From LLC to C-Corp: Structuring for Venture Capital

Executive Summary

LLCs are great for lifestyle businesses, but toxic for Venture Capital. A Boston biotech startup needed to convert to a Delaware C-Corp to close their Series A. Fynex managed the Section 351 tax-free exchange and positioned the founders for the lucrative QSBS (Qualified Small Business Stock) exclusion, potentially saving them millions in future taxes.

The Landscape: Biotech Context

Investors need 'Blocker' corporations to avoid unrelated business taxable income (UBTI). They demand C-Corps. But converting incorrectly can trigger a massive tax bill for the founders.

The Breaking Point

"VCs don't invest in pass-through entities. We had to change fast."

Dr. S

CEO

Biotech Startup

The conversion had to happen before the money hit the bank, or the QSBS clock wouldn't start.

The Fynex Protocol

We executed a statutory conversion. We worked with legal counsel to issue preferred shares to investors and common stock to founders.

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Technical Implementation

We filed the 83(b) elections for all founders to lock in their tax basis.

Verified Outcomes

Cap Table Ownership

Audited

The $5M round closed on time. The founders are now on track for a 100% tax-free exit on their first $10M of gains.

Future Horizon

We now handle their R&D Tax Credits.