On the surface, an LLC can be an attractive way to incorporate for a new business. But if you are planning to seek funding from investors, an LLC may not be your best option, especially since there are other options, such as an S corporation or a C corporation. If you are hoping to get support from investors, here are a few things to keep in mind before incorporating as an LLC.

Taxes can be complicated for investors. In LLCs, personal and professional taxes can be connected. When investing in an LLC, investors become partners, which implicates their personal finances. This can be a turn-off for many investors who work hard to keep their personal and professional finances separate.

Tax-exempt status can keep investors from contributing. Some investors simply cannot invest in LLCs because the venture capital funds have tax-exempt partners that are unable to receive business income or active trade. This can mean that venture capitalist who would be highly beneficial for your organization would be unable to invest.

Investors may be taxed in other states. A business that has active trade or does business in other states may subject investors to taxes in those states. This can also be an issue when non-U.S. investors invest in U.S. LLCs.

Many investors prefer investing simply. Most often, investors want to make a simple investment in an organization, especially in the early stages of business. Putting in investment and getting stock in return is the easiest way for investors to get involved.

Even though you may think an LLC is a perfect way to structure your start-up, there are implications that can result in reduced support from investors. Before you decide to incorporate as an LLC, be sure to weigh all the benefits and drawbacks, including the importance of support from investors for your business growth and success.