C-Corp vs S-Corp vs LLC: What’s the Difference?

Forming a business entity is one of the smartest moves you can make as a freelancer, consultant, or small business owner. But which structure is right for you?

Most independent entrepreneurs choose between three options: an LLC, an S-Corp, or a C-Corp. They all provide limited liability and a more professional foundation—but they differ significantly in how they handle taxes, ownership, compensation, and long-term growth.

In this post, we’ll break down the key differences to help you make an informed choice.

What They All Have in Common 

Before we dive into the differences, here’s what LLCs, S-Corps, and C-Corps all offer:

• Limited liability protection: Your personal assets are generally protected from business debts and lawsuits.

• The ability to enter contracts, open business accounts, and hire employees.

• Legal separation between your business and personal finances.

From there, the differences start to matter a lot—especially when you’re optimizing for taxes and wealth-building.

LLC vs S-Corp vs C-Corp: A Side-by-Side Comparison

Let’s look at each in more depth.

LLC: The Simple Starting Point 

An LLC (Limited Liability Company) is popular for good reason:

• Easy to set up and run

• Pass-through taxation: profits flow directly to your personal return

• Great for side hustlers and solopreneurs earning under $50K/year

The downside? Less flexibility when it comes to paying yourself or accessing advanced tax strategies.

S-Corp: The Tactical Tax Saver 

An S-Corp is not a separate entity type—it’s a tax election you make as a corporation or LLC.

• Allows business owners to split income into salary + dividends

• Reduces self-employment taxes on the distribution portion

• Best for those earning $80K to $150K and able to handle payroll + compliance

Limitations include ownership rules (U.S. citizens only, max 100 shareholders) and less reinvestment flexibility.

C-Corp: The Strategic Growth Vehicle 

The C-Corporation stands apart as a fully separate tax-paying entity. Though traditionally associated with large companies, it’s increasingly popular with solo entrepreneurs, consultants, and digital professionals.

• Flat 21% corporate tax rate

• Ability to retain earnings and reinvest in the business

• Full access to pre-tax benefits: healthcare, retirement, education, and more

• Clean separation of business vs personal income

What about double taxation? Yes, C-Corps pay taxes on profits, and shareholders pay on dividends. But most service-based business owners avoid this by paying themselves a salary and reinvesting profits instead of issuing dividends.

When to Choose What 

Here's a quick guide:

• Just getting started and making <$50K? LLC keeps it simple.

• Making $80K–$150K and want to reduce self-employment tax? S-Corp may help.

• Earning $100K+ and want long-term wealth, pre-tax strategies, and freedom to scale? C-Corp could be your best tool.

Example: Alex the Business Strategist 

Alex is a solo business strategist earning $180K/year. After forming a Delaware C-Corp, she:

• Pays herself a salary

• Uses pre-tax dollars for healthcare and a SEP-IRA

• Reinvests profits to build a small team

This structure has allowed Alex to reduce her tax burden and build long-term wealth, without worrying about shareholder restrictions or self-employment tax.

Choosing with Confidence 

Your business structure can be more than a compliance checkbox. It can be a strategic tool for protecting your income, reducing your taxes, and setting yourself up for future growth.

But navigating the options can feel overwhelming.

That’s where Lifestyle comes in. We help entrepreneurs, freelancers, and side hustlers form and manage Delaware C-Corps without the administrative stress. You focus on growing your income. We handle the filings, bookkeeping, compliance, payroll, and more.

Save on taxes. Build your wealth. Lifestyle makes it easy.