Entrepreneurship

Differences between LLC and C corporation in the USA

A complete guide on  the differences between LLC and C corporation

Introduction

A Limited Liability Company (LLC) is a business form in the United States that combines the personal liability protection of a corporation with the tax efficiency of a sole proprietorship or partnership. It is the most frequent sort of business in the United States. Through stock sales, C corporations provide endless development opportunities, allowing you to attract some very wealthy investors. The number of investors in a C Corporation is also unlimited. We will examine the major differences between an LLC and a C Corporation in this article.

What is an LLC?

In the United States, a limited liability company (LLC) is a type of corporate structure that protects its owners from being found personally liable for the liabilities of the firm. Limited liability companies are hybrid legal structures that incorporate elements of both corporations and partnerships / sole proprietorships.

What is a C Corporation?

A C corporation (C-corp) is a legal company in which the owners, or shareholders, pay their own taxes. Profits earned by a company are taxed at both the corporate and individual levels, resulting in a scenario of double taxation.

What are the differences and similarities between LLC and C corporation?

An analysis of the fundamental differences and similarities between an LLC and C Corporation are given below-

 

 

 LLC

C Corporation

Formation

Article of organization

Articles of Incorporation (C-corp is default corporation tax designation)

Choice of taxation structure

Yes. It is a Single Member LLC, SMLLC, or partnership for multiple members by default, as well as a S or C Corporation (by election)

No. The profits of a C Corporation are taxed at the corporate tax rate

Taxes deductible

Deductible on individual tax returns

Not deductible on personal tax returns

Members (Directors) and Shareholders

 

Members are allowed. Shareholders are not allowed in an LLC

Directors and Shareholders both are allowed in a C corp

Stock

A limited liability company (LLC) is not permitted to issue stock shares

C corporations are permitted to issue some stock classes with different voting rights

 

Investing in equity

It is more challenging to raise money and transfer membership interests

Capital raising is simpler

Retaining Profits

More challenging; whether cash is distributed or not, distribution shares are taxed

It’s simple because dividends are only taxed when they are distributed

Records and paperwork

 

There isn’t much paperwork needed. Annual state reports must be filed with the proper fee and can be sent in the mail, but most states allow or require online submission as well

 

There must be official board and shareholder meetings and minutes Additionally, annual state reports must be submitted

Shareholders meeting

Not necessary, it can have recorded actions

Board meetings and formal shareholders are required

Suitable for

Small companies with few investors

Medium to large businesses with several shareholders (including institutional investors)

Conclusion

As a result, many states have approved a new class of for-profit organization known as a “C corporation”. The interests of diverse stakeholders must be taken into account by the directors when making decisions in a C corporation. LLCs are more flexible. The operational agreement between the members may specify that individuals in charge of managing the company must take non-members’ interests into account.

 

Understanding what a corporation and an LLC are, how they are similar to one another, and how they differ is essential to making the best decision. There are, however, considerable non-tax differences as well. To make the best decision, business owners and their advisors should be aware of all these differences.

Team Ebizfiling

Ebizfiling.com is a leading online platform offering end-to-end business compliance solutions for startups, SMEs, and global companies. With a presence across India and international markets including the USA, UK, and Singapore, the company specializes in company/LLP incorporation, ITR and GST filings, legal advisory, and foreign subsidiary formation. Backed by experienced professionals including CAs, CSs, and legal experts, Ebizfiling delivers accurate, timely, and regulation-compliant services trusted by thousands of businesses. The platform aims to simplify complex compliance processes through technology, personalized support, and a deep understanding of Indian and global regulatory frameworks.

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