Short answer
A C corporation pays a flat 21% federal tax on its profit and is the structure U.S. investors expect. A single-member LLC owned by a foreign person is a disregarded entity, but it still files a pro forma Form 1120 with Form 5472 each year. Founders who plan to raise money, issue shares or grant stock options usually choose a C corporation.
Side by side
| C corporation | Single-member LLC (foreign owner) | |
|---|---|---|
| Federal income tax | The company pays 21% on its profit. | Not taxed at the company level. U.S. tax depends on whether the owner has U.S.-source business income. |
| Yearly federal filing | Form 1120, plus Form 5472 if 25% or more foreign-owned with reportable transactions. | Pro forma Form 1120 with Form 5472. |
| Shares and stock options | Yes. Common and preferred shares, option plans. | No shares. Membership interests only. |
| Investors | The standard for venture capital, usually in Delaware. | Most venture funds do not invest in LLCs. |
When a corporation fits
Choose a C corporation if you plan to raise money, add co-founders with shares, grant stock options, or keep profit in the company to grow. One-person AI businesses that plan to scale often start this way.
When to ask first
Tax results depend on your country and your income. Ask a tax professional in your country about tax on money you take out of the company. We explain the U.S. side on a free call.
Sources
This guide is general information, not legal or tax advice, and rules change. Confirm figures with the state or IRS, or ask us on a free call.