Compare Business Formation Types

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Your business type options

Business formation options have unique features and benefits. Use this table to determine which is right for you.

LLC

The simplest, most flexible way to structure your business to protect personal assets.

How It's Unique

Unlimited owners (members) allowed
Cannot issue stock
Board of directors not required

Protections & Taxation*

You're not personally on the hook for business liabilities
Pass through taxation—income generated passes to the LLC owners to file on their personal taxes.

Drawbacks to Consider

Ongoing filings and fees to stay in compliance
LLCs can't go public
Not recognized globally; you may be taxed as a corporation outside U.S.

Starts at $0 + state filing fees

S-Corp Election

A tax designation for LLCs that avoids double taxation on business profits.

How It’s Unique

Maximium of 100 owners
S-Corp is a tax status for LLCs and not an official business entity type
Owners must pay themselves a reasonable salary for their industry
Avoids double taxation on profits

Protections & Taxation*

LLC owners filing as an s-corp can save money on their personal taxes
Pass through taxation—similar to an LLC, profits are only taxed at the owner level

Drawbacks to Consider

Ongoing filings and fees to stay in compliance
All owners must be U.S. citizens and meet all IRS requirements
Closer IRS scrutiny for the business

Starts at $0 + state filing fees

C-Corp

A more complex structure with the ability to issue shares, go public, or go global.

How It’s Unique

Unlimited owners (members) allowed
Can issue shares to founders, employees, and investors
Owners may get preferred stock
Preferred for equity financing and attracting investors

Protections & Taxation*

You're not personally on the hook for business liabilities
Taxed twice—business pays at the corporate level, and shareholders pay on income received

Drawbacks to Consider

Ongoing filings and fees to stay in compliance
Less management flexibility; must have a board of directors
More admin; strict rules about holding meetings and keeping records

Starts at $0 + state filing fees

*ZenBusiness does not offer tax advice. We recommend you discuss questions or concerns about tax implications and benefits with an accountant or tax professional.

How To Form Your Business

An LLC, or Limited Liability Company, is a powerful and flexible business structure. It's the most popular choice for small business owners, entrepreneurs, and side hustlers because it protects your personal assets, provides tax flexibility, and simplifies the formation process.

1. Name Your LLC

Check to make sure there are no other businesses with that name in your state and that it aligns with the state's laws for LLC names.

2. Appoint A Registered Agent

You're required to have a registered agent available to receive important state correspondence and legal notices in person.

3. File Certificate Of Formation

This makes your LLC official! Once your paperwork is approved, and fees are collected, you are officially the owner of a limited liability company.

4. Create An Operating Agreement

An operating agreement may be the most important document for your LLC. It establishes the rules for operating your company and gives it further legitimacy.

5. Apply For An EIN

An Employee Identification Number (EIN) registers your business with the IRS and helps you open a business bank account, get financing, and hire employees.

6. Our Team Keeps You
Informed And Educated

Rest easy knowing we keep you informed of changes to federal and state requirements, such as the Corporate Transparency Act and the beneficial ownership information filing.

Launch your LLC in minutes. We'll take care of the paperwork so you can focus on your business.

“This is your life.
You want to get it right.”

– Mark Cuban on Starting a Business

Entrepreneur and Shark Tank host lays out
the steps to follow when starting with ZenBusiness

Form an LLC to protect your liability
Set up your banking and accounting
Grow sales by marketing your website

Is an S corp an LLC?

An S-Corp is a tax classification, while an LLC is a business structure. LLCs and corporations can both apply to be S corps if they meet the IRS’s criteria.

What is the difference between an S Corp and C Corp?

C corporations and S corporations are different tax designations available as business entities. Each have pros and cons, and the best choice for you will depend on the circumstances of your individual business.

What are the advantages of a C-Corp?
Even though C-Corps are subject to double taxation, they have several advantages over S-Corps:

Fewer restrictions and more flexibility
Can go public
Can have more than one type of stock
Easier to raise capital
Fewer limits to growth
Can have foreign shareholders

Depending on your goals as a business owner and the size of your business, you may find that these advantages outweigh the tax benefits of an S-Corp.

What are the advantages of an S-Corp?

For many businesses, S-Corps offer a number of advantages over C-Corps, including:

Pass-through taxation
Can pass losses to owners, who can claim them as a deduction on their taxes

Remember that an S corp is a tax election rather than a separate corporate entity. You can elect S corporation status whether you have a corporation or an LLC. However, it’s important to keep in mind that not all businesses have the option of filing as an S-Corp.

If you have additional questions about which is right for you, consider consulting a lawyer or tax professional.

Are S corp earnings subject to self-employment tax?

Owners of an S-Corp can pay themselves a salary from the company. They’ll pay employment taxes on that salary, but they won’t have to pay self-employment taxes on the remaining profits. This could mean substantial savings and is one of the benefits of an LLC filing as an S-Corp. (Note that the LLC members will still be responsible for income and other applicable taxes on the profits.)

Why would a company prefer an LLC over a C corp?

LLCs can be well suited for side hustles, because money and intellectual property typically flow relatively freely between the members and the LLC itself. This can happen without the tax consequences you would often see if the transactions happen in a C-Corp.

What are the benefits of a C Corporation?

Corporations, in general, can carry on doing business free of the individuals running it. Entrepreneurs might find this business entity attractive since the potential for growth is high; it’s easier to attract investors to a corporation than an LLC.

Here are some of the benefits of a C-Corporation?

It offers limited personal liability protection
It continues on despite leadership changes
It offers shares of stock
It can operate internationally

LLC

The simplest and most flexible business structure to protect your personal assets.

From $0 + state filing fees

Corporation (C-Corp)

This more complex structure can issue shares or take the business public.

From $0 + state filing fees

LLC with S-Corp Election

This tax designation avoids double taxation when your LLC is profitable.

From $0 + state filing fees

Selecting the Right Business Entity

How To Form Your Business

“This is your life. You want to get it right.”

LLC

Corporation (C-Corp)

LLC with S-Corp Election

Selecting the Right
Business Entity

“This is your life.
You want to get it right.”