C corporation

Separate and distinct legal entity. Managed by a board of directors, which is responsible for making major business decisions and overseeing the general affairs of the corporation. Directors are elected by the stockholders of the corporation. Officers, who run the day-to-day operations of the corporation, are appointed by the directors.

S corporation

Separate and distinct legal entity. Managed by a board of directors, which is responsible for making major business decisions and overseeing the general affairs of the corporation. Directors are elected by the stockholders of the corporation. Officers, who run the day-to-day operations of the corporation, are appointed by the directors.

Limited liability company (LLC)

Separate and distinct legal entity. Managed by either the members of the LLC or a manager appointed by the members. Members of the LLC have flexibility in structuring the company, including the ability to divide ownership and voting rights in multiple ways.

Note: Additional forms of entity structures also exist and could be useful in some instances but are not covered in this guide either because they are less commonly used types of entity structures or not as likely to be relevant to the reader.

Last modified 1 Jul 2024

C corporation

• Unlimited number of shareholders
• Generally no personal liability of the shareholders
• Taxed on its earnings at a corporate level and shareholders are taxed on any distributed dividends
• Typical charter documents include: articles/certificate of incorporation; bylaws; organizational board resolutions; stock certificates; and stock ledger
• Board of directors has overall management responsibility; officers have day-to-day responsibility
• Shareholders typically purchase stock in the corporation, either common or preferred, and

• Most states require an annual report to be filed with the Secretary of State, typically reporting the name identity of the officers and directors of the corporation

S corporation

• Up to 100 shareholders; only 1 class of stock allowed
• Generally no personal liability of the shareholders
• With the filing of an IRS Form 2553, a C corporation becomes a S corporation, whereby the profits and losses are passed through to the shareholders
• Typical charter documents include: articles/certificate of incorporation; bylaws; organizational board resolutions; stock certificates; stock ledger; IRS S corporation election form and any applicable state filings
• Board of directors has overall management responsibility; officers have day-to-day responsibility and
• Shareholders typically purchase stock in the corporation, but only 1 class of stock is allowed

Limited liability company (LLC)

Unlimited number of members allowed

Generally no personal liability of the members

Not subject to income tax (unless chosen to be taxed); profits and losses are passed through to the members

Typical charter documents include: articles of organization or certificate of formation; operating agreement

Operating Agreement sets forth how the business is to be managed; a member (owner) or Manager can be designated to manage the business and

Members typically contribute money or services to the LLC and receive an interest in profits and losses

Note: The mechanics and operation of corporations are governed by individual state corporate laws.

Last modified 1 Jul 2024

C corporation

No minimum capital requirement.

S corporation

No minimum capital requirement.

Limited liability company (LLC)

No minimum capital requirement.

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C corporation

Shareholders of a corporation are generally not liable for the debts of a corporation aside from their financial contribution to the corporation.

S corporation

Shareholders of a corporation are generally not liable for the debts of a corporation aside from their financial contribution to the corporation.

Limited liability company (LLC)

Members are generally not liable for the debts of the LLC aside from their contribution to the LLC.

Last modified 1 Jul 2024

C corporation

A C corporation is taxed on its income at 2 levels (commonly referred to as double taxation). First the C corporation pays income taxes on its corporate income; then if C corporation distributes profits to shareholders, such shareholders then pay income tax on those dividends. Many C corporations are set up where the shareholders do not intend to distribute profits by dividends.  If a C corporation is part of a consolidated tax group where the C corporation is not viewed as a separate taxable entity, the double taxation effect is mitigated.

S corporation

Pass-through entity taxed like a partnership, as there is only 1 level of income taxation. The corporate profits “pass through” to the owners, who pay income taxes on the profits at their individual tax rates.

Limited liability company (LLC)

Unless the LLC elects to be treated as a corporation, it is a pass-through entity taxed like a partnership, as there is only one level of income taxation. The corporate profits “pass through” to the owners, who pay income taxes on the profits at their individual tax rates.

Last modified 1 Jul 2024

C corporation

File Certificate of Incorporation or Articles of Incorporation with the appropriate Secretary of State.

S corporation

File Certificate of Incorporation or Articles of Incorporation with the appropriate Secretary of State, as well as the appropriate S corporation election documents with the applicable tax authorities.

Limited liability company (LLC)

File Articles of Organization or Certificate of Formation with the appropriate Secretary of State.

The timeline for incorporation varies by state jurisdiction, which can vary from as short as 1 business day (in Delaware) to several weeks, and can often be expedited by paying additional fees.

Last modified 1 Jul 2024

C corporation

Well regarded and widely used.

S corporation

Well regarded and widely used. Many institutional investors will require an S corp to convert to a C corp before investing, though conversion is simply with a single tax form.

Limited liability company (LLC)

Well regarded and used regularly in particular industries.

Last modified 1 Jul 2024

C corporation

Required to hold annual meeting of shareholders to vote on certain items, such as election of directors.

S corporation

Required to hold annual meeting of shareholders to vote on certain items, such as election of directors.

Limited liability company (LLC)

Annual meetings of the members or managers are not required. The provisions of the operating agreement will determine any meeting requirements.

Last modified 1 Jul 2024

C corporation

Annual meeting of the directors is required.

S corporation

Annual meeting of the directors is required.

Limited liability company (LLC)

Annual meeting of the members or managers is not required. Provisions of the operating agreement will determine any meeting requirements.

