Limited Liability Company.
The modern default. Liability protection with tax flexibility.
The LLC is America's most-formed entity — roughly 2.3M new ones per year. It gives you personal-asset protection, pass-through taxes by default, and almost no ongoing formalities. For most small businesses, this is the right answer.
How the IRS sees this entity.
Pass-through by default (can elect S or C)
Profit lands on the owner's personal return. The entity itself pays no federal income tax — the tax knife only cuts once, at personal rates.
What you owe, and when.
Forming the entity is the easy part. Here's the recurring paperwork that keeps it alive.
What this trades, and for what.
- Personal-asset protection
- Pass-through taxation (no double tax)
- Tax-election flexibility (S-corp, C-corp)
- Minimal ongoing paperwork
- Fits almost every use case
- Self-employment tax on all profit (without S-election)
- Banks occasionally ask for personal guarantees
- Not the standard vehicle for venture capital
The founders this fits.
- Consultancies and services firms.
- Holding real estate.
- E-commerce shops under $1M/yr.
- Single-founder companies that want asset protection.
You're raising priced venture rounds — VCs strongly prefer C-corps.
Where to actually file.
- Your home state
Default for most. Avoids foreign-qualification double fees.
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Privacy-friendly; $60 annual report; no state income tax. For passive holding companies.
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Mature LLC statute; strongest case law. Only worth it if the docs or investors demand it.
When to move on.
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Triggered when: Clearing >$80k/yr in active profit.
File Form 2553 with the IRS. Start running real payroll.
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Triggered when: Signed (or about to sign) a term sheet.
Statutory conversion or new DE C-corp via merger. Always with a lawyer.
Related articles.
Still not sure this is the right fit?
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