LLC vs. corporation: which should you choose?

Updated June 2026 · 5 min read

Most new businesses come down to two choices: an LLC or a corporation. They’re both ways to put legal distance between you and your business — but they behave very differently at tax time and when you raise money. Here’s the plain-English version.

The one-minute version

LLC — simple, flexible, and cheap to run. Profits pass through to your personal taxes. Great for most small businesses, freelancers, and side projects.
Corporation (C-corp) — more structure and paperwork, but the standard choice if you plan to raise venture capital or issue stock options.

Liability protection (a tie)

Both an LLC and a corporation separate your personal assets — your house, your savings — from the business’s debts and lawsuits, as long as you keep finances separate and follow the basic rules. On protection alone, it’s a wash.

Taxes (the real difference)

An LLC is a “pass-through” entity by default: the business itself doesn’t pay federal income tax, and profits land on your personal return. A C-corp pays corporate income tax, and then shareholders pay again on dividends — the classic “double taxation.” For most small businesses, the LLC’s single layer of tax is simpler and cheaper.

One nuance: an LLC can elect to be taxed as an S-corp once it’s profitable, which can save on self-employment tax. You don’t have to decide that on day one.

Paperwork & upkeep

LLCs are light: an operating agreement and an annual report in most states. Corporations are heavier: bylaws, a board, officers, shareholder meetings, and minutes. If you don’t need that structure, the LLC saves you real time.

Raising money

If you plan to raise from venture investors or grant stock options to employees, investors will almost always expect a Delaware C-corp. If you’re bootstrapping or running a lifestyle business, an LLC is usually the better fit.

A simple way to decide

Bootstrapping, freelancing, or a small team? → LLC.
Raising VC or issuing stock options soon? → C-corp.
Not sure yet? → Start as an LLC. It’s cheaper and you can convert later.

Not sure which to pick?

Answer a few questions and we’ll form the right one for you — $0 plus the state fee.

This guide is general information, not legal or tax advice. Your situation may differ — when in doubt, talk to an accountant or attorney. Filerra is not a law firm.