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What business type is right for you?

When you're starting a new business, you want to determine the business structure that's right for you. What's the difference between a limited liability company (LLC) and a corporation (Inc.)? And how is a C corporation different from an S corporation? Use these charts to help decide what business type is best for your needs.

LLC vs. Corporation

Limited Liability Company (LLC)

Shields personal assets from business liability
Requires separation of business and personal finances
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Allowable in all 50 states and the District of Columbia
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Highly flexible management structure
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Flexible tax reporting options
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Preferred by outside investors
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Preferred for IPO
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Recognized outside of the United States

Corporation (Inc)

Shields personal assets from business liability
Requires separation of business and personal finances
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Allowable in all 50 states and the District of Columbia
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Highly flexible management structure
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Flexible tax reporting options
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Preferred by outside investors
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Preferred for IPO
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Recognized outside of the United States

What is an S corporation?

After you create a corporation or LLC, you also have the opportunity to decide how you'd like your business to be taxed.

Single owner LLCs can be taxed either as a sole proprietorship or a corporation. LLCs with more than one owner can be taxed either as a partnership or a corporation. Income from LLCs treated as sole proprietorships or partnerships is reported directly on the owner’s individual tax returns.

New corporations, as well as LLCs considering corporate taxation can choose between filing taxes as a C corporation ("C corp") or an S corporation ("S corp"). An S corp is considered a "pass-through entity," which means the business itself isn't taxed. Instead, income is reported on the owners' personal tax returns. Businesses taxed as C corporations are not pass through entities. Income is taxed at the corporate level, and, if dividends are distributed, at the individual level as well.

We can help you understand your options so you choose what's best for your business. Talk to one of our network of attorneys today.

C-corp or S-corp

Here's a comparison of some key characteristics of businesses that choose to be treated as C corps and S corps.

C Designation

Owners pay personal income tax on profits
Business must pay corporate income tax
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All business income/loss is passed through to owners each year.
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No more than 100 shareholders
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Shareholders must be U.S. citizens or resident aliens

S Designation

Owners pay personal income tax on profits
Business must pay corporate income tax
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All business income/loss is passed through to owners each year.
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No more than 100 shareholders
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Shareholders must be U.S. citizens or resident aliens

You don't have to decide about S corp status right away. You have 75 days after the formation of your business to file with the IRS. If you're still not sure what to do, you may want to consult with one of our attorneys or tax specialists.


Step-by-Step Guide on Starting Your Business

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Easy as 1-2-3

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1. Select the business structure that's right for you and fill out a simple questionnaire.

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2. We'll assemble your documents and file them directly with your state.

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3. You'll receive your completed paperwork by mail.


Ask away. We have answers.

Common questions

Can I start a business without creating a corporation or LLC?
You don't need a corporation or LLC to go into business. Many business owners are in partnerships or are sole proprietors. But both a corporation and LLC canshield you from liability and may offer tax advantages.
What are the main differences between an LLC and a sole proprietorship?
You don't need to file any paperwork with your state to create a sole proprietorship (though you may still need business permits and licenses to operate lawfully). But an LLC protects you from personal liability - a sole proprietorship doesn't.Also, LLCs provide more flexibility as you grow your business.
What are the main differences between an LLC and an S corporation?
An LLC has more flexibility and fewer corporate formalities than an S corporation. S corporations are required to have annual meetings of shareholders and directors, while meetings of LLC member and/or managers are not required.. Also, LLCs can provide for a flexible management structure by members or managers, while corporations require management by a Board of Directors.

Learn more.
Do I need a name or DBA for my business?
You only need a DBA ("doing business as") if you are operating a sole proprietorship or partnership and you want to use a fictitious name for the business. You don't need a DBA for an LLC or a corporation unless you are using a name other than your LLC or corporate name while doing business.

Learn more.
Do I need any other licenses or permits to start my business?
Some cities, counties, and states require businesses to obtain licenses and permits to operate lawfully. We can help you figure out what you need. Learn More.

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Compare Business Structures – LLC vs. Corporation, S Corporation and C Corporation

You’ve decided to start a business, but you’re not sure where to begin. You don’t know if you should form an LLC or corporation, and need guidance to help you choose the right business structure. Each business structure has its advantages and disadvantages that are important to understand because choosing the wrong business entity could result in legal and tax implications down the road. The information above will allow you to compare LLC vs. corporation, and learn the difference between an S corporation and C corporation. LLCs and corporations both offer personal liability protection, but the most significant difference between LLC and corporation is that corporations are preferred by outside investors. When comparing LLC vs S corp, there are a few important differences to be aware of which are outlined above. Once you determine which business structure you need, you can start a business with LegalZoom in just three easy steps. The process begins by filling out a simple questionnaire. We’ll assemble your documents and file them directly with your state, and you’ll receive your completed paperwork by mail. If you need help deciding which business structure is right for you, a LegalZoom legal plan attorney can explain how each business entity works and help you decide.