There are three structures most US founders end up choosing between. The LLC. The C-Corporation. The S-Corporation. Each one solves a different problem, and the differences are not cosmetic. Once filed, your structure shapes how you're taxed, who can own you, how you raise capital, and what investors will be willing to do with you.
We've filed in all three across all 50 states for twenty-four years. The decision is rarely close once we walk a founder through their actual situation. Below is the framework we use.
Read each section as a side-by-side. The same question, asked of the LLC, then the Corp, then the S-Corp. By the end, the structure that fits your business is usually obvious.
Who can own each one.
This is the first filter, and for many founders, it's also the last. An LLC and a C-Corporation can be owned by anyone, anywhere; citizenship and residency don't matter. An S-Corporation is restricted to US citizens or US residents. Foreign nationals cannot hold S-Corp shares.
If you're a non-resident founder, the choice immediately narrows to LLC or C-Corp. If you're a US resident, the S-Corp opens up as a third option.
- LLC: open to founders worldwide, no residency requirement.
- C-Corporation: open to founders worldwide, no residency requirement.
- S-Corporation: US citizens and US residents only, capped at 100 shareholders.
How each one is taxed.
This is the second filter, and for many founders, the most expensive one to get wrong. The three structures are taxed three different ways.
An LLC uses pass-through taxation: the company itself doesn't pay income tax. Profits flow to the members' personal returns based on ownership percentage, where rates from 10% to 37% apply depending on individual income.
A C-Corporation pays its own corporate income tax at a flat 21% federal rate. When the company distributes dividends, shareholders then pay personal tax on those distributions. That's the source of what's commonly called double taxation.
An S-Corporation works like an LLC for tax purposes, even though structurally it looks like a C-Corp. Profits pass through to shareholders' personal returns. The corporate-level tax disappears.
The right structure isn't the most prestigious one. It's the one that matches who you are, where you live, and what you're trying to build.
Flat federal rate for C-Corporations
How each one issues ownership.
An LLC is owned through membership interests, expressed as percentages set in the Operating Agreement. Transferring ownership requires amending the Operating Agreement and is rarely as fluid as selling stock.
C-Corporations and S-Corporations both issue stock. Shares are easily transferable; a shareholder can sell without restructuring the company. C-Corps can list publicly; S-Corps cannot, but private share transfers within the residency-restricted shareholder pool are still clean.
If your plan involves outside investors, venture capital, or eventual sale of equity, the share structure of a Corporation makes the path much smoother. Investors expect stock. Membership percentages create friction.
How capital is raised.
An LLC raises capital primarily by adding members or restructuring contributions among existing members. Both approaches require negotiating amendments to the Operating Agreement.
A C-Corporation raises capital by issuing additional shares. The mechanics are well-understood by every investor and every term sheet. Equity expands cleanly without straining personal credit or restructuring the company's core documents.
An S-Corporation can also issue shares but only within the 100-shareholder cap and the US-residency requirement. Practically, this rules out the kind of capital raises that bring in foreign investors or scale to a public offering.
How each one is governed.
LLCs are governed by their Operating Agreement, which the members write. There's no requirement for a board of directors, no annual meeting, no minutes. The structure is intentionally light.
C-Corporations and S-Corporations are governed by a board of directors elected by the shareholders. Minutes, annual meetings, and formal corporate governance are part of the deal. The administrative weight is real, but it's also what investors and lenders expect to see.
Personal asset protection across all three.
On this dimension, the three structures are equivalent. The LLC, the C-Corp, and the S-Corp all separate company assets from personal assets. If the company is sued, only company assets are exposed. The members', directors', or shareholders' personal property is not at risk in standard business obligations.
This is why all three are sometimes lumped together as liability-shield structures. They share the same fundamental protection. They differ on tax, ownership, and governance, not on who's responsible for the company's debts.
Which one to choose.
If you're a non-resident founder, the choice is between an LLC and a C-Corporation. The LLC is simpler and cheaper to maintain. The C-Corp is what investors expect and what raises capital cleanly. For most non-resident founders running a service or e-commerce business, the LLC wins. For those raising venture capital or planning a US-based scale, the C-Corp wins.
If you're a US resident, the S-Corp opens up as a third option. The S-Corp is most attractive when you're a resident, planning to take regular distributions, and want to avoid the C-Corp's double taxation while still operating with corporate-style governance and stock.
We've seen founders pick the wrong structure because it sounded prestigious, usually the C-Corp, and then carry an unnecessary tax burden for years. We've also seen founders choose the LLC out of convenience, then struggle when investors arrive expecting stock. Neither mistake is fatal, but both are avoidable. A 15-minute conversation usually settles the question.