Difference Between LLC and C Corporation in the US

Written by Suzanne Campbell
May 20, 2025
Business, Global Business Expansion, United States

LLC or C Corp, which structure fits you? Which one is best for your business? Let’s learn the real difference

“One gives you flexibility. The other prepares you for fundraising. And the choice you make now shapes everything later.”

Let’s Have the Talk: LLC or C-Corp?

You’ve decided to set up in the US, of course, with a proper channel.

Maybe you’ve read through How to Start a Business in India or Bangladesh, and now you’re eyeing the U.S. structure. Maybe Stripe, Mercury, or your investor just told you, “You’ll need to register a U.S. entity first.”

And that’s when you fall into the rabbit hole: LLC vs. C Corporation.

They both sound official. They both get you a bank account and an EIN. But they’re not the same thing. And this one choice will impact your taxes, investors, compliance, paperwork, and most importantly, your sanity.

Let’s break it down in plain English.

First, What They Actually Are

LLC (Limited Liability Company)

An LLC is like the “freelancer turned founder” structure. It’s casual. It’s flexible. It doesn’t expect you to hire a lawyer every time you breathe.

Pass-through taxation (you pay taxes once, as an individual)
No shares, no stockholders
Simple compliance
Ideal for solo founders, consultants, or remote digital businesses

Quick Note: If you’re bootstrapping, freelancing, or running a service brand—it’s a great fit.

C Corporation

This one’s more formal—think “board meetings, shareholders, vesting schedules.”

It’s the go-to if you plan to raise venture capital or issue stock.

Double taxation (the company pays tax, and so do you if you get dividends)
Required to issue shares
Formal structure: board of directors, bylaws, officer roles
Preferred by VCs, accelerators, and tech investors

Quick Note: If you’re building to scale or pitch investors—it’s expected.

The Real Differences: LLC vs. C Corp

Taxes: Who Pays What?

LLC: You and your business are treated as one for tax purposes.

The profit goes straight to your personal income—you report it on your own tax return. Simple, no double tax.

C Corp: The business is treated like its own person.

It pays taxes first. Then, if you (as an owner) take money out—like dividends—you pay tax on that too. So yeah, two layers of tax.

Heads-up: For some foreign founders, C-Corp taxation isn’t as punishing if you reinvest everything into growth. But if you are taking money out? That’s when you feel the tax pinch.

Ownership & Setup: How Simple Do You Want It?

LLC: Way more relaxed. One owner, two partners, five friends—it’s flexible. You set the rules. No board meetings. No complicated filings.

C Corp: This is the “suit and tie” version.

You’ll need:

A board of directors
Bylaws
Shareholders
Regular paperwork

If you’re aiming for investment, a formal structure builds trust. If you are just starting out solo, LLC feels like a better fit.

Fundraising: Can You Bring Investors Onboard?

LLC: Not ideal for raising VC money. Investors usually stay away because LLCs don’t issue stock, and pass-through taxes complicate things for them.

C Corp: Built for fundraising. You can issue shares, create a cap table, and offer stock options—exactly what VCs want to see.

If you’re planning to pitch angels or raise rounds, C Corp is your ticket.

Maintenance: What Are You Signing Up For Long-Term?

LLC: Low upkeep.

Annual reports, maybe a state filing. No shareholder meetings or board minutes required. Perfect for indie founders or digital businesses.

C Corp: More rules.

You’ll need to keep records of meetings, file more paperwork, and stay on top of compliance stuff.

Not scary—but if you’re not organized, it stacks up quickly.

LLC vs. C Corp: At-a-Glance Comparison

Feature	LLC (Limited Liability Company)	C Corporation
Taxes	Pass-through: profits go to you, taxed once	Double tax: first, the company pays, then you pay again on dividends
Best For	Freelancers, consultants, solopreneurs, bootstrapped startups	Fundraising startups, venture-backed businesses
Structure	Flexible, no board or shares required	Formal: board, bylaws, shares, cap table
Fundraising Friendly?	Not ideal for VCs	Yes; investors prefer C Corps
Paperwork & Compliance	Low maintenance	Higher maintenance: annual meetings, minutes, filings
Profit Reinvestment	Fully personal; you pay taxes even if reinvested	Can reinvest at company level before personal tax kicks in
Ownership Flexibility	High; single-member, partners, custom agreements	Structured ownership via shares
Setup Speed	Fast and simple	Slightly more formal, still quick
Ongoing Cost	Lower annual fees and filings	Generally, higher admin costs
Foreign Founder Friendly?	Very	Yes, but with more moving parts

For a Minute, Let’s Talk U.S. Business Culture

In the U.S., people care how you show up on paper.

Even solo entrepreneurs use contracts. Even two-person startups separate shares. It’s not because they’re overly formal—it’s because here, legal clarity is seen as a sign of respect.

So if you plan to do business with Americans, pitch investors, or onboard U.S. partners, they’ll notice whether your structure is solid.

That said? Americans also love speed, clarity, and action. If your idea is good and you have an EIN, most people don’t care if you’re an LLC or C-Corp, until money is involved.

Which One Should You Choose?

Choose an LLC if:

You’re a solo founder or indie team
You want simple compliance
You’re not raising money soon
You value flexibility over formal structure
You’re testing an idea before going big

Choose a C-Corp if:

You plan to raise VC money
You’re applying to Y Combinator, Techstars, or similar
You need stock options or shares
You’re playing the long game and building a team
You want credibility in tech/startup finance circles

Bonus Notes: Non-Residents, Read This

You cannot form an S-Corp if you are not a US citizen or don’t have an SSN.
LLC or C-Corp are your only real options.
Without a Social Security Number (SSN), you’ll have to apply for an EIN by mail or fax; plan for delays.

Also, keep in mind: Stripe, PayPal, Mercury—all accept LLCs and C-Corps, as long as your structure and EIN are solid.

Final Thought: There’s No Wrong Choice, But There’s a Smart One

If you’re starting lean, testing the waters, or building on your own—go LLC.

If you’re raising capital, issuing shares, or thinking IPO (Initial Public Offering) someday—go C-Corp.

Just don’t choose based on what “everyone else is doing.” Choose based on where you are today—and where you’re willing to go tomorrow.

Because in the U.S., no one cares where you registered.

They care how you run it.

FAQ

Which is better: LLC or C-Corp?

There’s no one-size-fits-all.

Go LLC if you want flexibility, solo ownership, and simple compliance.

Go C-Corp if you plan to raise money, issue shares, or work with investors. That’s it.

Can I switch from an LLC to a C-Corp later?

Yes. You can convert—but it involves paperwork, potential taxes, and new EINs. If you know you’re raising capital, start with a C-Corp from day one.

Do investors fund LLCs?

Almost never. Most venture funds are structured in a way that can’t legally invest in pass-through entities like LLCs. C-Corp is the standard.

Is a C-Corp more expensive to maintain?

Yes. More filings, board meetings, tax returns, and formality.

But if you’re building a large or investor-backed company, it’s part of the package.

Do I pay more taxes with a C-Corp?

Possibly. C-Corps face double taxation—the company pays tax, and you pay again on dividends. The effect is manageable, though, provided you plan to keep the profits in the business or reinvest them.

Can a non-resident form a C-Corp?

Yes. Foreigners can form both LLCs and C-Corps.

But you can’t form an S-Corp unless you’re a U.S. citizen or green card holder with an SSN.

Which is easier for Stripe or PayPal?

Both LLCs and C-Corps are accepted—what matters is a clean structure, EIN, and a U.S. address. Most bootstrapped founders go LLC. Funded teams lean C-Corp.