If you’re registering a company in the USA, you probably had to decide whether you should incorporate a C-Corp or LLC. Here’s a quick guide to help you choose.
What is a C-Corporation?
C-Corp is preferable for raising investment or having plans to go public. It is a company taxed separately from its owners. C-Corps have shares/stocks and shareholders. The Shares/stocks can be distributed between founders, shareholders, employees etc. Shareholders of C-Corps have limited liability for the debts and obligations of the corporation.
What is an LLC (Limited Liability Company)?
LLCs are often the first choice for small businesses because this model offers ease of management, a simple structure, and of course, limited liability for founders. In addition, it has members who divide ownership of the company among themselves. Also, LLCs do not require a board of directors.
Given this, you can easily decide between an LLC and C-Corp; however, if you are still unsure of which to choose, here is a quick comparison for you:
LLC vs. C-corporation (How to choose between C-corp or LLC)
|Formation||Formation involves filing:|
– Articles of Organization
– Operating agreement
|Formation involves filing:|
– Articles of incorporation
– Corporate by-laws
– Elect a board of directors
– Hold a board meeting
– Hold a shareholders meeting
– Issue stocks and shares
|Ownership||Can either be a single owner (Single Member LLC) or several owners (multi-member LLC)||Shareholders, Directors and Officers.|
|Raising Investment||More difficult to get investors||Ideal for raising investment or going public (listing in a stock exchange)|
|Ideal Usage||More flexibility in the management of your business. You can add unlimited owners and do not require a board of directors.||A great choice for companies that want to issue shares to founders, investors, and employees; Also recommended if you wish to raise investment or go public eventually|
|Taxes||Owners can make a choice between being taxed as a corporation or as a partnership. |
Fun fact; You get to pick the option that minimizes taxes for you.
|C-corps pay corporate tax on corporation’s taxes, and can participate in tax-free reorganizations.|
|Liability||Limited liability of Owners||Limited liability of Shareholders|
Whichever you choose to go with, www.norebase.com is the place to start.
Let’s get your business set up!