Corporate Structure For A Crowdfunding Business

Crowdfunding Organizational Structure

I am asked this question so often, I thought it would be worthwhile to post a diagram of a relatively simple organizational structure for a Crowdfunding business.

If I’ve done this right, the diagram should be self-explanatory. Nevertheless, I’ll make one point about choosing the right entity.

When you start the business, you have to decide whether to form the Parent (see the diagram) as a limited liability company or as a C corporation. For the reasons discussed at length here, the right answer is almost always a limited liability company. But sometimes an institutional investor will insist on a C corporation, probably because the investor itself has limited partners that are tax-exempt entities and want to avoid paying tax on “unrelated business taxable income.” And if they’re investing enough money you’ll do what they want, despite the extra tax cost for you personally (that’s why they call it capitalism).

Until and unless that happens, use the limited liability company. It’s easy to switch if you have to.

Questions? Let me know.

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3 thoughts on “Corporate Structure For A Crowdfunding Business

  1. Arthur Lipper May 19, 2016 at 5:51 pm Reply

    Have you been able to create a structure for using Crowdfunding in the funding of an investment fund? If so I would welcome a conversation.

    • crowdfundattny May 20, 2016 at 10:21 pm Reply

      Only for very wealthy investors, very small funds, or funds that are willing to be regulated as investment companies.

      • Arthur Lipper May 21, 2016 at 1:08 am

        Thanks. This is what I assumed to be the case.

        Let me know if and when you find a way of using Crowdfunding to fund funds.

        Arthur

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