LLC vs S-Corp vs C-Corp

When you start a business, one of the first decisions you'll make is how to legally structure it. The three most common options are an LLC (Limited Liability Company), an S-Corp (S Corporation), and a C-Corp (C Corporation). Each comes with different rules around taxes, liability, and how you can grow.

An LLC is the most flexible option. It separates your personal assets from your business debts (so if the business gets sued, your house isn't on the line), and by default the IRS treats it as a pass-through entity — meaning business profits flow through to your personal tax return. There's no limit on the number of members, and you don't have to follow the same rigid formalities that corporations do.

An S-Corp is actually a tax election, not a separate entity type. You can elect S-Corp status for an LLC or a corporation. The big advantage is avoiding self-employment tax on a portion of your income — you pay yourself a "reasonable salary" (which gets taxed), and the remaining profit passes through as a distribution (which doesn't get hit with FICA taxes). A C-Corp is the standard corporate structure — it's its own tax-paying entity, which means profits get taxed at the corporate level and again when distributed as dividends ("double taxation"). But C-Corps are the go-to for businesses planning to raise venture capital or go public because they can issue multiple classes of stock.

Choosing the right structure directly affects how much you pay in taxes, how much personal risk you carry, and how easy it is to bring on partners or investors. An LLC works great for most small businesses because it's simple and flexible. But once you're consistently netting over $40K-$50K in profit, an S-Corp election can save you thousands in self-employment taxes. And if you're planning to scale aggressively and take on outside investment, a C-Corp is likely the path forward. Getting this wrong early can mean expensive restructuring later.