Three Names, Two Real Options for Most Founders
LLC, S-Corp, and C-Corp are often presented as three parallel choices, but that framing is misleading. An S-Corp isn't a separate type of legal entity — it's a tax election that an eligible LLC or corporation can make with the IRS. And critically, S-Corp eligibility rules exclude most non-US residents outright, which narrows the real decision for the majority of CompanyVista's audience down to LLC vs C-Corp.
Why S-Corp Usually Isn't Available to Non-US Founders
To elect S-Corp tax status, every shareholder must generally be a US citizen or resident individual (or certain qualifying trusts/estates) — non-resident aliens are not eligible shareholders. This single rule removes S-Corp from consideration for the vast majority of foreign founders forming a US company, regardless of how appealing the tax treatment might otherwise look on paper.
S-Corp is a tax election, not an entity type
You don't "form an S-Corp" the way you form an LLC or C-Corp — you form an LLC or corporation, then separately elect S-Corp tax treatment with the IRS, if eligible. Since eligibility excludes non-resident shareholders, this path is closed to most foreign founders before it's even worth evaluating the tax mechanics.
So the Real Choice: LLC vs C-Corp
With S-Corp off the table, the decision comes down to the same two structures covered elsewhere on this blog: a pass-through LLC (simple, low-cost, flexible, but incompatible with institutional VC funding and stock option plans), or a C-Corp (able to raise VC capital, issue stock options, and pursue QSBS tax benefits, but with more formal governance and a 21% corporate tax on profits).
Choose an LLC if...
You're running an online business, e-commerce operation, consulting practice, or holding structure, and have no near-term plans to raise US institutional venture capital. The LLC gives you the lowest annual cost, minimal formalities, and pass-through taxation with no entity-level tax.
Choose a C-Corp if...
You're planning to raise a seed round, Series A, or any institutional VC funding — even a few years out — or you need to issue stock options to employees and advisors. Nearly every US VC term sheet assumes a Delaware C-Corp specifically, and converting from an LLC later is meaningfully more expensive than starting with the right structure.
Quick Comparison
| Factor | LLC | C-Corp |
|---|---|---|
| Available to non-US founders | Yes | Yes |
| Entity-level federal tax | None (pass-through) | 21% on profits |
| VC/institutional funding | Not compatible | Standard structure |
| Stock options for employees | Not available | Available (ISO/NSO) |
| Ongoing formalities | Minimal | Board minutes, formal governance |
What About an LLC Electing to Be Taxed as a Corporation?
As a separate wrinkle, an LLC can elect to be taxed as a C-Corporation (a "check-the-box" election) without converting its legal form — this is a narrower, more situational move usually relevant for specific tax-planning reasons rather than a general recommendation, and it doesn't unlock the actual legal and governance features (multiple stock classes, Delaware corporate law) that institutional investors specifically require. For founders planning to raise VC funding, forming an actual Delaware C-Corp directly is the standard path rather than this election.
How CompanyVista Approaches This
We start every formation conversation by asking about your funding plans and business model — not by defaulting to whichever structure is simplest to sell — since the LLC-vs-C-Corp decision has real, sometimes costly consequences if it's revisited later.