When you're setting up a US company for the first time, everyone seems to have an opinion on LLC vs C-Corp. Some say LLC because it's simpler. Some say C-Corp because that's what VCs want. Both are right, depending on what you're actually trying to do.
Here's how to think through it.
Most accelerator founders open a US entity for one of two reasons:
The right entity type depends almost entirely on which of these applies to you.
If you're raising from US venture capital, the answer is almost always C-Corp, and usually Delaware specifically.
Here's why: most US VC funds are set up as limited partnerships, and those partnerships have restrictions on what they can invest in. LLCs pass income through to members, which creates tax complications for certain types of investors. C-Corps don't have that problem. So most VCs won't invest in an LLC, and some outright can't.
Beyond that, the standard fundraising tools (SAFEs, convertible notes, priced equity rounds) are all written with a C-Corp structure in mind. Using them with an LLC creates legal friction you don't need.
Delaware specifically is the default because Delaware's corporate law is the most developed and VC-friendly in the country. Investors, lawyers, and banks all know it well. There's nothing magic about Delaware itself, it's just where the infrastructure has built up over decades.
So: raising from VCs, want to use a SAFE, or planning a priced round eventually? Go C-Corp, Delaware.
If you're not raising from institutional VCs and your main goal is to have a US entity for billing clients, holding a bank account, or running US operations, an LLC can work well.
LLCs are simpler and cheaper to maintain. There's no requirement for a board, no stock issuance, no bylaws. You set up an operating agreement, you're done. Annual compliance costs are lower.
The tradeoff is flexibility later. If you raise from VCs down the road, you'll likely need to convert the LLC to a C-Corp, which is doable but creates legal work and cost. If you know VC funding is in the plan, it's usually cleaner to start as a C-Corp.
LLC is a reasonable choice if: you're running a bootstrapped or revenue-funded business, you want a US presence without full corporate overhead, and VC fundraising isn't in your near-term plans.
Both entity types owe US tax filings starting the year they're incorporated, even with zero revenue. A lot of founders assume taxes only matter once the company makes money. They don't.
For a Delaware C-Corp specifically, you owe the Delaware Franchise Tax annually (due March 1) and a federal Form 1120 to the IRS. If you have foreign ownership, you also owe Form 5472, which carries a $25,000 penalty if missed, even for inactive companies.
For an LLC with foreign members, there are equivalent IRS reporting requirements. The details differ, but the principle is the same: the clock starts when you incorporate.
See the full breakdown: what you owe in your first year, even with no revenue → taxhero.vc/blogs/first-year-us-taxes-zero-revenue
If you're raising VC: Delaware C-Corp. If you're billing US clients without VC funding: LLC is worth considering. If you're not sure: default to Delaware C-Corp. It's easier to stay a C-Corp than to convert later.
Ready to get started? Back to the full US incorporation guide for accelerator founders → taxhero.vc/blogs/us-company-incorporation-guide-accelerator-founders
Want to know what tax filings your new US company owes and when? Get your free, personalized startup tax calendar.
Get your free tax calendar → taxhero.vc/checkin
This article is for informational purposes only and isn't legal or tax advice. Consult a licensed professional for your specific situation.
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