Both protect owners so they’re not personally on the hook for business liabilities or debts. But, key differences include how they’re owned (LLCs have one or more individual owners and corporations have shareholders) and maintained (corporations generally have more formal record-keeping and reporting requirements). Even though LLCs are considered easier to start and maintain, investors tend to prefer corporations.

The way you’re taxed.

C corporation income is taxed twice—the business pays taxes on its net income, and then the shareholders also pay taxes on the profits they receive. With S corporation income, only the shareholders pay taxes on profits received.

Personal liability protection. An LLC protects owners from being personally on the hook for business liabilities or debts. A sole proprietorship doesn’t.

LLCs, S corporations, and sole proprietorships are taxed once on profits received. C corporations are taxed twice; the business pays taxes at the corporate level, and shareholders pay taxes on income received. Nonprofits with 501(c)(3) status are exempt from federal income taxes.

LLCs, corporations, and nonprofits. You don’t get personal liability protection with sole proprietorships or DBAs.