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Navigating the world of business entities can be overwhelming. Our Business Entity Guide simplifies the process, helping you select the right structure for your needs.
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Limited Liability Companies (LLCs)

An LLC offers flexibility, simplicity, and strong legal protection, making it the most popular choice for small businesses and individuals looking to hold assets like property, vehicles, or intellectual property. At Launch406, we often recommend LLCs for solo founders, real estate investors, and those who want to separate personal and business finances without unnecessary complexity.
LLCs are easy to manage and don’t require formal meetings or complex recordkeeping. They also provide liability protection by shielding your personal assets from lawsuits or debts tied to the business. Depending on your setup, LLCs may allow you to deduct expenses, manage taxes more easily, and plan for future ownership transfers. However, profits are generally subject to self-employment tax, which is a consideration for growing businesses.
Whether you’re forming an LLC to run a business or hold an asset, Launch406 ensures every detail is filed correctly, affordably, and in line with your goals.

Personal Liability Protection

LLCs create a legal separation between your business and personal assets. That means if your business is sued or takes on debt, your home, car, and personal

Ongoing State Requirements

Most states require LLCs to file annual reports and pay renewal fees. Missing these can cause your LLC to be administratively dissolved

Flexible Tax Treatment

By default, LLCs are taxed as pass-through entities – profits and losses flow through to your personal tax return. However, you can also elect S-Corp status to reduce self-employment taxes if your business income grows.

Self-Employment Tax Exposure

Unless you elect S-Corp taxation, all – business profits may be subject to full self-employment tax. This becomes more important as income grows.

Minimal Formality

LLCs don’t require corporate meetings or complex bylaws. You can choose how the business is managed and who makes decisions-giving you simplicity and control.

Not Ideal for Raising Capital

If you’re planning to seek venture capital or attract multiple investors, a C-Corp structure is generally preferred.

Use for Asset Holding

LLCs are commonly used to hold assets such as rental property, vehicles, intellectual property, or investments -adding a layer of protection and estate planning flexibility.

Limited Transferability

Selling or transferring ownership in an LLC is often more complicated than with a corporation, and usually requires the approval of other members.

Credibility

Operating as an LLC can make your business look more established and trustworthy. It’s easier to open a business bank account, apply for financing, and build business credit.

S-Corporations (S-Corps)

An S-Corp isn’t a type of business structure – it’s a tax election that can be made by an LLC or corporation. Choosing S-Corp status with Launch406 allows eligible businesses to reduce self-employment tax by paying the owner a reasonable salary and taking remaining profits as distributions, which aren’t subject to payroll taxes.

This structure is ideal for profitable service businesses or solopreneurs earning over ~$50K annually. With an S-Corp, you still enjoy liability protection, but you’ll also have stricter compliance requirements, such as running payroll and filing a separate business tax return. Launch406 helps you handle these requirements easily, so you can focus on growth and savings.

S-Corps must have U.S. shareholders (no more than 100) and can’t be used for holding investments or rental properties. For eligible business owners, though, they offer significant tax advantages when structured and maintained correctly and Launch406 can make sure yours is.

Significant Tax Savings

One of the biggest advantages of an S-Corp is the ability to save on self-employment taxes. Owners who actively work in the business are paid a “reasonable salary,” and profits beyond that salary are distributed as dividends not subject to payroll tax.

Payroll is Required

If you work in your business, the IRS requires you to pay yourself a “reasonable salary” through payroll. This means setting up a payroll system, filing quarterly returns, and managing withholdings.

Liability Protection

Like an LLC, an S-Corp is a separate legal entity. Your personal assets are shielded from business lawsuits, debts, and liabilities.

Increased Compliance

S-Corps have stricter requirements than LLCs. You’ll need to maintain corporate records, issue W-2s, and meet annual tax filing obligations – even if your business isn’t complex.

Pass-Through Taxation

An S-Corp avoids double taxation. Instead of paying corporate tax, profits pass through to the owner’s personal tax return-just like an LLC.

Ownership Restrictions

S-Corps can’t have more than 100 shareholders, and all must be U.S. citizens or residents. You also can’t have partnerships or corporations as owners.

Use for Asset Holding

LLCs are commonly used to hold assets such as rental property, vehicles, intellectual property, or investments -adding a layer of protection and estate planning flexibility.

Not Ideal for Passive Businesses

If you’re holding rental property or managing passive income, an S-Corp may not be a good fit. LLCs are usually better for asset holding and real estate.

Credibility

Operating as an LLC can make your business look more established and trustworthy. It’s easier to open a business bank account, apply for financing, and build business credit.

C-Corporations (C-Corps)

A C-Corp is the most formal and scalable structure available – and it’s the default form of corporation under U.S. law. At Launch406, we typically recommend C-Corps for startups planning to raise venture capital or businesses aiming to reinvest profits into rapid growth.

