If you plan to raise venture capital or go public, a C corporation (C corp) is usually the better fit. If you want simpler taxes and less paperwork, a limited liability company (LLC) often makes more sense. As of 2025, there are 36.2 million small businesses in the US, according to the Small Business Administration. Each of these businesses needs to select a business structure, building a foundation for how they operate, grow, and address challenges. This decision impacts every facet of business operations, including liability, taxation, and the ability to raise capital.

The decision between forming an LLC or a C corp is a major choice that can significantly influence a business’s operational efficiency, fiscal health, and growth potential. Below, we’ll explain what C corps and LLCs are, their benefits, and how to choose between them.

What’s in this article?

• What is a C corp?
  
• What is an LLC?
  
• What are the benefits of a C corp for a startup?
  
• What are the benefits of an LLC for a startup?
  
• C corp vs. LLC: Differences and similarities
  
• How to choose between an LLC and a C corp
  
• How Stripe Atlas can help
  

What is a C corp?

A C corporation is a type of business entity that’s legally separate from its owners. This means the corporation itself, not the shareholders who own the company, is held legally liable for the actions and debts the business incurs. C corps are subject to double taxation, which means corporate profits are taxed at the corporate level and then shareholders are taxed on any dividends or distributions they receive.

What is an LLC?

A limited liability company is a type of business structure in the US where owners have limited personal liability for the debts and actions of the company. The “limited liability” structure is designed to protect the personal assets of the owners (also known as members) in the event of legal or financial debts incurred by the business. Unlike C corps, LLCs are pass-through entities by default, which means that business profits are taxed once on personal tax returns.

What are the benefits of a C corp for a startup?

Recognized for its robust structure, investment potential, and perpetuity, a C corp could align well with your business’s growth trajectory and future aspirations. Here are the key advantages of C corps:

• Limited liability: One of the most significant advantages of a C corp is that it provides its owners (shareholders) with limited liability protection. If the corporation incurs debts or is sued, the shareholders’ personal assets (e.g., houses, cars, savings accounts) typically can’t be touched by creditors or litigants.

• Perpetual existence: A C corp has a “perpetual existence,” which means it can live on regardless of what happens to its shareholders, directors, or officers. This feature allows the business to maintain operational continuity through ownership changes and management transitions.

• Increased credibility: Incorporating a business can increase its credibility with potential customers, suppliers, and investors. The formal corporate structure sends a message that the business is professional and committed in the long term.

• Easier access to capital: C corps have a unique ability to raise funds through the sale of stock, whether through private placements or public offerings. Access to more capital can mean more opportunities for growth and expansion. Corporations can also take advantage of various other funding options such as bonds and convertible notes.

• No limit on the number of shareholders: Unlike some other types of corporations, a C corp can have an unlimited number of shareholders. This unlimited shareholder policy enables a C corporation to sell shares to a broader range of investors, both domestically and internationally.

• Ownership and management separation: In a C corp, owners and management can be separate. The shareholders own the company, but the board of directors—elected by the shareholders—makes the significant business decisions and oversees the corporation’s general affairs. The board of directors then appoints the officers who manage the day-to-day business operations.

• Tax deductions: C corps can deduct employee benefits such as health insurance and retirement plan contributions.

What are the benefits of an LLC for a startup?

An LLC is a flexible business structure that offers a strong blend of protection and simplicity. These are the benefits of LLCs:

• Limited liability: Just like a corporation, an LLC provides its owners (members) with limited liability protection. This means that the members aren’t personally responsible for the company’s debts and liabilities. If the LLC incurs debt or is sued, typically only the business’s assets are at risk. Members’ personal assets (e.g., homes, cars, personal bank accounts) are protected.

• Pass-through taxation: One of the most appealing characteristics of an LLC is the benefit of pass-through taxation. LLCs typically don’t pay taxes at the business level. Income or loss is reported on the owners’ personal income tax returns, and any tax due is paid at the individual level.

• Flexibility in management and ownership structure: LLCs have considerable flexibility in terms of management and ownership structure. They can be member-managed (where all members participate in the decision-making process of the business) or manager-managed (where designated members, or even outsiders, are appointed to manage the LLC).

• Less paperwork and formal requirements: Compared to corporations, LLCs have fewer annual requirements and ongoing formalities. This can make LLCs easier and less expensive to operate from a legal perspective.

• Flexible profit distribution: An LLC has flexibility in how it distributes its profits to its members. An LLC can choose to distribute its profits however it wants. This allows it to balance out any income disparities among different members, if necessary.

• Perpetual existence: In many states, if a member leaves an LLC or a member dies, the LLC doesn’t automatically dissolve. In other states, perpetual existence must be specified in formation documents or operating agreements.

C corp vs. LLC: Differences and similarities

When you choose a business structure, the decision between a C corp and an LLC can be challenging. Both provide limited liability protection, which legally separates the business from its owners and generally protects personal assets from business debts, lawsuits, and financial liabilities. Both structures also share similar state filing requirements, including formal registration documents and filing fees. But they can differ in their benefits and drawbacks.

Here’s a more detailed comparison to help you understand which might be the right choice for your business.

