Choosing between an LLC and a C-Corp is a key decision for US small business owners. It impacts how you file taxes, your compliance obligations, and how profits are taxed. According to official guidance from the IRS and the U.S. Small Business Administration (SBA), each structure has distinct rules.
Understanding them can help you plan ahead and stay compliant, and many business owners rely on corporate tax services in US for expert guidance.
LLCs are flexible business structures. The IRS treats them differently depending on the number of owners and whether the LLC elects corporate taxation.
Single-member LLCs are treated as disregarded entities for federal tax purposes.
File business income on the owner’s personal return using Schedule C (Form 1040).
The LLC itself does not file a separate federal income tax return.
Multi-member LLCs are treated as partnerships unless they elect corporate taxation.
File Form 1065 (Partnership Return).
Provide each member with a Schedule K-1, which reports their share of income on personal tax returns.
Members pay self-employment taxes (15.3%) on earnings.
LLCs may elect C-Corp taxation by filing Form 8832, changing the LLC’s tax treatment to corporate taxation.
LLC income passes through to members and is taxed at individual federal income tax rates (10%–37% in 2025).
The 2025 SALT deduction cap affects deductions for state and local taxes.
C-Corporations are separate taxable entities. They file their own returns and pay corporate taxes.
File Form 1120 (corporate tax return).
Pay a flat 21% federal corporate tax rate on profits.
Dividends distributed to shareholders are taxed again on individual returns.
Suitable for businesses that want to retain earnings for growth or offer employee benefits.
Must comply with federal reporting requirements, including annual corporate filings.
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LLCs: Pass-through taxation, simpler filing, self-employment taxes, optional corporate election.
C-Corps: Corporate tax rate 21%, double taxation on dividends, more compliance requirements, suitable for growth and reinvestment.
Navigating IRS and SBA rules can be complex. Corporate tax services in US help small businesses:
Ensure compliance – Correctly file forms like Schedule C, Form 1065, and Form 1120.
Optimize tax planning – Identify whether LLC or C-Corp taxation aligns with business goals.
Entity selection guidance – Advise based on federal rules and your business’s long-term strategy.
Stay updated on legislation – Track federal and state updates, including SALT deduction rules.
For US small businesses, the LLC vs C-Corp decision has direct tax and compliance implications. LLCs provide simpler filing and pass-through taxation, while C-Corps offer growth and reinvestment advantages but face double taxation. By following IRS and SBA guidance, and leveraging professional corporate tax services in US, business owners can make informed decisions that protect compliance and support long-term success.
Running a business is complex enough. That’s why we offer combined accounting and tax filing plans at one fixed price. Our AI handles your daily books while tax experts manage your filing obligations. Plus, your dedicated CSM is just a SMS away. Chat with us now, email [email protected], or use our contact form.
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