Should my startup be an LLC or C-Corp?

Choose a C-Corp if you plan to raise venture capital, issue stock options to employees, or eventually go public. Choose an LLC if you are bootstrapping, want simpler taxes, or do not plan to take outside equity investment. Most VC-backed startups must be C-Corps because investors require preferred stock classes that only corporations can issue.

C-Corp advantages for funded startups: ability to issue multiple stock classes (common + preferred), QSBS tax exclusion (up to $10M capital gains tax-free after 5 years), stock option plans (ISO/NSO), unlimited shareholders, and investor familiarity. C-Corp disadvantages: double taxation (21% corporate tax + dividend tax), more complex compliance (board meetings, minutes, annual reports), and higher formation costs. LLC advantages for bootstrapped businesses: pass-through taxation, operational flexibility, fewer formalities, and lower maintenance costs. You can always convert an LLC to a C-Corp later when you're ready to raise — the conversion is typically tax-free if structured correctly.