C Corporations vs. LLCs

C Corporations file IRS form 1120 to report corporate income to the Internal Revenue Service. The IRS taxes company profits at corporate tax rates and dividends paid to shareholders at individual tax rates. For this reason, you may hear tax professionals refer to "double taxation" of a C corporation. C Corporations use bylaws to set forth the management rules with their shareholders, directors, and officers.

In contrast, a Limited Liability Company (LLC) provides the same protection from personal liability with the added benefit of "pass-through" taxation. This means that LLC owners report their share of profit and loss in the company on their individual tax returns. LLCs combine the tax flexibility of a partnership with the asset protection of a corporation. LLCs draft an internal operating agreement to govern its ownership. Overall, the requirements to maintain an LLC in good standing are less stringent than for a corporation.

Form your C Corporation or LLC online or contact a Business Specialist at 800-818-6082 (toll-free) or 302-636-5440.