LLC or Corporation?
For most founders this is a five-minute decision, not a five-week one. The honest answer turns on a single question — are you raising money from U.S. investors?
One question decides most of it
Everything else is detail. If you are not raising from U.S. venture investors, an LLC is almost certainly right — and cheaper, simpler and lighter to run.
Form an LLC
- You are selling online, consulting or running an agency
- You are the only owner, or there are two or three of you
- You want the least paperwork that still gives liability protection
- You are not planning to raise institutional investment
- You want profits taxed once rather than twice
Form a Corporation
- You are raising a priced round from U.S. venture investors
- You need an option pool to hire and retain people with equity
- You want multiple share classes with different rights
- You are planning an eventual acquisition or public listing
- You want to retain profit inside the company rather than distribute it
The differences that actually matter
Ten practical distinctions, without the legal-textbook detour.
| LLC | C-Corporation | |
|---|---|---|
| Owners are called | Members | Shareholders |
| Governing document | Operating Agreement | Bylaws + shareholder agreement |
| Default federal tax | Pass-through — profit is taxed once, to the owners | Taxed at company level, then again on dividends |
| Can issue stock | No — membership interests instead | Yes, including multiple classes |
| Employee equity | Awkward — profits interests, not options | Straightforward — a standard option pool |
| What investors expect | Rarely accepted for a priced round | The default for U.S. venture money |
| Formalities required | Minimal | Board meetings, minutes, resolutions, records |
| Ongoing admin | Light | Heavier — and the formalities are not optional |
| Ownership changes | Amend the Operating Agreement | Transfer shares — cleaner at scale |
| Typical use | Consulting, eCommerce, agencies, holding companies | Startups raising capital, businesses issuing equity |
Four beliefs that cost founders money
These come up in almost every consultation. Each one has sent somebody down an expensive path.
“A Corporation looks more professional”
It does not, to anyone who matters. Banks, payment processors, suppliers and enterprise customers work with LLCs constantly. Choosing a Corporation for appearances buys you board minutes and double taxation in exchange for nothing.
“An LLC means I pay no U.S. tax”
An LLC is not a tax exemption — it is a pass-through. The profit is still taxable; it is taxed to the owners rather than to the company. Whether a non-resident owner owes U.S. tax depends on where the income is effectively connected, which is a question for a CPA and not a formation agent.
“I can switch later, so it does not matter”
You can convert an LLC to a Corporation, and it is a normal transaction. But it costs money, takes time, and always seems to become urgent in the same month a term sheet arrives. If venture funding is a realistic plan within a year, start as a Corporation.
“S-Corp is the cheaper option”
An S-Corporation is a tax election, not an entity type — and it is unavailable to non-resident aliens. If you do not hold U.S. person status, this option is closed regardless of what a U.S.-focused blog post says.
What each one costs to form
Switch between LLC and Corporation to see how the total changes in your state. In most states the difference is small — the real difference is what it costs to run.
All-in — our service fee and the Wyoming state filing fee are both included.
- Ongoing state cost
- $60 minimum every year
- Typical processing
- 1–5 business days, then your EIN
State fees reviewed August 2026 and can change without notice — we confirm your exact total in writing before anything is filed. Ongoing state costs are the state’s own charges and are not marked up by us.
FormationXperts is not a law firm and does not provide legal or tax advice. Where needed, we coordinate with licensed professionals.
Not sure which one fits?
Tell us what the business does and whether investors are in the picture. We will give you a straight recommendation — and say so if the answer is obvious.