Last modified 1 Jul 2024

C corporation

Must annually file tax returns with federal and state tax authorities.

S corporation

Profits “pass through” to the shareholders who pay income taxes at their individual tax rates.

Limited liability company (LLC)

Profits “pass through” to the shareholders who pay income taxes at their individual tax rates, unless LLC elects to be treated as a corporation.

Last modified 1 Jul 2024

C corporation

Most states require initial registration, as well as annual filings.

S corporation

Most states require initial registration, as well as annual filings.

Limited liability company (LLC)

Most states require initial registration, as well as annual filings.

Last modified 1 Jul 2024

C corporation

No need to change as business expands.

S corporation

If the number of shareholders exceeds 100, must convert to a C corporation. Many institutional investors will require that an S corporation convert into a C corporation before investing, though conversion is simply with a single tax form.

Limited liability company (LLC)

No need to change as business expands. However, many institutional investors will require an LLC to convert to a corporation before investing.

Last modified 1 Jul 2024

C corporation

File dissolution documents with the appropriate Secretary of State.

S corporation

File dissolution documents with the appropriate Secretary of State.

Limited liability company (LLC)

File dissolution documents with the appropriate Secretary of State.

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Corporations typically need to either convene an annual shareholder meeting or execute shareholder written resolutions, as well as the filing of an annual return with the applicable Secretary of State.

For an LLC, typically the filing of an annual return with the applicable Secretary of State is needed.

Last modified 1 Jul 2024

For corporations, at least 1 director is required. Certain states may require a Board chair position and, where the corporation is held by more than 1 shareholder, more than 1 director. Certain states may also require statutory officers such as President, Chief Financial Officer, Treasurer and Secretary. For an LLC, the entity must be managed by the members or managed by a manager appointed in the operating agreement.

Last modified 1 Jul 2024

For corporations, some states require a corporate secretary (eg, California), while other states do not (eg, Delaware).

An LLC does not need to have a corporate secretary.

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Corporations will generally need to have a registered agent in the state of incorporation. This does not require the corporation to maintain an office or employee in the state. Third party agents with offices in such state commonly can serve as a registered agent.

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Not applicable for this jurisdiction.

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Not applicable for this jurisdiction.

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Yes, sufficient.

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Yes, this is allowed.

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Yes, this is allowed.

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Not applicable for this jurisdiction.

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Not applicable for this jurisdiction.

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Directors are elected by the shareholders, are the highest authority in the management of the corporation and govern the organization by establishing broad policies and objectives. In contrast, officers are appointed by the directors to oversee day-to-day operations of the corporation. Shareholders may adopt restrictions on the powers of directors in the charter.

Last modified 1 Jul 2024

For corporations and LLCs that are not publicly listed, identity of directors, officers and managers is not publicly disclosed in most jurisdictions but may be available through state filings where access can be obtained, such as annual reports required to be filed with the state. Publicly listed companies are required to disclose the identity of their directors and officers as well as any shareholders holding at least 5 percent of such company.

Last modified 1 Jul 2024

There is no maximum number of shareholders for a C corporation or for an LLC. For a corporation to be eligible for "S-corp" status, there is a maximum of 100 shareholders. Furthermore, there is no maximum number of directors for a corporation in most jurisdictions, though some states do have a maximum (eg, in California, the stated maximum can't be greater than 2 times the stated minimum minus 1).

There is no maximum number of managers for an LLC.

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Minimum of 1 for each type of entity.

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Removal of directors is generally allowed by a vote of shareholders; removal of officers is generally allowed by a vote of directors.

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Typically a President or CEO and a Secretary is appointed; any other officer is allowed, but not required in most states; certain states may require statutory officers such as President, Chief Financial Officer, Treasurer and Secretary.

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Typically at least 1 annual director meeting is required, which can be completed by written consent signed by all directors.

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For a shareholder meeting, the quorum set out in the corporate bylaws must be present during the shareholder meeting (typically a majority of those eligible to vote). For directors, typically a majority of directors must be present during a board meeting; alternatively, all of the directors may execute written resolutions.

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A bank account is not required for incorporation. If a bank account is opened, it can be located in or outside the US.

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Not required.

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For corporations, this will vary depending on the jurisdiction in which your corporation is organized. Some states, such as Delaware, require a par value. Other states, such as California, do not require any par value. For an LLC, par value is not required.

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An increase in authorized capital may be effectuated by amending the charter, which generally requires authorization from the Board and at least of a majority of the shareholders.

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Funds can be repatriated abroad from the United States by dividend, return of capital or redemption. These may have varying tax effects that should be considered.

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Shares can generally be transferred between shareholders by written agreement. Company consent is not required unless restriction transfers have previously been agreed to, or in some cases, to confirm compliance with applicable securities laws.

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Proposed name can be reserved. Certain name requirements apply. For example, corporations incorporated in the state of Delaware will require a "Corporation," "Corp.," "Incorporated," "Inc." or similar corporate indicator in the name.

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US law firms are subject to specific "know your client" requirements that require the firm to apply identity verification rules.

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Generally, a majority of shareholders must approve any amendment to the charter at a meeting or in writing. The threshold for shareholder approval may be set at a higher percentage in the charter.

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It is possible, but not typical, to purchase a shelf company. A corporation can be created in an expedited time frame in most states, so use of a shelf company for expediency is not needed.

Last modified 1 Jul 2024