LLC vs S-Corp vs C-Corp: 2026 Comparison

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Choosing between an LLC, S-Corp, and C-Corp is the most consequential decision new founders make in 2026—it changes your tax bill, your liability exposure, and your ability to raise capital for the next decade. We modeled tax outcomes across entity types at $80K, $150K, $300K, and $750K net income levels and pulled formation and annual fees from every state’s Secretary of State website in April 2026. The headlines are simple but worth showing the math.

A single-member LLC is the right default for most solo founders. An S-Corp election typically beats an LLC once net profit clears about $50,000 above a reasonable salary. A C-Corp is almost never the right choice unless you plan to raise institutional venture capital or want to retain significant earnings inside the company.

How This Guide Works

We compared the three entities on eight axes: liability protection, tax treatment, formation cost, annual maintenance, ownership flexibility, ability to raise capital, payroll requirements, and complexity. Each section below ends with a worked example. The tax math uses 2026 federal rates and assumes a single filer in a no-income-tax state to keep apples-to-apples.

At-a-Glance Comparison

Feature	LLC	S-Corp	C-Corp
Liability protection	Yes	Yes	Yes
Federal taxation	Pass-through	Pass-through	21% flat (entity) + dividends
Self-employment tax	15.3% on all profit	Salary only	N/A (W-2 only)
Owner restrictions	None	≤100, US persons	None
Stock classes	Membership units	One class only	Multiple classes
VC compatible	Rarely	No	Yes
Annual filing	Simple	1120-S + K-1s	1120 + dividends

The Three Structures Explained

LLC — Limited Liability Company

The default choice for most US small businesses. Provides personal asset protection while keeping tax simple (single-member LLCs are “disregarded entities” treated as sole proprietorships for federal tax; multi-member LLCs default to partnership taxation). Formation runs $40 in Kentucky to $500 in Massachusetts.

Best for: Solo founders, family businesses, real estate holding entities, service businesses under $250K net profit.

S-Corp — Subchapter S Election

Technically not a separate entity but an IRS tax election available to LLCs and C-Corps that meet eligibility (≤100 shareholders, US persons only, one class of stock). The election eliminates self-employment tax on distributions above a “reasonable salary.”

Best for: Owner-operated businesses earning $80K+ in net profit who can afford payroll administration.

C-Corp — Standard Corporation

A separate legal and tax entity that pays its own federal income tax (flat 21%). Allows unlimited shareholders, multiple stock classes, and is the only structure that accepts institutional venture capital.

Best for: Startups raising venture capital, businesses planning to retain earnings, multinationals with foreign ownership.

Formation Cost by State (Selected)

State	LLC formation fee	LLC annual fee	C-Corp formation fee
Kentucky	$40	$15	$50
Wyoming	$100	$60	$100
Texas	$300	$0*	$300
Delaware	$90	$300 franchise	$89 + franchise
Florida	$125	$138.75	$70
California	$70	$800 franchise	$100 + $800
New York	$200 + pub.	$9 biennial	$125
Massachusetts	$500	$500	$275

*Texas: Margin tax applies only above $2.47M in revenue.

Tax Math at $150K Net Profit

Single filer, no state income tax, reasonable S-Corp salary of $75K:

LLC (sole prop taxation):

• Federal income tax (after QBI 20%): ~$22,400
• Self-employment tax: $21,194
• Total federal: ~$43,594

S-Corp:

• W-2 salary $75K → employer/employee FICA ~$11,475
• Federal income tax on $75K salary + $75K distribution (after QBI): ~$22,400
• Total federal: ~$33,875
• Savings vs LLC: ~$9,700

C-Corp:

• Entity tax: $150K × 21% = $31,500
• Dividend tax at owner level (15%): $17,797
• Total federal: ~$49,297 (worst outcome — illustrates double taxation)

Tax Math at $80K Net Profit

The S-Corp advantage shrinks at lower incomes because reasonable-salary requirements and payroll-admin costs eat the savings.

Entity	Approx. federal tax	Notes
LLC	~$15,800	Includes 15.3% SE tax
S-Corp	~$14,200	Net savings ~$1,600 — barely worth the complexity
C-Corp	~$23,800	Double taxation dominates

Below $50K net profit, stay with a standard LLC. Above $80K, run the S-Corp numbers with a CPA.

How to Choose Your Entity

1. If you have one employee (yourself) and net profit under $50K — LLC, no S-election.
2. If profit consistently exceeds $80K and you can pay yourself a reasonable salary — LLC with S-Corp election.
3. If you’ll raise venture capital — Delaware C-Corp from day one.
4. If you have foreign or institutional owners — C-Corp.
5. If you’re testing an idea pre-revenue — sole proprietorship; form the LLC after you sell.

Recommended Offers

💡 Editor’s pick: Bizee (Incfile) files your LLC for $0 plus state fees and includes free registered agent service for year one.

💡 Editor’s pick: Northwest Registered Agent is our top pick when privacy matters—their address shields yours from public filings.

💡 Editor’s pick: Stripe Atlas is the standard for forming a Delaware C-Corp if you’re raising VC; $500 covers entity, EIN, and stock issuance.

FAQ — LLC vs S-Corp vs C-Corp

Q: Can I switch entity types later? A: Yes—LLCs can elect S-Corp at any time, and C-Corps can revoke S elections. Switching from C-Corp to LLC triggers taxable events; switching from LLC to C-Corp is usually clean.

Q: What is a “reasonable salary” for S-Corp owners? A: The IRS requires comparable wage data. Most CPAs use 30–60% of net profit as a defensible range, depending on role.

Q: Does my entity affect liability protection? A: All three offer it equally if you maintain corporate formalities—separate bank accounts, written contracts, and proper filings.

Q: Do venture capitalists invest in LLCs? A: Rarely. Most VC funds can’t accept K-1 income, so they require Delaware C-Corps.

Q: Is the QBI deduction available to C-Corps? A: No—Section 199A applies only to pass-through entities (sole props, partnerships, LLCs, S-Corps).

Q: What state should I form in? A: Your home state in almost every case. Delaware only makes sense for VC-track startups.

Related Reading on ERP Stack Hub

• How to Start a Small Business in 2026
• Small Business Tax Guide for 2026
• How to Write a Business Plan in 2026
• Best Business Bank Accounts 2026
• Best Business Banks for LLCs

Final Verdict

For most US small businesses in 2026, an LLC in your home state is the right starting structure. Add the S-Corp election when net profit consistently clears $80K. Only choose a C-Corp if VC, foreign ownership, or retained earnings are in the plan—the double taxation makes it the wrong call for everyone else.

This article is for informational purposes only and is not legal, tax, or financial advice. Tax rules, state fees, and program eligibility are accurate as of publication and subject to change. ERP Stack Hub may receive compensation for some placements; rankings are independent.