LLC vs C-Corp, Explained Simply
These are the two most common ways to structure a US company. This guide explains the difference in plain terms, so the choice fits your plan instead of a default.
What it is
When you start a US company, you pick a legal structure. Two show up far more often than the rest:
- An LLC (Limited Liability Company) is a flexible, lightweight structure. By default, if it has one owner, the US tax system treats it as a "disregarded entity" — meaning the company's profit is treated as the owner's, and the LLC itself usually pays no separate federal income tax. It is popular with small businesses and solo e-commerce sellers because it is simple and cheap to run.
- A C-Corp (a corporation taxed under "subchapter C" of the tax code) is a more formal structure. It is its own taxpayer: it files its own return, called Form 1120, and pays a flat 21% federal corporate income tax on profit (as of 2026). Investors and venture-capital firms almost always expect a C-Corp, usually formed in Delaware.
Both give you "limited liability" — the protection that, if the business owes money or is sued, your personal savings are generally shielded. That part is shared; the differences are about tax and paperwork.
Why you should care
The structure shapes your taxes, your admin, and your ability to raise money. An LLC is usually less to administer and avoids a separate layer of corporate tax. A C-Corp can face "double taxation" — the company pays tax on its profit, then owners pay tax again on dividends they take out — but it is the structure investors want, and it can be the better home once you have many owners or plan to raise venture capital.
Where you form the company matters too. Wyoming is a low-cost, popular home for a simple LLC — as of 2026, roughly $100 to file and about $60 a year. Delaware costs more (around $110 to file, plus an annual franchise tax that as of 2026 starts near $300 for a small company) and mainly makes sense if you are raising outside investment or plan to operate as a C-Corp. Either way, these fees feed into your yearly costs — see our guide on annual reports.
What happens if you ignore it
Choosing badly is expensive to undo. Form a C-Corp when a simple LLC would have done, and you take on corporate returns, franchise taxes, and complexity you did not need. Form an LLC and then land an investor who insists on a C-Corp, and you may have to convert — extra legal work and cost at the worst moment.
There is also an obligation founders often miss: a foreign-owned single-member LLC has its own yearly federal filing, Form 5472, no matter how simple the company looks or whether it earned anything. Picking a structure without knowing what it commits you to is how founders end up with surprise filings and penalties. And whichever you choose, you will need an EIN before you can bank or file.
What we handle for you
We help you choose the structure and state that fit how you plan to raise money, take profit, and operate — then we form it correctly and set up the filings it triggers. It is the starting point of our US market-entry service. Tell us your plan and we'll recommend the right fit.