Compare Business Entity Types

Feature LLC S Corporation C Corporation

Legal Structure Flexible, member-managed or manager-managed Separate legal entity, shareholders & officers Separate legal entity, shareholders & officers

Taxation Pass-through (default) or elect corporate tax Pass-through (must meet IRS requirements) Subject to corporate tax (double taxation)

Owner Requirements No limit on number or type of owners Up to 100 U.S. citizens or residents only Unlimited owners; no residency restriction

Self-Employment Taxes Members typically pay SE tax on all income Shareholders/employees avoid SE tax on salary Employees pay payroll taxes; dividends exempt

Ideal For Small businesses, real estate, freelancers Businesses seeking pass-through with payroll Startups, investors, global growth companies

Profit Distribution Flexible—per operating agreement Must follow % of ownership (pro rata) Must follow % of ownership (pro rata)

Entity Formalities Low – fewer corporate formalities Moderate – must hold meetings, maintain minutes High – strict formalities, board meetings, etc.

Reinvestment & Growth Limited (no stock issuance) Moderate – limited investor options Excellent – can issue multiple classes of stock

Double Taxation Risk None (unless elected) None (if IRS requirements are met) Yes – corporate and shareholder levels

Payroll Capability Optional Required if owners are active employees Required if owners are employees