Delaware C corp vs LLC for non-US founders: how to choose

For most non-US founders, the Delaware C corp vs LLC decision comes down to three things: how the entity is taxed, whether you plan to raise from US investors, and how much filing work you are willing to carry. A C corporation is taxed on its own profits and is the structure most US investors expect. An LLC is simpler on paper but can create complicated filings when the owners live outside the US. This guide walks through each factor using official sources, as of October 2026.

The table below summarizes the comparison. Figures come from the IRS 2025 Form 1120 instructions, the IRS Form 5472 instructions (Rev. December 2024) and Delaware's Division of Corporations, as of October 2026.

How each entity is taxed

A C corporation pays federal income tax at the entity level and files Form 1120. The IRS 2025 Form 1120 instructions apply a 21% rate to taxable income. Profits stay in the company until they are paid out, and Stripe's Atlas documentation notes that C corporations "Can typically use early startup losses to offset future taxes."

An LLC works differently by default. Stripe's documentation says LLC profits and losses "are passed through to founders by default", and that with a non-US founder "tax filings can become complex." Pass-through treatment means the owners, not the company, generally carry the tax result. For a founder living in Germany or India, that can bring US filing questions to a personal level, which is exactly what many founders want to avoid.

The Form 5472 rule for foreign-owned single-member LLCs

This is the detail most non-US founders miss. The IRS treats a single-member LLC owned by one person as a disregarded entity. When that owner is a foreign person, the IRS calls it a "foreign-owned U.S. DE".

According to the IRS Form 5472 instructions (Rev. December 2024), a foreign-owned US disregarded entity must file a pro forma Form 1120 with Form 5472 attached. It cannot be filed electronically. It goes by fax or mail, with "Foreign-owned U.S. DE" written across the top of Form 1120. The penalty for not filing, or for filing a substantially incomplete form, is $25,000, with an additional $25,000 if the failure continues more than 90 days after IRS notification.

None of this makes an LLC wrong. It means the LLC is not the low-maintenance option it can look like. Someone has to own that filing every year.

What investors expect

If you plan to raise from US venture investors, the C corporation is the usual answer. Stripe's Atlas documentation describes C corporations as "Preferred by institutional investors who might be unable to invest in LLCs" and as the structure "Used to grant equity to employees, advisors, and investors." Stock options, SAFEs and preferred share rounds are all built around corporate shares.

There is also a tax incentive tied to the C corporation. Under Section 1202 as amended in July 2025, qualified small business stock must be issued by a domestic C corporation. Stock acquired after July 4, 2025 can qualify for a partial exclusion, subject to a per-issuer cap of $15,000,000 or 10 times basis if greater:

• 50% exclusion after three years
• 75% exclusion after four years
• 100% exclusion after five or more years

These benefits apply to US taxpayers, so whether they matter to you depends on your tax residence. Read more in do US investors require a Delaware C corp.

Annual costs in Delaware

Both entities have a formation fee and a yearly cost. Delaware's fee schedule, revised August 1, 2026, lists $109 to file a certificate of incorporation (varying with stock) and $110 to form a domestic LLC.

After that, the paths split. A Delaware corporation files an annual report and pays franchise tax by March 1. The report fee is $50, and the minimum franchise tax is $175 under the Authorized Shares method or $400 under the Assumed Par Value Capital method (per the Delaware Division of Corporations, as of October 2026). Choosing the wrong method can produce a much larger bill, which our Delaware franchise tax guide explains.

A Delaware LLC pays a flat annual tax of $400, due on or before June 1, with no annual report. Some formation providers still quote $300. Delaware's own pages say $400, so use that figure. Neither tax is prorated, so an entity formed late in December still owes the full year.

Which one fits your situation

If you are a venture-track startup, or expect to grant stock options to US hires, the C corporation is usually the cleaner choice. Converting later costs time and legal fees.

If you are an established company opening a US sales arm, the question is usually whether the US entity should be a corporation owned by your parent company. Stripe Atlas, for example, offers a C corporation subsidiary of an existing company, with the shares issued to the parent after incorporation.

If you are a single founder with a small services or software business, no plans to raise and a bookkeeper who understands Form 5472, an LLC can work. Price in the annual filing and the penalty risk before you decide.

The right entity follows from your US commercial plan. Greatweek's US market entry work sits upstream of this choice: whether the US opportunity is real at your stage or a year too early, which buyers to target first and which route to market fits your economics. Those answers tell your lawyer whether you need a venture-ready structure now.

Questions to settle before you file

Write down your answers to four questions:

• Will you raise from US investors in the next two years?
• Will you grant equity to US employees?
• Who owns the company today, individuals or a parent company?
• Who will prepare the US federal filings every year, and do they handle foreign-owned entities?

If you cannot answer the last question, solve it first. The filing burden is where the LLC and C corporation differ most for non-US owners. The wider context is in our guide to the benefits of incorporating in the US.

Frequently asked questions

Can a non-US founder own a Delaware C corporation?

Yes. Formation providers such as Stripe Atlas accept non-US founders and offer Delaware C corporations. You will still need an EIN, which takes longer without an SSN or ITIN.

Is an LLC cheaper than a C corp for a foreign founder?

The Delaware fees are similar. The LLC's annual tax is $400 and the corporation's minimum franchise tax is $175 or $400 plus a $50 report fee, as of October 2026. The bigger cost difference is usually tax preparation, especially the Form 5472 filing for a foreign-owned single-member LLC.

Do I have to file Form 5472 if my US LLC had no revenue?

Ask your tax advisor before assuming a quiet year means nothing is due. The IRS instructions set the filing requirement for foreign-owned US disregarded entities, and the penalty for not filing is $25,000.

Can I convert an LLC to a C corp later?

Conversions are possible but involve legal work and tax analysis. If you expect to raise venture capital, it is usually simpler to start as a C corporation.

Greatweek helps companies decide when a US entity is worth the fixed cost. If you want a second view on timing, book a 20-minute US Entry Review. Confirm the entity choice with a qualified US tax advisor and corporate lawyer before filing.