LLCs (Limited Liability Companies)

LLCs were introduced in the 1970s and have become the most popular structure for small businesses. Key characteristics:

• Liability protection — your personal assets are separate from your business debts and legal obligations
• Flexible taxation — by default, a single-member LLC is taxed as a sole proprietor (income passes through to your personal return); multi-member LLCs are taxed as partnerships. You can also elect to be taxed as an S-Corp.
• Minimal record-keeping — no board meetings, no annual shareholder votes, no formal corporate governance required
• Flexible management — you can run it yourself or designate managers
• Not internationally recognized — if you need to operate outside the U.S., a corporation may be required
• No stock — LLCs issue membership interests, not shares

LLCs are the most common choice for freelancers, consultants, small service businesses, and any owner who wants liability protection without corporate complexity.

Corporations

Corporations are older, more formal structures better suited to businesses seeking outside investment or planning to go public:

• Legal entity — the corporation is its own legal person, entirely separate from its owners
• Liability protection — shareholders are not personally liable for corporate debts
• Extensive record-keeping — requires board of directors, annual meetings, meeting minutes, formal resolutions
• Stock — can issue shares to attract outside investors or compensate employees
• International recognition — generally recognized worldwide
• Corporate taxation — C-Corps are taxed at the corporate level (double taxation on dividends); S-Corp election avoids this for qualifying small businesses

Most ZenBusiness customers choose LLCs. If you're building a venture-backed startup or need to issue stock options to employees, talk to a business attorney about whether a C-Corp is the better fit.

What's the difference between an LLC and an S-Corp?

An S-Corp is not a business entity type — it's a tax election. You form an LLC (or corporation), then elect S-Corp status with the IRS. The S-Corp election changes how the business income is taxed: instead of all profit being subject to self-employment tax, you take a "reasonable salary" (taxed as W-2 wages) and take the rest as distributions (not subject to self-employment tax). This can save significant money for profitable small businesses. Talk to a CPA about whether an S-Corp election makes sense for your situation.

Do I need an LLC to run a business?

No — you can operate as a sole proprietor without any formal registration. But a sole proprietorship offers zero liability protection: your personal assets (house, savings, car) are at risk if the business is sued or can't pay its debts. Forming an LLC or corporation creates a legal separation between you and your business. For most business owners, the cost of formation ($50–$500 in state fees) is well worth the protection.

How long does formation take?

It depends on your state. Some states approve formations in 1–3 business days; others take 2–4 weeks. Rush processing is available in most states for an additional fee. See our Formation Process & Timeline article for details.

Can I form an LLC in a different state than where I live?

Yes — you can form an LLC in any state, regardless of where you live. Many small business owners choose Delaware, Wyoming, or Nevada for their favorable business laws. However, if you actually operate your business in your home state, you'll generally need to also register as a "foreign LLC" in your home state, pay its filing fees, and maintain a registered agent there. For most small businesses with no multi-state tax planning needs, forming in your home state is simpler and cheaper.

Is my business address the same as my registered agent address?

No — these are two different things. Your registered agent address is the address where legal documents and state mail are sent; it appears in the registered agent section of your state filing. Your business address is where you actually operate and may appear in other sections of state filings. A registered agent service address cannot be used as your principal business address.