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The Legal Structure Of Ventures And Exit Routes: A Study Of Single-founder Start-ups In The United States

Byungku Lee, Yeri Cho

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The purpose of this article is to focus on the role of the legal structure of ventures for the event of the entrepreneurial exit. Specifically, this study is to reveal the different effects of incorporated and non-incorporated legal structures of ventures on diverse exit routes. Using the Kauffman Firm Survey, this study investigated the relationship between the legal structure of ventures and their exit routes with a sample of 901 single-founder start-ups that were founded in 2004 and exited during 2005 to 2011 period. The finding of this study confirmed that ventures with an incorporated legal structure were less likely to exit by sale than ventures with a non-incorporated legal structure. While little research has considered the legal structure of ventures as a predictor of different exit routes, this study empirically suggests the importance of considering the forms of the legal status of ventures in studying entrepreneurial exit routes.