Taxation

One of the main differences between an LLC and a C corp is how they’re taxed. An LLC is a pass-through tax entity, which means the company itself doesn’t pay any income taxes. Instead, income is passed through to the owners, who report it on their personal tax returns. On the other hand, a C corp is subject to “double taxation.” The corporation pays taxes on its earnings at the corporate level, and then shareholders pay taxes again on dividends they receive. However, C corps have the advantage of being able to deduct the cost of employee benefits.

Investment opportunities

If you plan to seek investment from venture capitalists or aim to go public in the future, a C corp incorporated in Delaware is usually the preferred choice. This is because C corps can have an unlimited number of shareholders and are more familiar to investors. An LLC is often less appealing to investors because it’s a less standardized business structure.

Management structure

In a C corp, the management structure is divided into shareholders, directors, and officers, which can provide clarity of roles but might also introduce administrative issues. In contrast, LLCs have a more flexible structure. They can be managed by members (owners) or by managers, who could be members or outsiders.

Administrative requirements

C corps often have more administrative requirements, such as naming registered agents, holding annual meetings, recording meeting minutes, and creating bylaws. These requirements can create more structure in business operations, but they can also result in more paperwork. LLCs generally have fewer administrative tasks, which can mean less paperwork and lower legal and accounting fees.

Profit distribution

C corps distribute profits to shareholders based on the number of shares they own. LLCs have more flexibility in profit distribution: they can distribute profits however they see fit, as long as it’s outlined in the operating agreement.

Perpetual existence

A C corp can exist perpetually, which means it can continue indefinitely, regardless of what happens to its individual owners or managers. An LLC’s lifespan can vary by state. In some states, if a member exits the LLC or passes away, the LLC is dissolved—unless there’s a different provision in the operating agreement.

How to choose between an LLC and a C corp

The decision to form an LLC or a C corp depends on a variety of factors. Here’s how to assess your options for structuring your business:

• Understand your business goals: Determine your business’s long-term goals. For example, if your business plan includes going public or seeking investment from venture capitalists, then a C corp is typically the better choice. But if your primary goal is to keep things simple while protecting yourself from personal liability, an LLC might be more suitable.

• Assess the nature of your business: Different businesses come with different levels of risk and liability, which can inform your choice. If your business carries a high risk of liability, having the added protection of a C corp structure might be more beneficial.

• Examine your tax situation: C corps are subject to double taxation—once at the corporate level and again at the individual level when dividends are distributed to shareholders. An LLC, however, is a pass-through entity so taxes on profits are paid only once on the owner’s individual tax return. The One Big Beautiful Bill Act has further influenced this choice by cementing a permanent 21% flat rate for C corps, while securing a permanent 20% qualified business income (QBI) deduction and an increased state and local taxes (SALT) deduction cap for LLC owners.

• Consider your need for investment: If attracting investors is a key part of your business strategy, forming a C corp might make more sense. C corps allow an unlimited number of shareholders and are generally the preferred, and sometimes the required, structure for venture capitalists and other institutional investors. An LLC structure can make bringing on investors more complicated given the complexity of filling out the Schedule K-1 tax form and issues with unrelated business taxable income (UBTI).

• Think about management structure: An LLC offers more flexibility in management structure, as it can be member-managed or manager-managed. C corps have a defined structure with a board of directors and officers.

• Factor in administrative requirements: C corps often require more administrative tasks, such as holding annual meetings and filing reports, which can be burdensome for a small business.

• Seek outside counsel: After you’ve evaluated all of the factors above, consult a business adviser or legal expert to guide your decision. They can provide advice personalized for your situation and goals and help you understand the industry- or state-specific requirements and processes for forming an LLC or a C corp.

How Stripe Atlas can help

Stripe Atlas handles everything you need to legally launch your company—incorporation, employer identification number (EIN), equity setup, and tax filings—so you can fundraise, open a bank account, and start accepting payments in as little as two business days, from anywhere in the world.

Join 100,000+ startups incorporated using Atlas, including startups backed by top investors like Y Combinator, a16z, and General Catalyst.

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The application takes under 10 minutes. You’ll choose your company structure, confirm your name is available, add up to four cofounders, set your equity split, and e-sign. Then, Atlas takes it from there, including notifying cofounders to sign their documents electronically.

Banking and payments before your EIN arrives

Atlas files your EIN application automatically after incorporation. You don’t have to wait. Atlas enables pre-EIN payments and banking so you can start accepting payments and making transactions right away. US founders with a Social Security number are typically eligible for expedited IRS processing.

Automatic 83(b) tax election filing

Atlas files your 83(b) election for you—US and non-US founders alike—with US Postal Service certified mail and tracking to reduce personal income taxes. You’ll get a signed 83(b) election and proof of filing directly in the Stripe Dashboard, with certified mail confirmation.

World-class company legal documents

Atlas provides all the legal documents you need to start running your company—drafted by Cooley, one of the world’s leading venture capital law firms—and stores them directly in the Stripe Dashboard. These documents are designed to help you fundraise immediately and ensure your company is legally protected, covering aspects like ownership structure, equity distribution, and tax compliance.

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Learn more about how Atlas can help you set up your new business quickly and easily, or get started today.