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Delaware has the most established corporate law in the US, so many companies (though not all) tend to go that route. Below is a survey of LLCs, C Corps, and S Corps as corporate forms, for purposes of founding a startup. On a personal note, my company, EquityZen, is organized as a Delaware C corp.1. TaxationC Corp. A C corp is a separate taxable entity independent from its stockholders. Thus, the earnings of a C corporation are generally taxed twice: once at the corporate level on the corporation’s taxable income and a second time at the stockholder level on dividends or distributions. This concern is diminished if we do not plan to take distributions as shareholders and intend to reinvest any revenues in to the company. In addition, C corps often must pay higher state franchise taxes than LLCs or S corps.If a C corp generates net operating losses rather than net income, these are carried forward to offset future corporate taxable income. However, such operating losses may not be used to offset taxable income of the individual shareholders.LLC. LLCs are flow through entities for tax purposes, meaning that taxable income earned by the entity is passed through to individual members (through via election to be taxed as a partnership). Thus, earnings are taxed only once, at the member level. An LLC may elect to be taxed as a C corp, an S corp, or a partnership. It may specially allocate items of income or loss among its various members (i.e., not according to ownership percentages). It may use taxable losses generated at the entity level to offset taxable income of the individual LLC members. However, such flexibility is countered by increased compliance costs due to the application of complex partnership tax rules that also apply to LLCs.Additionally, redemptions of membership interests are a deductible expense to the LLC.S Corp. Similar to LLCs, S Corps receive flow through tax treatment. However, an S Corp must allocate its taxable income to the individual stockholders according to their ownership stakes in the company. Taxable losses at the entity level may be used to offset personal taxable income of the individual stockholders, but only to the extent of the tax basis of their interests in the entity. Stock basis is not increased by corporate borrowing, even if the shareholder guarantees debt; to increase basis and take losses, shareholder must borrow directly and contribute cash (or other property).An S Corp structure may result in the reduction in the overall employment tax burden. One difference between S Corp taxation and partnership taxation is that owners of LLCs can not be employees of the company. All member draws are subject to self-employment tax. With S Corps, owners may be reduce employment taxes by taking part of their income in salary (and paying employment taxes on that) and taking the rest of their income as a distribution. S Corp shareholders who are employees are taxed as employees and receive a Form W-2, not a Form K-1. As long as the salary is reasonable in the eyes of the IRS, the income taken as a distribution is not be subject to employment tax withholding.2. GovernanceC Corps. C corps have well-defined structural accountability, with governance responsibilities held separate and apart from the owners. Management is accountable to the board of directors and therefore has the ability to transact business without stockholder participation in each decision. However, corporations are required to pay attention to formalities that legislatures and courts have determined to be significant (e.g., meetings of boards of directors and maintenance of corporate bylaws, corporate minute books, stock ledger books, separate bank accounts, etc.).LLCs. LLCs are creatures of contract and thus operate more informally then C corps and are either managed directly by the owners or managed by one or more owners (or an outside party) designated to fulfill such responsibility. Unlike corporations, they are not bound by corporate formalities such as holding regular ownership and management meetings. However, in contrast to corporations, they do not operate under a well-defined regime of uniformity and legal precedent.S Corps. S corps operate in a manner similar to C corps and must therefore adhere to statutory formalities for decision making.3. OwnershipC Corps. C corps may have an unlimited number of stockholders (subject to SEC reporting requirements if the number exceeds 2000). The owners do not need to have a relationship with one another nor have a role in running the day-to-day affairs of the company. Additionally, they may transfer their ownership freely and readily (by selling their stock) without affecting the continuing existence of the business or the title to its assets. Thus, the perpetual existence of the entity is unaffected by the death or withdrawal of any one shareholder.LLCs. Similar to a corporation, an LLC may have an unlimited number of members. However, ownership transferability for an LLC is not as flexible as that for a C corp. Generally, a member needs the approval of other members before selling an interest in the LLC. Also, a death, withdrawal, expulsion, or other departure of a member may constitute a termination of the LLC and a deemed liquidation for federal tax purposes.S Corps. Unlike C corps. and LLCs, S corps are limited to 100 domestic stockholders. Stockholders must be individuals, with limited exceptions for certain trusts, estates, and exempt organizations. Stockholders must also be U.S. citizens or residents (this may be an issue if either of you are not citizens or residents). Ownership transferability is flexible and similar to that of C corps. Finally, the perpetual