Types of Corporations & Business Structures

Different Types of Corporate Structures

You’ll learn about the four main types of business entity below — LLCs, S Corporations, C Corporations and nonprofits, so you can decide which will best meet your needs.

Limited Liability Company (LLC)

The LLC is one of the most popular types of business entities. It’s ideally suited for smaller organizations and startups, for several reasons:

LLCs are fast and easy to setup.
LLCs have a simple business structure.
Forming an LLC is generally inexpensive.
Running an LLC is easier than running a C Corp or S Corp.
There are fewer rules, regulations and legal compliance issues for LLCs.
LLCs are formed and regulated on a state level.

The cost and policies governing an LLC do vary from state to state. Check out our LLC State Information resource for additional info on your state.

LLC Limited Liability Protection

A man with a title Start na LLC in the background

Like C Corps and S Corps, LLCs provide their owners with limited liability protection. This means the business assets are owned separately by the LLC, not by the owners. Any liability the business has (e.g. monies owed, equipment, depreciation, lawsuits, etc.) are purely the liability of the business, and do not (generally) have any impact on the individual owner’s personal assets.

Types of Tax an LLC is Liable For

It’s important to note that an LLC will be liable for certain types of tax, for example:

Payroll tax on salaries paid to employees (but not to members or owners — they will pay self-employment tax on their personal tax returns).
Sales tax on goods purchased by and for the business.
Property taxes on owned business property.
In certain cases, other types of tax or tariffs may need to be paid by an LLC.
Generally, these taxes can be subtracted as business expenses and do not flow through to individual owner’s tax returns.

Business Structure

Comparison Chart

protection

Limited Liability Protection

LLC

C-Corp

S-Corp

Nonprofit

LLC

LLCs provide personal asset protection, which shields you from being personally liable for business debts.

C-Corp

C Corps provide personal asset protection, which shields you from being personally liable for business debts.

S-Corp

S Corps provide personal asset protection, which shields you from being personally liable for business debts.

Nonprofit

Nonprofits provide personal asset protection, which shields you from being personally liable for business debts.

STATE FILING FEES

State Formation Fees

LLC

C-Corp

S-Corp

Non-Profit

LLC

LLCs are required to pay formation fees to the state. Fees will vary based on the state of incorporation.

C-Corp

C Corps are required to pay formation fees to the state. Fees will vary based on the state of incorporation.

S-Corp

S Corps are required to pay formation fees to the state. Fees will vary based on the state of incorporation.

Non-Profit

Nonprofits are required to pay formation fees to the state. Fees will vary based on the state of incorporation.

Ongoing Compliance Fees

LLC

C-Corp

S-Corp

Non-Profit

LLC

Depending on the state of incorporation, reports and fees may be required.

C-Corp

An annual report and franchise fees are generally due each year along with other reports and fees, which varies depending on the state of incorporation.

S-Corp

An annual report and franchise fees are generally due each year along with other reports and fees, which varies depending on the state of incorporation.

Non-Profit

For Nonprofits this varies from state to state.

MANAGING YOUR BUSINESS FEES

Flexible Management Structure

LLC

C-Corp

S-Corp

Non-Profit

LLC

LLCs must be member or manager managed according to the terms of the operating agreement.

C-Corp

C Corps are required to have shareholder elected directors who oversee and elect officers to run the day-to-day operations of the company.

S-Corp

S Corps are required to have shareholder elected directors who oversee and elect officers to run the day-to-day operations of the company.

Non-Profit

Nonprofits are managed by their board of directors following the regulations set forth in their Bylaws.

Adding/Transferring Ownership

LLC

C-Corp

S-Corp

Non-Profit

Ongoing Requirements

LLC

C-Corp

S-Corp

Non-Profit

LLC

Depending on the state of incorporation, an LLC may be required to file an annual report and/or pay franchise fees.

C-Corp

After formation, C Corps have many ongoing formalities such as writing bylaws, selecting directors, holding initial and annual shareholder meetings, and issuing stock.

S-Corp

After formation, S Corps have many ongoing formalities such as writing bylaws, selecting directors, holding initial and annual shareholder meetings, and issuing stock.

Non-Profit

After formation, Nonprofits have many ongoing formalities such as writing bylaws, selecting directors, and seeking tax exempt status.

Ease of Raising Capital

LLC

C-Corp

S-Corp

Non-Profit

LLC

LLCs are not allowed to sell stock but may be able to raise capital via bank loans and various other avenues.

C-Corp

C Corps may issue many types of stocks, which may be sold to an unlimited number of shareholders.

S-Corp

S Corps may issue one type of stock, which may be sold to a maximum of 100 shareholders.

Non-Profit

Nonprofits may obtain bank loans, grants, venture capital, and tax-exempt donations. In some states, Nonprofits may sell stock.

TAX

Pass-through Taxation

LLC

C-Corp

S-Corp

Non-Profit

LLC

LLCs are not taxed at the corporate level. Instead, all profit and losses are reported with the personal income taxes of each member.

C-Corp

The income of the C Corp is taxed at the corporate level and then again at the shareholder level.

S-Corp

S Corps are not taxed at the corporate level. Instead, all profit and losses are reported with the personal income taxes of each shareholder (owner).

Non-Profit

The income of Nonprofits is taxed at the corporate level unless they apply for and are granted tax-exempt status.

Double Taxation

LLC

C-Corp

S-Corp

Non-Profit

Tax Exempt

LLC

C-Corp

S-Corp

Non-Profit

Get Started with the Right Type of Business Entity

Get started

LLC

Keep personal assets separate from the company

s-corp

Keep personal assets separate from the company

C-corp

Attractive to investors

nonprofit

Donations can be recorded by donors as not taxable

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Learn about the difference between LLCs, S Corporations, C Corporations, and Nonprofits

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