How Taxation Differs
An LLC is pass-through by default — profits flow to the owner's personal return. A C-Corp is taxed at the corporate level, and shareholders are taxed again on dividends — the classic 'double taxation' tradeoff, offset by advantages a C-Corp offers for reinvesting profit and issuing equity.
What Investors Typically Expect
Venture investors overwhelmingly expect a Delaware C-Corp — it's the standard structure for issuing preferred stock, employee equity, and multiple funding rounds. An LLC can convert to a C-Corp later, but most founders raising institutional capital start as a C-Corp to avoid that conversion step.
Key Insights
- 1If you're bootstrapping or running a service/e-commerce business, an LLC's simplicity and pass-through taxation is usually the better fit.
- 2If you're raising venture capital, a C-Corp (typically Delaware) is close to a default expectation from investors.
- 3Converting an LLC to a C-Corp later is possible but adds legal and accounting cost — worth planning for early if you already know you'll raise.
- 4Neither structure is inherently 'more legitimate' — the right choice depends entirely on your funding path.
