I started my company as an LLC. Since it began in Pennsylvania, I registered as a PA LLC. Welp, I applied to Y Combinator and they accepted me, but it turns out they won't invest in LLC companies. I figure, no biggie, I'll just convert to a DE C Corp as I'd been planning to do eventually anyway. It turns out this isn't so simple for dissolving a PA LLC, and it is a several month process. I almost wasn't accepted into Y Combinator as a result because they aren't going to wait several months before making their investment, and was only able to attend because a very experienced lawyer found a loophole to convert my company into a PA C Corp.
I am still suffering headaches from this, even after my company shut down, because of all sorts of bizarre issues of being a PA C Corp. And since nobody knows anything about PA C Corporations, I can't use standard documents and legal advice is particularly expensive (and usually not the best).
>a very experienced lawyer found a loophole to convert my company into a PA C Corp.
This is a pretty standard business transaction called a conversion. As you found with dissolution of your PA LLC taking unexpectedly long, these transactions/processing times vary by not just transaction type but of course State too.
After conversion from PA LLC to PA C-Corp, did you end up Domesticating it to DE, because from the sound of it they wouldn't want to invest in any thing but? Some States are so backwards about processing times you might have been able to dissolve the PA C-Corp much faster than the LLC, but that is a little rarer.
Glad it worked out for you and to see a positive HN post about lawyers vs DIY.
This was a while ago so I don't remember the specifics, but the reason the conversion was special is the lawyer was able to do it in a few days instead of several months. These issues are specific to Pennsylvania, which has really awful corporate law. Supposedly all of these things are trivial for other states, but I'm just speaking from personal experience (and of course I mostly listened to what the lawyers told me, but I have every reason to believe they were extremely good at what they do).
Very interesting that no one suggested to form a new C-Corp that acquires assets of your PA LLC. Like any other profession, lawyers come in different colors. A lawyer experienced in issues of closely held businesses would have made it easier.
They insisted the previous corporation had to first be dissolved. I am not a lawyer, but I believe this is just standard practice. I suppose it's because there can be objections from investors in the original LLC if you take money in a new entity, and in very bad situations (which are probably very unlikely) that could lead to lawsuits. I think lawyers are just trying to do things properly to avoid these sorts of things.
Yes, you can register an LLC or C Corp in any state, but the reason people do things a certain way is usually because of taxes. You don't want to get double taxed (the specifics are nuanced and vary from state to state).
If I were to do it all over again, I would just start out as a DE C Corp.
Yes, and that's probably what you should do, because the other states tend to have weird rules about LLCs.
(I'm in Illinois, have/had NYC parters, operated out of NYC, Chicago, and California, and ultimately sold the company and got to watch a couple hundred thousand dollars in legal and accounting get spent --- like with any serious acquisition --- and neither "DE" nor "LLC" appeared to cause any hiccups for us.)
I am still suffering headaches from this, even after my company shut down, because of all sorts of bizarre issues of being a PA C Corp. And since nobody knows anything about PA C Corporations, I can't use standard documents and legal advice is particularly expensive (and usually not the best).
Corporate law isn't always so cut and dry.