LLC vs. Other Business Structures: Which Is Best for Your Business in the U.S.?
When starting a business in the United States, one of the first and most important decisions you’ll face isn’t what product to sell or how to attract customers, but how to legally structure your business.
Your choice will affect your taxes, your liability, your ability to grow, and even the trust you inspire in clients and investors. Among all options, the LLC (Limited Liability Company) is one of the most popular. But is it always the best choice?
In this blog, we’ll explore the differences between LLCs and other structures so you can make an informed decision.
1. What is an LLC and why is it so popular?
The LLC blends two worlds:
The legal protection of a corporation, separating personal and business assets.
The simplicity of sole proprietorships/partnerships, especially in taxation.
Main benefits:
Personal liability protection.
Flexible taxation.
Fewer compliance requirements than corporations.
Credibility with clients and banks.
2. Sole Proprietorship: the simplest path
This is the easiest and cheapest way to start, but comes with high risks.
No formal registration (beyond local permits).
Owner is fully responsible for debts and obligations.
Income reported on personal tax return.
The issue? No separation between personal and business finances. If your business is sued, your personal assets are at risk.
3. Partnership
Two or more people can start together.
General Partnership: all partners share responsibility.
Limited Partnership: some partners are only investors.
The risk: partners are liable for each other’s decisions.
4. C Corporation (C-Corp)
The most robust structure, often chosen by large companies.
Advantages:
Ability to issue shares and attract investors.
Strong liability protection.
Recognized worldwide.
Disadvantages:
Double taxation: corporate profits + dividends.
High costs and compliance requirements.
5. S Corporation (S-Corp)
A version designed for smaller businesses.
Pass-through taxation (no double taxation).
Strong liability protection.
Limitations:
Maximum 100 shareholders.
Only U.S. citizens or permanent residents can own shares.
One class of stock only.
6. LLC vs. Others: Quick Comparison
7. Key factors to choose your structure
Risk level: High-risk businesses → LLC or Corporation.
Taxes: Want simplicity? Sole proprietorship. Want flexibility? LLC. Seeking investors? C-Corp.
Scalability: Small family business → LLC. Fast-growth plans → C-Corp.
Budget & paperwork: Sole proprietorship = cheapest, C-Corp = most expensive.
8. Practical recommendation for Latino entrepreneurs
For most new entrepreneurs, the LLC is the most balanced choice:
Protects personal assets.
Builds trust with clients and banks.
Allows growth with less bureaucracy.
