C-Corp
A C-Corp is a separate legal business entity taxed as a corporation by the US government. For most European founders starting out, a US LLC is simpler, but understanding C-Corps helps you plan for growth.
What is a C-Corp?
A C-Corporation (C-Corp) is a business structure that the US treats as a separate tax entity from its owners. When you form a C-Corp, the business itself pays federal and state income tax on its profits. Any money you then take out as salary or dividends is taxed again at your personal rate. This double taxation is the defining feature of a C-Corp.
For example, if your C-Corp makes $100,000 profit, it pays corporate tax (roughly 21% federal). If you then withdraw $50,000 as a dividend, you owe personal income tax on that $50,000 too.
How a C-Corp Differs from an LLC
A US LLC is a pass-through entity. Income flows to you personally, and you pay tax once at your individual rate. No double taxation.
A C-Corp pays corporate tax first; you pay personal tax second. C-Corps are more complex to run (more paperwork, annual filings, corporate formalities) but can be useful if you plan to reinvest profits, raise venture capital, or take investors early.
When Do Non-US Founders Use a C-Corp?
Most European founders starting out choose a US LLC for simplicity. You can get an ITIN (no visa needed), an EIN, a US business bank account, and US business credit cards, all while based in Europe.
You might form a C-Corp later if:
- You are raising institutional venture capital (VCs often expect C-Corp structures)
- You want to keep profits inside the business and reinvest them without paying personal tax
- You have multiple co-founders and want a clear cap-table framework
Many founders start with an LLC, then convert to a C-Corp once they meet one of these milestones. Services like Founders Credit handle the LLC formation and compliance from day one, so you can scale on your own terms.
C-Corp Tax Filing for Non-Residents
If you are a non-US resident owner of a US C-Corp, the corporation still files a Form 1120 (federal return) every year. You will owe tax on any US-source income (money your business earned in the US). There are tax treaties between the US and most European countries that can help reduce or eliminate double taxation, but you must plan for this.
Filing Form 1120 as a foreign-owned C-Corp means hiring a US tax accountant. This cost, combined with the complexity of running a C-Corp, is why many non-US founders prefer to start with an LLC and stay nimble.
Key Takeaway
A C-Corp is a separate tax entity that pays corporate tax, then you pay personal tax on withdrawals. It adds administrative burden and double taxation, but it is a proven structure for fundraising and growth. For your first US business as a European founder, an LLC is usually the cleaner path. You own it, it flows through to your tax return once, and you can set up your ITIN, EIN, bank account, and business credit cards in weeks.
Frequently asked questions
Do I need a C-Corp to get a US LLC, ITIN, and business bank account?
No. A US LLC is separate and simpler. An ITIN, EIN, and bank account work with either structure. Most non-US founders start with an LLC, which requires less compliance overhead.
Can I change from an LLC to a C-Corp later?
Yes. You can convert your LLC to a C-Corp election (Form 8832) or form a new C-Corp and transfer assets. It is easier to plan this in advance, but it is possible. A US tax specialist can guide the transition.
What is the double taxation problem with a C-Corp?
The corporation pays federal tax (about 21%) on profit. Then when you withdraw money as a dividend or salary, you pay personal income tax again. An LLC avoids this by passing income through to you once.
Do I file US tax returns on a C-Corp as a non-US resident?
Yes. Your C-Corp files Form 1120 annually. You may also file a personal return if you have US-source income. Tax treaties can reduce what you owe, but you must file and plan ahead.
Why would a VC investor want me to use a C-Corp?
VCs expect clean, standard cap-tables and preferred stock rights. C-Corps are designed for this. LLCs complicate equity splits with multiple investors, so venture-backed companies almost always convert to C-Corps before fundraising.
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