Delaware LLC vs C-Corp: Which Structure for Your Startup?
Detailed comparison of Delaware LLC and C-Corp — tax treatment, equity, fundraising, and exit considerations for founders.
LLC vs C-Corp: The Fundamental Difference
Delaware offers two dominant structures: the LLC (Limited Liability Company) and the C-Corporation. The right choice depends on your funding plans, tax situation, and exit strategy.
Delaware LLC
An LLC offers pass-through taxation (profits taxed at member level, not entity level), flexible profit distribution, minimal formality requirements, and strong asset protection.
Best for: Bootstrapped businesses, real estate, consulting firms, businesses not seeking VC funding.
Delaware C-Corporation
A C-Corp is the standard for venture-backed startups. It allows issuance of preferred stock (required by most VCs), employee stock option plans (ESOPs), and clean exit structures (acquisitions, IPOs).
Best for: Startups seeking VC/angel investment, businesses planning an IPO, companies wanting to issue equity to employees.
Tax Considerations
LLCs avoid double taxation (entity + individual). C-Corps face a 21% federal corporate tax, then dividend taxation at the individual level. However, the QSBS exclusion (Section 1202) allows C-Corp founders to exclude up to $10M in capital gains on exit.
The Verdict
If you're building a venture-backed technology company: choose a C-Corp. For everything else: an LLC is usually simpler and more tax-efficient.
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