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Business Entity Comparison, C-Corp vs. S-Corp
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LLC vs. c and s Corporation

LLC vs. C-Corporation and S-Corporation – Which is the right Choice for you?

Choosing the right business entity, LLC vs. Corporation, depends on what business characteristics you need for your company to succeed. Important factors to consider include: which tax structure is right for your business, will you be raising capital, how many shareholders will you have, where do your investors reside, and will you have more than one class of stock? There is much to consider. The chart below will help you decide. Still have questions? Call our formation specialists at 877.901.5800.

CHARACTERISTICS
LLC
C-CORPORATION
S-CORPORATION
Limited Liability of Owners
Personal Liability Protection
Personal Liability Protection
Personal Liability Protection
Continuity of Life
Determined by State of Formation
Perpetual
Perpetual
Entity Federal Income Tax
Optional – can either be taxed solely at the member level or at both the entity level and member level
Taxed at both the entity level and the shareholder level
No entity level taxation – profit and loss is passed through to the shareholder
Ease of transferability of ownership
As outlined in the Operating Agreement
Shares of stock are easily sold but restrictions may exist in Shareholder’s Agreement
Stocks can be sold but must meet IRS restrictions on who can own stock. May be restrictions in Shareholder’s Agreement
Favorable Federal Income Tax deductions for health insurance and other fringe benefits
Depends on chosen tax treatment
Yes

Better than Proprietorship but not as favorable as C-Coporation

Can limit personal liability of officers and directors for breach of fiduciary duties
Yes
Yes
Yes
Can issue more than one class of stock / ownership
Yes
Yes
No
Limitation on number or qualifications of shareholders
No
No
Yes – maximum of 75 shareholders and must be a citizen of the USA
Fiscal year account may be available
No
Yes
No
Self employment tax on dividend distributions
Depends on chosen tax treatment and amount of salaries to Members
No
No
Member flexibility for employment taxes
Yes. Members can elect to treat themselves as employees or self employed
No. Corporations must have employees
No. Corporations must have employees
Flexibility of allocating income and tax deductions among members
Yes. Members can make special allocations of income and tax deductions
No
No
All Owners can have management ability
Yes. LLC can either be member managed or manager managed
Shareholders can also serve as Directors and Officers
Shareholders can also serve as Directors and Officers
Operational Requirements
Can be very simple operationally, but operating agreement, Managers, Annual Meetings recommended. Annual Report of Managers and/or Members required
Board of Directors must appoint Officers who manage the day-to-day activities of the corporation. Must have Annual Meetings and annual reporting required
Board of Directors must appoint Officers who manage the day-to-day activities of the corporation. Must have Annual Meetings and annual reporting required
Management Members outline management in their operating agreement Shareholders must elect a Board of Directors who appoint Officers who manage the day-to-day activities of the corporation Shareholders must elect a Board of Directors who appoint Officers who manage the day-to-day activities of the corporation
Raising Capital Membership Interests may be sold to raise capital Shares of stock may be sold to raise capital Shares of stock may be sold to raise capital