existence of the S corp is unaffected by the death or withdrawal of any stockholder.4. FundraisingC Corps. Most venture and institutional investors favor C corps because they may have separate classes of stock, allowing for the creation of various levels of preferences, protections, and share valuations. A C corp is also the easiest type of entity to take public in an initial public offering.LLCs. Although LLCs may be attractive to businesses financed by a small number of corporate investors and/or individuals, they are often not suitable for companies planning to attract venture capital or pursue multiple rounds of funding. LLCs require complicated operating agreements that may render the operation of the LLC undesirably difficult with a high number of members. They may be unattractive to tax-exempt venture fund investors because their investment in a flow through entity may produce unrelated business taxable income. Finally, investors simply may be less familiar with LLCs and therefore less willing to invest in them.S Corps. S corps are not a popular entity choice because, in addition to presenting the same challenges to tax-exempt venture fund partners as those presented by LLCs, S corps are limited to one class of stock (meaning no preferred stock financings) and 100 stockholders. Such inflexible features are typically unattractive to venture investors. S Corps are easily converted to CCorps (and this is often triggered automatically, e.g., if the number of stockholders crosses the 100 threshold).5. Employee CompensationC Corps. Businesses that plan to use equity incentives (e.g. stock options) to attract and retain talent often prefer to operate as C corps. C corps can offer incentive stock option plans that allow employees to defer tax on the equity compensation until they sell the underlying stock. Additionally, C corps. may offer certain fringe benefits to employees that are tax-deductible to the company and also tax-free to the employee.LLCs. While an LLC may reward employees by offering them membership interests in the LLC, the equity compensation process is awkward and may be unattractive to employees. Furthermore, LLCs are not able to offer certain forms of equity compensation available to C corps., such as incentive stock options.S Corps. Although S corps can grant stock options, they should not be granted to non-U.S. residents. S corps are less flexible than C corps with regard to fringe benefits and must either report the benefits as taxable compensation to the employees or forfeit the fringe benefit deduction available to the company.I'm a founder of EquityZen, a marketplace for private investments.

For many startup founders, navigating the securities law landscape (federal and state) can be tricky and is best tackled with the help of an experienced attorney. As a general rule, Section 5 of the Securities Act of 1933, requires that any offer or sale of securities must be registered with the Securities and Exchange Commission unless an available exemption from registration exists.There are three common scenarios when securities laws typically come into play for most early stage startups:Issuing equity to the foundersFirst and foremost, “founders stock” is not an actual type of class of security. It is simply a term used to typically describe common stock that is granted to founders, usually in the form of restricted stock that is (and always should) be subject to vesting.Securities Act Rule 4(a)(2) provides an exemption from registering an issuance of such securities not involving a public offering that is sold to people who take the initiative in founding or organizing the business. One thing to note, however, is that even if you are selling shares to founders under this exemption, there may be requirements under state “blue sky” laws that may need to be complied with.Raising money from investorsWhen it comes to raising money from outside investors, founders need to be aware of various securities laws (state and federal) that may apply. Regardless of the fundraising structure (e.g. convertible debt, SAFEs, stock issuances, etc.) a startup needs to follow the registration requirements under Section 5 before issuing its securities. Luckily, there are some available exemptions from registration that many companies rely on to raise money without running afoul of the federal securities laws. If you raise money while running afoul of these laws, you may become subject to civil and criminal penalties and any investments that are received may be subject to rescission by a disgruntled investor - neither of which you want to ever deal with.The private placement exemption under Section 4(a)(2) of the Securities Act and the Section 506(b) safe harbor under Reg D are the two most common ways startups navigate through securities laws. Here is some more information on both of these exemptions that may be helpful: Seed Financing – Compliance with Securities Laws - Should I SignIncentivizing non-founding team membersLastly, many startups use equity (typically in the form of options subject to vesting) to incentivize other team members to be a part of the business (often since the ability to pay top dollar in cash compensation is not an option for most in the early days).Rule 701 of the Securities Act permits a startup to offer equity to consultants, employees and directors without having to comply with federal securities registration. This rule also has some very specific dollar and percentage threshold limitations on issuances as well as a host of other restrictions and requirements. Therefore it is best for one to consult an attorney with experience setting up equity incentive plans that are in compliance with both state and federal laws before doing so.

