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LLC or corporation

The main differences between the two entity types.

Getting started · 2 min read · Updated November 11, 2026

In this guide
  1. Limited liability company
  2. Corporation
  3. Quick comparison

The two most common choices for a new company are the limited liability company (LLC) and the corporation. Both are separate from their owners in the eyes of the law, and both can limit the owners' personal responsibility for the company's debts, subject to the rules of each state.

Limited liability company

An LLC is usually the simpler option. It has members instead of shareholders, and it is run either by its members or by managers. Its rules are written in an operating agreement. Formalities such as annual meetings are generally lighter than for a corporation.

By default, the IRS treats an LLC with one member as part of its owner for income tax, and an LLC with several members as a partnership. An LLC can choose to be taxed differently. Which treatment fits depends on the owners and where they live.

Corporation

A corporation has shareholders, a board of directors and officers such as a president, secretary and treasurer. It follows more formal rules, including bylaws and records of decisions. A standard C corporation pays tax on its own profits, and shareholders may be taxed again on dividends they receive.

Investors often prefer corporations, because shares are easy to issue and different classes of shares are well understood. If you plan to raise money from investors, mention that to Fae and to an advisor.

Quick comparison

  • Owners: members in an LLC, shareholders in a corporation.
  • Formalities: lighter for an LLC, heavier for a corporation.
  • Investment: corporations are the usual choice for venture funding.
  • Taxes: depend on the entity, the owners and their country of residence.

Which one is right for you depends on your goals and your tax situation, which is a question for a licensed professional.

This is general information, not legal or tax advice.

General information, not legal or tax advice. If your case needs it, a licensed attorney or accountant can advise you. Read the disclaimer

Related questions

What people usually ask after reading this.

Can I open a US company if I live abroad and have no SSN?

Yes. You do not need an SSN or an to form an or a , and you do not need one to get the company's . Fae asks only for what the filing needs and tells you what each item is for.

What is the difference between an LLC and a C-Corp?

An is the simplest way to own a business in the US, and its internal rules go in the . A is a standard corporation, the kind investors usually ask for, and its rules go in the Bylaws. Fae explains the differences and recommends one for your situation, and the decision is yours.

What does the formation include?

We check the name, file with the state, order the for the first year and prepare your or Bylaws. Help opening a bank account comes with every order. The , , business address and are separate services you choose.

What is an Operating Agreement?

It holds an 's internal rules: who owns what percentage and how decisions get made. We draft it from your company file, a person on the team reviews it, and it appears in your dashboard with your other documents. For a corporation the equivalent document is the Bylaws.

Is Fae a lawyer? Is she a person?

Fae is an AI assistant, and she says so if you ask. She is not a lawyer and Fairentity is not a law firm. What cannot be automated is done by a person on the team, and you see the same progress in your dashboard.

Keep reading

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Still have a question about your case?

This guide is general. Fae can apply it to your company, your country and your state.