The answer is based on how the startup was set up. Without getting into comparisons of legal structures, I can tell you that the best legal entity (really, the only) for a high-growth startup is a corporation (C corporation in the US). Even more so, if the founders are looking to raise VC or outside funding. There are arguments of double taxation thrown around, however, there are ways to manage taxes efficiently (Look to the Masters!). In Canada, federal and provincial laws and taxes usually factor in when founders are deciding on where to incorporate. In the US, Delaware is preferred as it is considered the universal corporate law. For Canadian startups looking for funding in the US, which is usually the case, a conversion or a new entity setup may be required.

An efficient system (as mentioned in my last post) requires a proper entity setup. DIY kits or SaaS incorporation platforms have their use but they are not the solution for a “true” startup like yours. Too many times, I have come across DIY incorporations that either require amendments or need to be replaced with a new entity. There are almost always issues related to taxes, proper ownership and management of IP, interests of founders, vesting schedules. Seeking the right advice at the right time can save the startup critical resources in the long run. Masters in the field can save you time from having to scour through documents and contradictory information. Ask for help!