Tag Archives: crowdfunding organizational structure

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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