Quora has tens of millions of users, and is one of the best places to discuss all things Elon Musk. Elon Musk is extremely well informed: he knows this.I have no doubt that Elon's staff get emailed the answers related to Elon, SpaceX, Telsa, and SolarCity, and brief him on them. Employees of Elon Musk-run companies have made plenty of comments, both with their names and titles, so there is no doubt that Quora questions and answers are part of discussions in those companies.The fact that Elon is not on Quora in an obvious way is a good sign of Quora's quality: neither Elon nor his staff have felt the need to come on and provide an answer (which would quickly rise to the top based on the number of upvotes it would get) that would otherwise be missing, nor have they needed to correct something. And look at how often Jimmy Wales gets asked questions. It's an example of "Give people an inch, they'll take a yard." Elon is smart, and he knows the questions would never stop.And think a few moves ahead on the chess board. Most of us don't really want Elon to be on Quora, for some very specific reasons dealing with federal rules and regulations that apply to people who move markets.Keep in mind that Elon Musk is chairman and/or CEO of multiple publicly traded companies. He has a legal and fiduciary obligation to inform ALL shareholders equally at the same time. Elon is in the top 1/10th of 1% of public company CEOs in using Twitter to make announcements, and there are plenty of people who have complained (enough to make it into the Wall Street Journal articles) that this is not, in fact, in compliance with SEC (Securities and Exchange Commission) requirements, because not everyone is on Twitter.Read this if you want a starting point for the controversy: Taming the Tweets of Corporate Execs: A look at Elon Musk and Tesla | SmartBlogsIf Twitter is not named as an official channel of disclosure (the point of that link), then Quora would be even less so.So consider the risk/reward from Elon's perspective of leaping into Quora:1. He writes an answer. Some people make dumb comments, which he can either ignore or waste time responding to.2. People complain to the SEC that Elon is giving inside information to Quora people, possibly creating negative publicity or worse.3. Star-struck people start flooding Quora by directly asking Elon personal questions, which he can either ignore (and look rude) or answer (and deepen the SEC-related criticism)That's a no-win situation, and if you like and respect Elon and the work he is doing, don't you want him to stay focused on that, rather than on dealing with the Outrage Industry, trolls, flamers, bored SEC employees, industrial espionage agents, honey-pots, and shit-stirrers, as well as see your feed filled with thousands of questions asking Elon what he had for breakfast that morning?"But what about Jimmy Wales? He answers all the time." Jimmy Wales is not the CEO of a publicly traded company based in the United States, so he is not subject to even 1/100th of the rules that apply to Elon Musk.Personal note: What evidence do I have that Elon Musk's staff stay on top of social media? A few days after I met with Elon (a meeting described on Quora), one of his top staff contacted me about a Google+ post I made that had a picture of something "secret" in the background from the SpaceX plant in Hawthorne, and asked me to take it down. I asked how she found my post. She said that they run Picassa searches for specific objects, as well as key phrases! Rest assured, if a top person has the time to talk to me about a post seen by a few hundred people, when there's a post seen by about 80,000, like this one Alex Lightman's answer to Why are many people on Quora obsessed with Elon Musk? they know about it in Hawthorne at headquarters.