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Find out what business type is right for you.

Business types at a glance

How it protects you LLC Corporation Nonprofit Sole prop

Limited liability protection

This ensures you or other partners aren't personally on the hook for yes yes yes - company debts and liabilities.

How it's managed and maintained

Flexible management structure Corporations require a board of directors, annual meetings, record yes - - yes keeping, and more. LLCs and sole proprietorships have rules too—but they're less strict. State compliance requirements After you form, there are annual requirements to keep your business yes yes yes - in good standing. How it's taxed LLCs and corporations have yes yes - yes multiple tax options. Tax exempt Nonprofits with 501(c)(3) status are exempt from federal income taxes. - - Only with 501(c) - (3) status How it can grow Flexibility to raise capital Get access to funds from banks, venture capital firms, and foundations. yes yes yes - Able to IPO Only corporations can sell shares - C corp only - - on the stock market.

See a detailed comparison

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Both protect owners so they're not personally on the hook for business liabilities or debts. But, key differences include how they're owned (LLCs have one or more individual owners and corporations have shareholders) and maintained (corporations generally have more formal record-keeping and reporting requirements). Even though LLCs are considered easier to start and maintain, investors tend to prefer corporations.

What's the difference between a C corporation and an S corporation?

he way you're taxed.C corporation income is taxed twice—the business pays taxes on its net income, and then the shareholders also pay taxes on the profits they receive. With S corporation income, only the shareholders pay taxes on profits received.