What each entity actually is
An LLC is a separate legal entity owned by members. It gives you liability protection without the formalities of a corporation: no board of directors, no mandatory annual shareholder meetings, and a flexible management structure.
An S corporation is not a different kind of company. It is a tax election. You form an LLC or a corporation first, then elect S corporation treatment with the IRS by filing Form 2553. The election changes how the business is taxed — it does not change the entity itself.
A C corporation is the traditional corporation: owned by shareholders, run by directors and officers, and taxed as its own entity. It is the structure built for outside investment and, eventually, going public.
Formation and setup compared
Forming an LLC usually means filing articles of organization with the state and adopting an operating agreement. The ongoing paperwork is light: most states ask for an annual report and a registered agent.
Forming a corporation means filing articles of incorporation, adopting bylaws, issuing shares, and appointing directors and officers. The paperwork is heavier, and the formalities are not optional — skipping them can weaken the liability protection.
An S corporation follows the same formation steps as the underlying entity, then adds the Form 2553 election. The election must be filed on time, and only qualifying entities can make it.
How each one is taxed
By default, a single-member LLC is taxed as a sole proprietorship and a multi-member LLC as a partnership. Profits pass through to the owners’ tax returns.
An S corporation also passes profits through, but with one important difference: owners who work in the business must be paid a reasonable salary first, and only the remaining profit passes through as distributions.
A C corporation pays tax at the company level, and shareholders pay tax again on dividends. That double layer is the main reason small businesses usually avoid C corporation status — unless they plan to raise venture capital or reinvest heavily, where keeping profits inside the company can make sense.
Liability protection
All three structures separate your personal assets from the business — if the protection is maintained. For an LLC, that means keeping business and personal finances apart and staying current with state filings. For corporations, it also means observing formalities: meetings, minutes, and records.
No structure protects you from your own wrongdoing, from personal guarantees on loans, or from unpaid payroll taxes. Liability protection is real, but it has limits.
Ongoing compliance
LLCs: annual or biennial report in most states, a registered agent at all times, and a separate bank account.
S corporations: everything the underlying entity requires, plus payroll for owner-employees, the reasonable-salary rule, and the S election’s eligibility limits (for example, no more than 100 shareholders, and shareholders must generally be individuals).
C corporations: board and shareholder meetings, minutes, annual reports, and corporate tax returns.
Which one fits your business?
Choose an LLC if you want simplicity, flexibility, and pass-through taxation without payroll complexity.
Choose an S corporation election if your business is consistently profitable and paying yourself a salary plus distributions would save tax overall. Talk to a tax professional before electing — the salary rule and eligibility limits matter.
Choose a C corporation if you plan to raise outside investment, offer stock options, or reinvest profits at scale.
What it costs to form each one
The formation packages are the same for every entity type on this site. Every tier includes registered agent service free for the first year and virtual mail free for the first month, plus the state filing fee, which you pay at cost with zero markup.
The Basic package costs $0 plus the state fee. The Standard package costs $199 plus the state fee and adds EIN assistance, an operating agreement or bylaws, an S corporation election where it applies, and compliance alerts. The Premium package costs $299 plus the state fee and adds expedited filing where the state offers it, ready-to-use business contracts, a domain name, a business email, and a US business phone number free for the first year.
You see the full total before you pay. There are no upsells and no hidden charges.
Can you change later?
Yes. An LLC can elect S corporation tax treatment later, or convert to a corporation. A corporation can elect S status if it qualifies. Changing structure is possible, but it can have tax consequences, so plan the starting structure carefully rather than assuming a switch is free.
Where to go next
Ready to start? Compare the packages, read how the process works, or get in touch through the contact page. For a step-by-step walkthrough, see the business formation checklist. For the registered agent requirement in plain language, see what a registered agent is. Nonprofit founders should read the nonprofit formation page instead — the rules there are different.
Not legal or tax advice.