In Startup Wars, an entrepreneurial student has the opportunity to set up their own company.
This opportunity allows a student to see firsthand what the components of their company are – and how initial decisions can impact their startup.
Some of the items that students consider are:
- Company location
- Type of organization (Corporate or LLC)
- Questions are answered, like: Do I need an LLC?
- Startup name choices and logos are explored
- Taxes for the startup are investigated
- Specific skills can be focused on
These module discoveries and decisions need to be made before the simulation can begin. A potential business must take these key concepts into consideration.
With these choices in place, the simulation will simulate real life – giving each student an incredible opportunity to create and learn, without risk.
What Concepts Will Students Learn From Setting Up A Simulated Company Module?
Through creating a company module in a Startup Wars Simulation, students will learn many new terms and techniques. They will be able to apply this knowledge to real life.
Some things students will learn:
- The specific differences between an LLC startup and a Corporate business.
- The importance of knowing the taxes of a city, and why or why not that would make a potential city a good choice.
- They will discover their strengths and weaknesses. This will allow a student to know what areas they need to focus on.
- Their decision making skills will be sharpened by exploring life-like scenarios.
Mastering these concepts is important because they are necessary for deciding when to start a business, and what is needed for success. It’s important to learn the basics of setting a business foundation.
LLC vs. C Corporation
In the United States, there are two main options when creating a business: LLC start ups or a Corporation. Both types of businesses will require you to file business formation documents with your state.
What is an LLC and how does it work? What does LLC stand for?
Let’s break the difference between LLC and Corporation down:
- LLC – LLC stands for “limited liability company”. An LLC has the benefits of a Corporation, but it pays lower tax rates. That can be a big savings for a startup.
Personal assets are separate from business assets and can’t be seized due to business-related lawsuits or bankruptcies. LLC owners are called members due to the fact that they each own a percentage – a membership/interest.
- C Corporation – A C-Corp can make a large profit,but it can be taxed – and be held legally liable in court. It is more secure and lives separated from the owners and shareholders. It is also easier to raise capital and secure investments. That can be a bonus when starting out.
There are obviously some very huge corporations out there, but there are also some very well-known companies that are actually LLCs.
Some LLC company examples include: Pepsi-Cola, Nike Sony, and IBM, among countless others.
Benefits of C Corp vs LLC:
There are unique benefits to both a C Corp and an LLC.
- These two entities have strong legal advantages for helping protect a startup’s assets. They provide protection from creditors and add security against legal liability.
- The initial creation and set-up of an LLC is easier, and it can be far more flexible than a C Corp. The people running the LLC can create a management structure that works for their business needs.
- A Corporation can have a standardized and rigid operating structure. They also require more reporting and recordkeeping than an LLC.
- C Corp vs LLC tax advantages: LLCs have more options available to them for their taxes than corporations. The llc tax return can be done quite simply, online, even by a single member llc.
- It can be easier to raise capital for a C-Corporation, so there is less chance of going bankrupt if you plan right. Venture capitalists prefer investing in C corporations.
- Share ownership is considered preferable to owning LLC membership interests.
Further Questions:
- What about an LLP?
LLP vs LLC: An LLP is a “limited liability partnership”. Essentially, it is a partnership – with a limited liability for one or more of the partners. This general partnership does not require any legal filings. With an LLP, you must also file the additional paperwork with your state. It is a separate business entity.
- What is a Domestic Limited Liability Company? What is a foreign LLC?
A Domestic LLC (DLLC) is essentially an LLC that is formed in the same state in which it does its business.
A foreign LLC is an LLC that is formed in a different state than the one in which it does its business in.
- What is an LTD?
LLC vs LTD: LLCs and Ltds are both governed under state law. The primary difference between the two is that Ltds pay taxes – LLCs do not
- What is a holding company llc?
A holding company is a parent business entity.
Holding Company vs LLC: A holding company is primarily a corporation that does not manufacture or sell any products, services, or any business operations. It simply holds the controlling stock (or the membership interests) in other companies.
- What is a sole proprietorship?
LLC vs Sole Proprietorship: A sole proprietor is a situation where someone owns an unincorporated business by themself. Examples include: local tea shop, an artist, and a graphic designer.
Deciding how to set up your startup business can raise many questions because there are several options. Knowing whether or not to create an LLC or C Corp (LLC vs INC) or an LLP can affect your startup company in many ways.
Why Are These Decisions Important?
The decision to set up a C Corp vs LLC startup is a very important decision because the choice can truly make or break your startup business.
For example, with an INC vs LLC, if you pick the wrong business location, set too high of a salary, or do not take note of the taxes in the city, it could cause you to go bankrupt.
The C Corp vs LLC choice also comes down to the benefits and challenges of C corp vs LLC taxes. Your business entity will determine your tax burden, your ability to raise capital from potential investors, and it will have a direct impact on potential expansion in the future.
Your business entity choice – The LLC vs. C-corporation – also can impact your time. After all, you need to set aside the time to maintain your business to keep it in good standing.
Choose wisely!
Get advice from experts, and explore the many options through Startup Wars simulations! Because choosing the correct business structure – if done correctly – can kick-start your business to success.
