Built for small business
An LLC is simple to run, with one layer of tax and few formalities.
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LLC vs C-Corp: which one should you form?
An LLC is simpler and cheaper to run. A C-Corp is built for investors. Compare them side by side and pick the one that fits your plan.
How Jupiter Filing Can Help
Understand the key parts of the service before you begin.
Built for investors
A Delaware C-Corp is what most investors expect to fund.
Liability protection in both
Either structure keeps your personal assets separate from the company.
Open to foreign owners
Non-residents can own an LLC or a C-Corp. The yearly filings differ.
The short answer
Most freelancers, consultants, online sellers and small businesses are better off with an LLC: less paperwork, lower yearly cost and a single layer of tax. A C-Corp, usually formed in Delaware, makes sense when you plan to raise money from investors, issue stock options or sell the company one day. If you are not sure, start with an LLC.
LLC vs C-Corp side by side
| LLC | C-Corp | |
|---|---|---|
| Best for | Small business, freelancers, services, e-commerce | Startups that will raise investor money |
| Liability protection | Yes, for owners | Yes, for shareholders |
| Tax treatment | Profit passes to the owners. No company-level income tax by default | The company pays corporate tax, and owners are taxed again on dividends |
| Federal return | Form 5472 with pro forma 1120 (foreign owner), Form 1040 (US owner) or Form 1065 (multi-member) | Form 1120 |
| Ownership | Members, with flexible profit sharing | Shareholders holding stock |
| Investors and stock options | Awkward. Most investors prefer stock | Standard structure |
| Formalities | Few. No board or annual meeting required | Board, officers, bylaws, minutes |
| Yearly cost | Lower | Higher, with extra franchise tax and accounting |
| Foreign owners | Allowed | Allowed |
Tax: one layer or two
An LLC is a pass-through. The company itself usually pays no federal income tax, and the profit is reported by the owners. A C-Corp is taxed as its own taxpayer at the federal corporate rate, and when it pays dividends the owners are taxed again. That is the "double taxation" people mention. Owners outside the US also face US withholding on dividends paid by a corporation, which a tax treaty can reduce. Your home country's tax rules apply in addition, so speak to a tax professional who knows both countries.
When an LLC is the better choice
- You work for yourself or run a small team and do not plan to take investor money.
- You want low yearly cost and little paperwork.
- You want to take profit out without a second layer of company tax.
- You are a non-resident running an online business.
When a C-Corp is the better choice
- You plan to raise venture or angel money. Investors usually expect to buy stock in a Delaware C-Corp.
- You want to give employees stock options.
- You want to sell shares in the company later, or take it public.
What about S-Corp?
An S-Corp is a tax election, not a separate company type. It is generally limited to US citizens and residents as shareholders, so most non-resident founders cannot use it.
Can I switch later?
Yes, but it has a cost. Converting an LLC to a C-Corp is common when funding arrives, and it involves new filings, tax consequences and legal fees. If investor money is likely within a year or two, it can be cheaper to form the C-Corp first.
Next steps
- Decide on LLC or C-Corp using the table above.
- Choose the state. Compare yearly cost in our LLC filing fees by state table.
- Get an EIN and a registered agent.
- Plan your yearly filing, whether that is Form 5472 and Form 1120 for a foreign-owned LLC or the corporate return.
This page is general information, not legal or tax advice. If you are raising money, talk to a startup lawyer before you choose.
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Frequently Asked Questions
Answers to common questions about LLC vs C-Corp.
Is an LLC or a C-Corp better?
An LLC is better for most small businesses because it is simpler and cheaper. A C-Corp is better if you plan to raise money from investors or issue stock options.
Can a non-resident own a C-Corp?
Yes. A foreign person can own a US C-Corp. The company files its own corporate return, and dividends paid to foreign owners can be subject to US withholding.
Does an LLC pay tax?
By default an LLC does not pay federal income tax itself. Profit passes to the owners. A foreign-owned single-member LLC still files an annual information return (Form 5472 with a pro forma Form 1120).
What is double taxation?
A C-Corp pays corporate tax on its profit, and shareholders pay tax again on dividends they receive. An LLC has only one layer by default.
Should I form a C-Corp to get investors?
If you expect venture or angel investment, yes, a Delaware C-Corp is the usual structure. Without investors, an LLC is usually enough.
Can I convert my LLC to a C-Corp later?
Yes. It needs new filings and has tax consequences, so plan it with a professional rather than treating it as a quick change.
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