I have an LLC. I took funding from Mark Cuban, based on a product I created that took about three months to put together. I hadn't intended to raise venture capital, but in a spur-of-the-moment type action I emailed him about what I was doing. I didn't even have a number in mind when he replied, so I just came up with something off the top of my head in about five minutes (I tried to be reasonable, and aim a bit lower than higher, because his involvement was worth more than the cash); that was an interesting and surreal hour of my life. Mark is the real deal, and the best business partner you could ask for.
Observation: Just yesterday on HN there was a discussion about the relative merits of forming a Delaware C corp, as the majority of startup-focused lawyers consistently recommend. Countering that are the number of accountants who would recommend forming an LLC in your own state, then electing S-corp taxation or conversion to a C corp in the future upon demonstrated growth/success. One of the primary reasons for the Delaware C corp is the opinion that "that's what investors will expect." Yet, here we have a case (and granted, all we know about you is the name "throwaway78390", so you could be pulling our leg, but this is HN so we'll assume you are legit) that formed an LLC and yet was able to attract a name-brand investor. I guess I'm curious whether Mark expressed any reservation at all about investing in an LLC and not mandating that you form a C corp? My assumption: we all get too hung up on this corporate form jazz, when really if it is a great idea and you can show traction, investors will beat a path to your door step.
I don't think Mark Cuban is a normal VC type investor. He's willing to invest in an unknown person that he got an off the cuff email from. I don't think any large VC firm would do that.
What worked for me was using Clerky to setup our corporation and various corporate documents and then when we did take some investment the review of our corporation papers took a few days till we got the money whereas other people who had a non standard business entity (LLC in another state) recieved their money 3-4 months later due to the time and lawyer fees it took.
The LLC was his team's preference (and I was happy with it as well, having prior Delaware LLC experience), it was formed for the investment.
We used YC docs (http://ycombinator.com/documents/) for the employment contract among other things, with a few adjustments for things I wanted changed.
The due diligence, formation, agreements, etc. were all a very easy process. His team is excellent to deal with, very professional, and his people and lawyers were always available if I had questions. They're pretty much an entrepreneur's ideal.
Regarding the LLC. I think for this business it was quite desirable, as it has slightly unusual attributes and prospects. It was always understood it wasn't going to be a billion dollar funding company (that would eg take numerous rounds from large VC firms). It was always going to be profitable from early on, requiring no substantial further funding. You could say it's a partnership in a corporation's body.
If we were going to agree to an investment from Andreessen Horowitz tomorrow morning, we'd likely reform to a C corp for future purposes.
I echo your sentiment about getting hung up on corporate form though. The hassle involved can vary depending on your partners of course. With a partner like Cuban, if there's something that needs to be done, like shifting to a C corp for business or investment purposes, then it'll get done with minimal drama.
Most of these things simply are not going to be a major problem unless you have shitty partners that might cause problems in the process of reforming the company from an LLC to a C. Mostly these are trivial issues that people sometimes waste large amounts of time on because their partners suck.
Thanks throwaway78390, would love to know more about your business, why you chose to approach Mark Cuban, etc. Sounds like an interesting story all around.