C-Corps offer strong liability protection and allow unlimited shareholders, including foreign owners. They’re also eligible for certain deductions and fringe benefits, like health insurance and retirement contributions. However, one of the biggest drawbacks is double taxation – profits are taxed at the corporate level and again when distributed as dividends.

C-Corps require more paperwork, strict compliance (like bylaws and annual meetings), and corporate tax filings. Launch406 handles every step, ensuring your C-Corp is set up properly and in compliance with both state and federal laws. For businesses with big ambitions, this structure can provide flexibility and long-term advantages.

Attract Investors & Raise Capital

C-Corps are the preferred structure for venture capitalists, angel investors, and institutional backers because they allow for unlimited shareholders, including other businesses and foreign investors, and the ability to issue multiple classes of stock.

Double Taxation

Unlike pass-through entities like LLCs and S-Corps, C-Corp income is taxed twice- once at the corporate level and again when dividends are distributed to shareholders, reducing overall take-home profits for owners.

Limitless Growth Potential

If your business plans to scale aggressively or eventually go public, the C-Corp structure supports long-term expansion and broad ownership without restrictions on who can hold shares.

Formal Compliance Requirements

Operating as a C-Corp involves strict legal obligations, including maintaining bylaws, holding annual board and shareholder meetings, keeping corporate minutes, and appointing a board of directors – all of which add to the administrative workload.

Offer Equity to Employees

C-Corps can issue stock options and equity-based incentives, which makes them ideal for startups and high-growth companies looking to attract and retain top talent through employee ownership.

Higher Administrative Costs

C-Corps typically face more expensive setup and ongoing maintenance compared to simpler structures like LLCs. This includes filing corporate tax retums (Form 1120), potentially hiring a CPA for compliance, and managing payroll and legal documentation.

Strong Legal Separation

C-Corps are fully separate legal entities, which provides the strongest liability protection available for business owners. This is particularly valuable for businesses with significant legal exposure or investors seeking protection from business-related risks.

Not Suited for Real Estate or Lifestyle Businesses

C-Corps are generally a poor fit for passive income ventures such as rental property ownership or solo consulting work, as the double taxation and rigid compliance requirements often outweigh the benefit
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“Thanks to Launch406, I was able to set up my business quickly and efficiently. Their guidance made the process seamless and stress-free!”

Emily Johnson
CEO, Startup Co.

Client Image
★★★★★

“Thanks to Launch406, I was able to set up my business quickly and efficiently. Their guidance made the process seamless and stress-free!”

Emily Johnson
CEO, Startup Co.

Client Image
★★★★★

“Thanks to Launch406, I was able to set up my business quickly and efficiently. Their guidance made the process seamless and stress-free!”

Emily Johnson
CEO, Startup Co.

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FAQs

LLC vs. S-Corp vs. C-Corp - What's Right for You?

What's the difference between an LLC, S-Corp, and C-Corp?

An LLC (Limited Liability Company) is a flexible, easy-to-manage structure that protects your personal assets. An S-Corp is a tax election that lets businesses avoid double taxation and pay owners via payroll. A C-Corp is a traditional corporation that's great for startups, investors, and businesses planning to scale-but it comes with more compliance and double taxation.

Which structure is best for a solo business owner or freelancer?

You might consider S-Corp status when your business is generating consistent profit-generally around $50K or more per year. It can reduce self-employment taxes by allowing you to pay yourself a reasonable salary and take additional profits as distributions.

Why do startups and tech companies choose C-Corps?

C-Corps are preferred by venture capitalists and angel investors because they allow for multiple shareholders, stock classes, and international ownership. They're also the best structure for issuing employee stock options and planning for an IPO.

What are the tax differences between LLCs, S-Corps, and C-Corps?

LLCs and S-Corps are pass-through entities profits flow to the owners' personal tax returns.
S-Corps allow you to split income between salary and dividends, potentially lowering taxes.
C-Corps pay corporate tax at 21%, and owners pay again on dividends - called double taxation - but may qualify for benefits like Section 1202 capital gains exclusions.

Which business structure offers the best liability protection?

All three offer limited liability, but C-Corps provide the highest level of separation between owners and the business. LLCs also offer strong protection, especially for holding assets or real estate.

Can I change my business entity type later?

Yes, but it requires filing paperwork and may trigger tax consequences. For example, converting an LLC to an S-Corp is relatively simple, while changing from S-Corp to C-Corp or vice versa may be more complex. At Launch406, we guide you through the best starting point and how to pivot later if needed.

Can Does Launch406 help me decide which structure is right for my business?I change my business entity type later?

Absolutely. Launch406 includes personalized support to help you choose the best entity for your goals. Whether you're starting a side hustle, launching a tech startup, or protecting real estate assets, we break down the pros and cons so you can make a confident decision.

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