There are really two decisions to be made here - the choice of entity and the choice of state.
Delaware is the choice for two big reasons: it is generally considered one of the most "founder/board friendly" venues, and it has one of the well-established bodies of law so you don't pay to litigate issues. Another important side effect is that any lawyer in any state is qualified to validate coprorate structure, whereas in another state you need to find a local lawyer. I wrote a little about this in the past: http://bit.ly/31lbT2.
As for choice of entity, well, that's complicated which I went into a little more depth with here: http://bit.ly/cIpSL.
S-Corp and LLC are both known as "pass-through" entities which as mentioned by cch don't pay tax directly - the members/owners do. This also means that the members/owners can't file their personal taxes until the corporation files its own. This is generally best for closely held companies where you don't want to bring a lot of people on, give options, and you're operating with tax losses (to take advantage of the write-offs on your personal tax). Plus, unlike a C-Corp, you're not double taxed.
On the other hand, VCs can't and won't invest in anything but C-Corps (http://bit.ly/mKx08) - so if you're thinking about going this route, it may be better to just do c-corp right away and minimize your legal expenses.
My summary in that first article:
"If you're actively seeking VC funding (VCs will only invest in C-Corps) and don't anticipate significant tax losses (which is probably the case with many technical startups), then C-Corp is usually a good choice. If you want to take advantage of the pass-through taxation, Imke has a good discussion on choosing between an LLC and an S-Corp. Partnerships are ok initially, but best avoided given the lack of a liability shield."
There are really two decisions to be made here - the choice of entity and the choice of state.
Delaware is the choice for two big reasons: it is generally considered one of the most "founder/board friendly" venues, and it has one of the well-established bodies of law so you don't pay to litigate issues. Another important side effect is that any lawyer in any state is qualified to validate coprorate structure, whereas in another state you need to find a local lawyer. I wrote a little about this in the past: http://bit.ly/31lbT2.
As for choice of entity, well, that's complicated which I went into a little more depth with here: http://bit.ly/cIpSL.
S-Corp and LLC are both known as "pass-through" entities which as mentioned by cch don't pay tax directly - the members/owners do. This also means that the members/owners can't file their personal taxes until the corporation files its own. This is generally best for closely held companies where you don't want to bring a lot of people on, give options, and you're operating with tax losses (to take advantage of the write-offs on your personal tax). Plus, unlike a C-Corp, you're not double taxed.
On the other hand, VCs can't and won't invest in anything but C-Corps (http://bit.ly/mKx08) - so if you're thinking about going this route, it may be better to just do c-corp right away and minimize your legal expenses.
My summary in that first article:
"If you're actively seeking VC funding (VCs will only invest in C-Corps) and don't anticipate significant tax losses (which is probably the case with many technical startups), then C-Corp is usually a good choice. If you want to take advantage of the pass-through taxation, Imke has a good discussion on choosing between an LLC and an S-Corp. Partnerships are ok initially, but best avoided given the lack of a liability shield."