC offers the greatest flexibility. Governance is all about how decisions get made for your company including: board authorities; shareholder rights; voting rights; and how distributions get made to investors. To learn specifics about different entity types, visit your state’s Secretary of State website or the same website in states you are considering.
Popular States to form businesses include: Delaware, Wyoming, and Nevada. As of this writing, 38 States have Benefit Corporation statutes which bids well for the impact movement.
Want to get prepared to raise capital successfully?
Download our Free Fundraising Checklist Here: https://thechangeagenthub.net/fundraising-checklist
Once you receive the checklist you’ll be redirected to a video walkthrough so you can use this checklist most effectively. And you’ll also be invited to check out our 9-step fundraising preparation roadmap with detailed information called Impact Incubator Immersion. This program is the exact process all our impact clients have used to raise capital successfully.
