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I am an LLC, can I still create an offering?

While LLCs are still able to create offerings on StartEngine, their corporate documents do not lend themselves well to Equity Crowdfunding. It is because of this that we require that all LLC's work with a securities attorney.

Therefore in an attempt to provide resources to LLCs, there are a couple of options at their disposal:
 

Remain an LLC

  • Requires Issuer to work with their own attorney & provide legal sign-off on Operating Agreement
  • The subscription agreement is a Subscription & Joinder agreement I.e. the Operating Agreement becomes public and the Investors join to that operating agreement via their investment
  • The operating agreement itself must be membership units not interests
  • Sign off language: We have been engaged as counsel with respect to [COMPANY’s NAME] offering of securities pursuant to Regulation Crowdfunding. [COMPANY NAME]’s operating agreement allows for the admission of members who have no day-to-day obligations to the company, and the operating agreement does not impair any investor's right to sell, assign, pledge, hypothecate, or otherwise restrict the investor's ability to transfer the interests, except as required under Regulation Crowdfunding. Additionally, the Company is eligible to raise under Rules 100(b) and (c) of Regulation Crowdfunding.

Convert to a C-Corp

  • If the company wants to convert to a C-corp they can either go Standard or Premium 
    •  Standard
      • The company will first convert and then be able to go through the process as a Standard company
If your company is an LLC, you should seriously consider which corporate structure is right for your business. Some reasons why companies have chosen to change from an LLC to a C-Corp are as follows:
  • LLCs are not ideal corporate structure when bringing on hundreds, if not thousands of investors
    • The company will need to issue K1s on every investor which is extremely tedious
  • LLCs do not provide liquidity for the investors
    • people that purchase the units in the LLC will not have access to liquidity as these securities can't trade 
  • LLCs require detailed and extensive changes to it's Operating Agreement
    • These must be done by an attorney and are very specific depending on the state and the crowdfunding regulations
    • This takes a lot of time and can be very expensive