re: S corp or LLC

The one big benefit of an S Corp is the fact that the net income allocable to the shareholder is not subject to the self-employment tax. You do have to pay yourself a salary, which eats away at some of the benefits of an S Corp, but the savings can still be sizeable.

In exchange for the tax savings, you give up a lot of flexibility and non-tax benefits that are inherent in an LLC taxed as a partnership.

So, to answer your question, one would need to know more about the business you are in.

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VC funds are concerned with the exit strategy for the investments they make. The goal for VC funds is for the companies it invests in to go public. This is the easiest, and generally most profitable, way for the VC fund to cash out of an investment. If the VC fund owns membership interests in LLCs, those interests often have to be sold at significant discounts due to lack of marketability and lack of control.

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I'm guessing you must work with a lot of late-stage investors? The clients I've had in this area tend to be earlier in the pipeline, and almost all of them are LLCs taxed as partnerships, to allow the losses to specially allocate to the money partners. But they are generally bought out long before an IPO.