LLC vs Corporation: What You Need to Know Before Filing

One of the first — and most important — decisions every entrepreneur makes is how to legally structure their business. The two most common choices are forming a Limited Liability Company (LLC) or a Corporation.

The structure you choose impacts everything: taxes, liability, fundraising, and even how much paperwork you’ll deal with. At All Things Business, we help entrepreneurs and startups navigate this decision so they can start strong and avoid costly mistakes.

Here’s a breakdown of what you need to know before filing.

1. Liability Protection

Both LLCs and Corporations protect your personal assets from business debts and lawsuits. But there are slight differences in how that protection works.

• LLC: Offers “limited liability,” meaning your personal assets (like your home and savings) are generally protected if the business faces debt or legal action.

• Corporation: Also provides strong liability protection, but requires stricter adherence to corporate formalities (like board meetings and recorded minutes).

👉 Best for: Entrepreneurs who want personal protection without a lot of ongoing compliance.

2. Taxes

Taxes are often the deciding factor between an LLC and a Corporation.

• LLC: By default, LLCs are “pass-through entities.” Profits and losses are reported on your personal tax return — no corporate taxes. However, you can elect for your LLC to be taxed as an S-Corp for potential tax savings on self-employment taxes.

• Corporation:

  • C-Corporation: Pays taxes at the corporate level, and shareholders also pay taxes on dividends (known as “double taxation”).

  • S-Corporation: Avoids double taxation, but has more restrictions (limited number of shareholders, all must be U.S. citizens or residents).

👉 Best for: LLCs are flexible for small businesses, while C-Corps are better for companies planning to raise outside investment.

3. Ownership and Management

The structure you choose also affects how you run your business.

• LLC: Flexible management. You can run it yourself (“member-managed”) or appoint managers. Great for small businesses and startups that want simplicity.

• Corporation: More rigid. Must have a board of directors, officers, and shareholders. Decisions must be formally documented.

👉 Best for: LLCs if you want fewer rules, Corporations if you’re planning for investors and long-term growth.

4. Fundraising and Investors

If you plan to seek outside investment, the structure matters.

• LLC: Harder to attract investors. Most venture capitalists prefer corporations because shares are easier to issue and transfer.

• Corporation: The preferred choice for investors. Corporations can issue stock and are more attractive to venture capital and angel investors.

👉 Best for: Corporations if you’re aiming for large-scale growth with investors.

5. Paperwork and Compliance

One of the biggest differences is how much paperwork you’ll need to maintain.

• LLC: Minimal paperwork. Typically requires filing articles of organization, an operating agreement, and annual reports depending on your state.

• Corporation: Requires more ongoing compliance, including bylaws, annual shareholder meetings, board minutes, and detailed record-keeping.

👉 Best for: LLCs if you want simplicity, Corporations if you need formal structure.

Final Thoughts

There’s no one-size-fits-all answer — the choice between an LLC and a Corporation depends on your business goals, tax situation, and growth plans.

At All Things Business, we guide entrepreneurs through this decision by helping them understand liability, taxes, and compliance so they can choose the structure that sets them up for long-term success.

👉 Thinking about forming your business? Contact Atbmain today for expert guidance on whether an LLC or Corporation is the right choice for you.