I once got to meet a bunch of M&A/corp dev people from Google/FB and other companies together and asked them "What would you do if you were a founder and wanted to streamline an acquisition?". Across the board, the top response was "Have all your paperwork in order from day 1 - employment agreements, IP assignments, every single thing you can think of"
When I started on my company, I set up an LLC just to have the business entity, but I don't think it's nearly clean enough or sufficiently separate from personal finances. Now that I'm moving into the next phase, I'm reincorporating with a fresh C Corp structure. Since the old entity never hit revenue generation, it's not a big deal to leave behind.
One of my goals for the new entity is to have a totally clean entity with perfect notes, for eventual acquisition.
You might still want to talk about this with a professional accountant or tax lawyer. Even though your LLC didn't make money, it made your IP. Your C corp technically has to buy that IP from your LLC - which cost something.
Once you are small, no big deal, if you get big you might have a problem at hand. Definitely talk with a professional to make sure you are taking appropriate steps in transferring the IP.
> Your C corp technically has to buy that IP from your LLC - which cost something.
It doesn't have to, but until it does it doesn't own it and can't enforce it. The former LLC owner may own the IP as the successor in interest of the LLC, but even if they were the sole stockholder of the C Corp, that wouldn't give the C Corp any rights at all (it might use the IP because the owner had no interest in enforcing rights against the corp he owns, but that's a tenuous prospect and a dangerous one for other investors.)
> Definitely talk with a professional to make sure you are taking appropriate steps in transferring the IP.
Even though your LLC didn't make money, it made your IP. Your C corp technically has to buy that IP from your LLC - which cost something.
That's likely wrong (at the federal level, at least). Single-owner LLCs are disregarded for tax purposes unless they expressly choose to be treated as corporations, so generally for tax purposes an LLC's owner is treated as directly owning all of the LLC's assets (and as directly earning all of the LLC's income). Contributions to a C-corp are generally tax free (see, e.g., IRC 351). State tax regimes may differ.
I'm a bit confused here? The OP basically said "your LLC created the IP and now a C-Corp owns but it never legally transferred it". IANAL, but from what they've told me, if IP is transferred from one entity to another you must make a transaction. You can't simply say "I made this so wherever I go to next, that entity owns it"
Source - I've had the same situation and discussed with a lawyer.
Legally, his comments were partially correct in that the LLC would own the IP prior to the transfer. But tax-wise, they were completely incorrect--a single-member LLC generally does not exist for tax purposes, and it is generally possible (even trivial) to transfer the "LLC's" assets to the C-Corp without incurring any tax liability. (A transaction occurs in this sort of situation, but generally it doesn't result in any "costs" or taxes due).
There's a lot more work involved in preparing a data room than just incorporating. You need a finance person helping you to get things organized. All invention and assignment agreements, all IP transfer agreements, all your financials and bookkeeping, taxes, audit, and regulatory paperwork, etc.
If your IP was assigned from you to the LLC, you have to do an assignment (and potential payment from your C corp to the LLC). Just trying to help you keep it clean since that's your priority.... [Not a lawyer, but double check]
