Company entity options
Stripe Atlas supports two options for forming a U.S. company in Delaware:
- C Corporation
- Limited Liability Company (LLC)
Reasons you might choose to incorporate a C Corporation include:
Raising outside funding: A Delaware C Corporation is the entity generally preferred by outside institutional investors who might be unable to invest in LLCs.
Ownership: A corporation’s structure facilitates granting equity to employees, advisors, and investors.
Tax treatment: For tax purposes, a corporation is a separate tax-paying entity from its owners; taxes on a C Corporation’s profits and losses are reported and paid by the corporation.
Defined governance structure: A Delaware C Corporation has a well-known, regulated, management structure.
If you choose to incorporate as a C Corporation, this can be either a new company—owned by individuals and investors—or a Delaware subsidiary of an existing company (even if that company is not located in the U.S.).
The choice of a standalone or subsidiary corporation—and the number of shares you authorize for your company—can affect the amount of Delaware Franchise Tax your C Corporation owes, while also affecting your future tax and compliance obligations.
To help with these decisions, Stripe Atlas provides users with access to tax and legal guides. We strongly recommend asking your own legal counsel or tax advisors for their advice as well.
Many C corporations that incorporated with Stripe Atlas (with 10,000,000 authorized shares) end up owing the minimum Delaware Franchise Tax amount due under the Assumed Par Value calculation method.
Limited Liability Company (LLC)
LLCs are more common for indie hackers with no plans to raise outside capital. For information about LLCs as an alternative to C Corporations, you can take a look at our Stripe Atlas Guide to Picking an Entity.
Stripe Atlas does not support LLCs for non-U.S. founders. If you believe an LLC is the right option for your company, please consider the following:
- An LLC is not typically chosen by founders who intend to raise outside funding.
- There can be significant legal complexity and additional tax considerations for members of an LLC who live outside the U.S. or who are not U.S. citizens (for example, forming an LLC might create U.S. personal income-tax obligations for a non-U.S. owner).
For LLCs, Stripe Atlas supports formation only as a standalone company, not as a subsidiary. If you choose to form an LLC, you will establish a new company—owned by one individual, or by a group of individuals. All Delaware LLCs pay a flat Delaware annual LLC tax.
When to form your company
C Corporations active in Delaware any time before December 31st owe at least the minimum Delaware Franchise Tax for that year. LLCs active before December 31st owe the full annual LLC tax for that year.
Neither the Franchise Tax nor the LLC tax is prorated. Your company might also owe U.S. Corporate Income Tax for the outgoing year. It might also owe taxes to a U.S. state other than Delaware, depending on where the LLC operates.
For all these reasons, companies planning to form near the end of a year might want to consider instead forming in January of the following year.
Now that you’re familiar with Stripe Atlas, you may want to read more about:
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