C Corp Vs. LLC: Benefits And Drawbacks Of Each (2026)

What an LLC Is

An LLC is a business entity with legal personhood. It exists separately from its owners, who therefore aren’t usually personally liable for the company’s liabilities and debts.

What a C Corp Is

A C corp is also a business entity with legal personhood. The “C” comes from subchapter C of the Internal Revenue Code and denotes the entity’s taxation status. C corps also protect shareholders from personal liability for company liabilities and debts.

Key Differences at a Glance

The following are some of the key differences regarding LLC vs. corporation designation:

• Taxation
• Ownership
• Management
• Ease of adding investors and raising capital
• Corporate formalities

LLCs are owned by members who control the company through member votes. The members may manage the day-to-day operations directly or through a manager.

Corporations are owned by shareholders. Although these shareholders vote on some issues, they have much less control than LLC members. Instead, they indirectly control the corporation by electing the board of directors. The directors, in turn, choose officers to manage day-to-day operations.

State laws impose many more formalities on corporations than on LLCs. For example, Florida requires corporations to hold annual meetings and maintain corporate records that include meeting minutes. The state has no such requirements for LLCs.

How Each Structure Is Taxed

C corps, by definition, are subject to corporate taxation. Shareholders report their profits or losses and pay taxes on their net profits. If they receive a salary or dividends, they pay personal income tax on them. Thus, corporate revenue may be double-taxed.

In contrast, LLCs are subject to pass-through taxation. Profits and losses are allocated to the LLC members, who report them on their individual tax returns. The LLC isn’t taxed. Instead, the members pay tax on their profit share. Avoiding double taxation is one of the benefits of an LLC.

Raising Investment and Equity

C corps can have outstanding shares. When they need to raise capital, they sell those shares. The ease of infusing capital is a key benefit of the C corp structure.

These shares represent equity ownership and voting rights. However, directors and officers still control the company.

The process of raising capital is much more difficult for LLCs, which can’t have outstanding shares. To raise capital, an LLC can make a capital call to existing members. To raise capital from a new owner, members may need to amend the operating agreement to create and sell a new ownership share.

How to Choose the Right Entity

Choosing the right entity comes down to your priorities. If you want to add investors or leave profits in the company to build the business, a C corp may suit your needs. Alternatively, if you want to avoid double taxation and closely control the company, an LLC may be better.