LLCs for most. C-Corps for VC-backed startups targeting QSBS exclusion.
By Alif Al Razi, Anonymousllc.co
| Dimension | Anonymous LLC | C Corporation |
|---|---|---|
| Tax treatment | Pass-through (no entity-level tax) | Double taxation (21% corp + dividend tax) |
| QSBS eligibility | No | Yes (IRC § 1202 — up to $10M gain exclusion) |
| VC preference | Unusual for VC | Standard for VC fundraising |
| Anonymity | Anonymous in 4 states | Officers/directors often disclosed |
| Asset protection | Charging order protection | Corporate veil (weaker against sole shareholders) |
| Administrative burden | Low | High (board meetings, corporate formalities) |
| Flexibility | High (OA governs everything) | Rigid (corporate law governs) |
| Self-employment tax | Applies (default) | Not applicable (salary + dividends) |
Anonymous LLCs avoid double taxation — income passes through to the owner's return. Formation is simpler, administration is lighter, and the operating agreement provides flexible governance. Charging order protection is generally stronger than the corporate veil for single-owner entities. Anonymous LLCs are the right choice for almost every non-VC business.
C Corporations face double taxation (21% corporate rate + tax on dividends when distributed) but offer Qualified Small Business Stock (QSBS) under IRC § 1202 — potentially excluding up to $10M in capital gains on exit. VCs strongly prefer C-Corps (Delaware C-Corp specifically) for investment. If you are building a startup targeting a venture-backed exit, a C-Corp is typically required.
For 95%+ of anonymous LLC buyers, the LLC is the right structure. C-Corps are specifically for VC-backed startups targeting institutional fundraising and QSBS. If you're not raising VC, an anonymous LLC is simpler, cheaper, and provides better asset protection.
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