Startup Consultants near you

The Small Business Administration sets out the practical differences. A sole proprietorship carries unlimited personal liability and is taxed on the owner's return. A partnership varies by type, with general partners exposed personally. A limited liability company protects owners from personal liability and can be taxed in more than one way. A C corporation protects owners and is taxed at the corporate level, with shareholders taxed again on dividends.

The S corporation is where founders most often trap themselves. It avoids corporate-level tax, but the SBA describes its ownership limits plainly: no more than 100 shareholders, certain trusts and estates, and no partnerships, corporations or non-resident aliens. Venture funds are partnerships or corporations, and many angel investors are not US persons, so an S election that saved tax in year one can disqualify the investors a company wants in year two.

None of this is a recommendation. It is the set of facts a founder should have in front of them when a lawyer and an accountant make the call together, which is how the decision should be made.

Selling shares, convertible notes or simple agreements for future equity means selling securities, and the offering needs an exemption from registration. The most used is Rule 506(b) of Regulation D. The SEC's small business guidance sets out its conditions: no general solicitation or advertising to market the securities, sales to no more than thirty-five non-accredited investors in any ninety-calendar-day period, and those investors must be sophisticated enough to evaluate the merits and risks.

The information requirement is the part founders miss. Where any non-accredited investor takes part, the company must supply disclosure documents and financial statement information, and be available to answer their questions. And if anything is given to accredited investors, it must be made available to the non-accredited ones too.

The practical consequence is that a public post inviting investment, or a pitch event that is genuinely open to the world, can compromise the exemption a company is relying on. This is a conversation with securities counsel before the raise, not a clean-up afterwards.

It starts with reconciliation. Every share, option, note and promise gets traced to a document, and anything that cannot be traced gets fixed before an investor finds it. That work is dull and it is the highest-value part of the engagement, because a cap table an investor cannot verify stalls a round at exactly the moment momentum matters.

Then the model and the materials. A model with editable assumptions, a use-of-proceeds statement tied to named milestones, and a data room organized the way diligence is actually conducted: corporate records, cap table, financials, customer contracts, employment and contractor agreements, intellectual property assignments. The deck is written last, from the model, so the numbers in it are the numbers in the file.

A startup consultant assembles and pressure-tests. They should not be forming your entity, drafting your equity documents or opining on the securities exemption, because those are legal acts. A startup lawyer does that, and the fixed-fee formation packages available from firms that work with early companies are usually cheaper than the cost of fixing homemade documents.

An accountant handles the tax election, payroll registration and the books, and should be consulted before the entity choice is final. An accelerator provides network, deadline pressure and sometimes capital in exchange for equity, which is a fair trade for a first-time founder without a network and an expensive one for a founder who already has both.