Both, of course chose Delaware as their corporate home, even though they are headquartered elsewhere. But why did they choose different entity types? The difference between an LLC and a corporation is clearly defined by this one example that the new generation of entrepreneurs will fully take advantage of.

This is not a question of “Which is right?” This is a matter of strategy. YouTube actually started as a corporation filing their Certificate of Incorporation with the Delaware Division of Corporations on October 3, 2005. On November 8, 2006, just 13 months and five days later, they merged their corporation into an LLC, which is one of the key advantages of a Delaware company: they can change from one form of entity to another whenever they want. Google, as you know is listed on NASDAQ. As of year-end 2008 it had 314,000,000 shares outstanding and a valuation of $93.6 billion. Even though 60% of that is owned by institutions, there are millions of individual shareholders in Google.

YouTube, LLC, on the other hand, is owned by a few members. Nobody, but the insiders, know how few, and nobody, but the insiders, knows who the owners are. More than that, nobody but the owners know what the company finances are because no public disclosure is required. That’s the benefit of a Delaware LLC. Your members and their ownership percentages, and your financial valuation are a private matter that only the company insiders know. There is no public registration, no public disclosure and no federal requirement of any type that would require the owners of a Delaware LLC to reveal who they are on the public record.

Google chose to be a Delaware Corporation so they could go public and raise money, which they did on August 16, 2004. Once they did this, they quickly became one of the richest company’s in history. Their rise to power created tens of thousands of millionaires and a lot of billionaires. The company has current cash reserves of $50 billion. With that stash of cash, the whole world wondered what they would do with it.

YouTube originally planned on following the Google, Inc. model, but they soon met the real Google guys, and others and found that cash was available to them without going public. If you have all the money in the world offered to you by capable investors, why disclose who owns you? Why disclose your governance structure, why disclose your finances? Why be regulated by the Stock Exchange and the S.E.C.? Hey, if you’ve got the investors without going to the public markets, you’re much better off to keep it simple. That was the YouTube approach beginning on November 8, 2006, and that’s what makes them valuable to their owners…..whoever they may be.

So, as the next successful entrepreneur, which would you choose? A Delaware Inc. or a Delaware LLC?