Raising capital
No double taxes
Flexible management
Tax exemptions
Employee benefits
Easy maintenance
Based on your answers, the majority of On Call lawyers recommend:
Best Choice
Best Choice
Best Choice
Best Choice
LLC
- Common for small businesses
- Raise money using bank loans
- Variety of management structures you can implement
- Relatively easy compliance requirements
- Taxes paid on personal tax returns
- Limited tax deductions
- Formation fees are tax deductible
C-Corp
- Raise money from investors
- State-defined management structures
- Potential double taxation
- Wider range of tax deductions
- Formation fees are tax deductible
S-Corp
- Limited to 100 shareholders
- State-defined management structures
- Taxes paid on personal returns
- Wider range of tax deductions
- Formation fees are tax deductible
- Can only be owned by U.S. residents
Non-Profit
- Common for charities
- Tax-deductible donations
- Strict state management structures
- Wide range of tax deductions
- Formation fees are tax deductible
Any recommendation is based on a survey of Rocket Lawyer On Call attorneys and does not constitute legal advice.
Want to compare all the details?
View Complete Comparison Chart
| LLC | S-Corp | C-Corp | Non-Profit | Sole Proprietorship | |
| Managing your business | |||||
 Limited liability protection | |||||
| LLC members are not personally responsible for business debts or liabilities. | C-Corp shareholders are not personally responsible for business debts or liabilities. | S-Corp shareholders are not personally responsible for business debts or liabilities. | Non-Profit directors are not personally responsible for NPO debts or liabilities. | Sole Proprietors are personally responsible for business debts and liabilities. | |
|
Perpetual existence | varies | ||||
| With the proper planning, LLCs can exist for generations. | S-Corps continue to exist even if the owners or majority shareholders leave or pass away. | C-Corps continue to exist even if the owners or majority shareholders leave or pass away. | Non-Profit organizations and institutions survive after their directors leave. | Sole Proprietorships do not exist when the owner quits or passes away. | |
| Favorable for raising capital | varies | ||||
| LLCs can raise money via banks and investors but cannot sell stocks. | S-Corps can get loans from banks, as well as distribute stock to up to 100 people. | C-Corps have the easiest time raising capital as there is no cap on how many people can own stock. | Non-Profits can both get loans and receive tax-deductible donations. | Sole Proprietorships can occasionally receive bank loans but cannot sell stocks. | |
| Management flexibility | |||||
| LLCs allow for a large variety of management structures based on your specific needs. | Management structures for S-Corps are largely dictated by state and federal law. | Management schemas for C-Corps are largely dictated by state and federal law. | NPOs need to follow strict management laws to guard their non-profit status. | Since Sole Proprietorships have only one member, there is no management structure. | |
| Tax Considerations | |||||
| Pass-through taxes | |||||
| LLC members are taxed on their personal tax returns. The LLC itself is not taxed. | S-Corp shareholders are taxed on their personal tax returns. The company itself is not taxed. | C-Corps are taxed both at the corporate level and again on shareholders' individual returns. | Non-Profits are taxed on a corporate level but may also enjoy a host of tax-exempt benefits. | Sole Proprietorships are taxed only on their owner's tax return. | |
| Double taxation | |||||
| Since LLCs can be a pass-through entity, owners are taxed on their personal income. | S-Corp shareholders are taxed personally. The S-Corp, however, is not. | C-Corp income is taxed at the corporate level first, then again at the personal level. This is called "double taxation." | Non-Profits are only taxed once and can write off most of their expenses. | Sole Proprietors are taxed only on their personal tax return. | |
|
Tax exemptions | |||||
| LLCs can claim deductions but not tax-exempt status. | S-Corps can claim deductions but not tax-exempt status. | C-Corporations are not tax-exempt entities | Not only are donations to Non-Profits tax-exempt, but NPOs can themselves apply for tax-exempt status. | Sole Proprietorships are the least official business entity and cannot claim tax exemption. | |
| State government fees | |||||
| Formation fees | |||||
| LLCs must pay state fees during the incorporation process. These fees are tax deductible. | S-Corps must pay state fees to legally incorporate. These fees are tax deductible. | C-Corps must pay state fees to become legally recognized. These fees are tax deductible. | Non-Profits pay state fees when they incorporate. These fees are tax deductible. | Since Sole Proprietorships aren't incorporated entities, they don't pay formation or compliance fees. | |
|
Compliance fees | |||||
| While LLCs have less compliance requirements than other entity types, there are reports and licenses that need to be filed and maintained. | S-Corps usually will need to file reports and pay compliance fees on an annual or semi-annual basis. | C-Corps generally must file reports with their state, as well as a host of other regulatory and compliance fees. | Non-Profits have more compliance responsibilities than other entities as they must continually preserve their tax-exempt status. | Sole Proprietors do not have ongoing compliance fees. | |
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