Starting your business

Sabeen Khan

In early 2024, Sabeen Khan filed what she thought was all the right paperwork to start Khoobi, her dream beauty and wellness app.

She originally chose to file her business as a limited liability company, or LLC, “because it came as a package deal with a website and I was like, ‘This is what official businesses do,’” she explained. “When you look up or Google ‘How to start a business,’ it’s always like ‘Start an LLC.’”

The former Wall Street analyst had already quit her job and moved in with her parents to focus on building Khoobi, which she described as a “prediction intelligence platform for beauty brands.” She hired a founder coach and set up the first call a few weeks after officially filing.

During that first meeting, the coach told Khan that some of her choices could prevent her from successfully raising venture capital funding. Specifically, one of the mistakes, the coach said, was that Khan registered her company as an LLC and not a corporation, or a C Corp.

After the call, Khan closed her laptop and cried on the phone to her friend.

“I think I needed the tough love,” Khan told Founder Brew.

Read more about what Khan would do differently.—DL

      

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Starting your business

Amelia Kinsinger

When starting your own business, it’s important to not try to fit a square peg into a round hole. While there are a variety of corporate structures available to founders, picking the right one can help you hit the ground running.

The three main corporate structures are a C-Corporation, an LLC, and an S-Corporation. Let’s break down the definitions, tax protections, and benefits of each one.

What’s a C-Corp?

A C-Corp is just a fancy name for a corporation. The defining characteristic of a corporation is that the company is legally separate from its owners, stockholders, and shareholders, meaning the company—not its owners and holders—would be on the hook for any debt or legal issues.

To create a C-Corp, owners must establish corporate bylaws and file articles of incorporation with the state the business is in. (Should that state be Delaware? Read on…) In general, incorporating a business can also include forming a board of directors, issuing stock, creating shareholders’ agreements, and getting an Employer Identification Number from the IRS.

For startups, registering as a corporation—rather than an LLC—can give your new business a bit more credibility. But that has to be earned: Corporations need to have a board of directors and produce annual reports. Corporations also have to pay corporate income taxes, and shareholders are also personally taxed on the profit, or capital gains, they retain from the corporation. This is referred to as “double taxation.”

What’s an LLC?

A limited liability company, or LLC, is a structure that mixes sole or partnered ownership of a company with corporate ownership. Like a corporation, the owner of an LLC isn’t personally responsible for their company’s debts. But unlike a corporation, any profits and losses an LLC experiences fall under the owner’s personal finances.

Read more about the difference between the three structures.—TC

      

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Stat: 43,000. That’s how many investors Scottish co-founder of BrewDog James Watt says he has wrangled together as part of a bid to buy back his pub chain, which sold this year to a US firm. Some want to know how Watt tracked everyone down. (the Guardian)

Quote: “I would like to see it so that every single CEO, founder, entrepreneur does what I did, which was to give equity to every single employee.”—Mark Cuban, on addressing income inequality in the US (Fortune)

Read: Adam Goldberg was floating in his pool during Covid-19 lockdowns when he decided to make a homemade bagel. Read about how his lean operations and “rush chairman” personality launched the $300 million bagel-shop-with-a-party-vibe PopUp Bagels. (Grub Street)

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