TL;DR: The LLC vs C-Corp decision is one of the most consequential legal choices a solo founder makes. LLCs offer simplicity and pass-through taxation. C-Corps enable VC investment, stock options, and have a cleaner cap table. This guide covers decision criteria by business model, the Stripe Atlas incorporation process, post-incorporation compliance, and how to manage ongoing obligations.
Introduction
Should you incorporate as an LLC or a C-Corp? The answer depends on your funding plans, revenue model, and growth ambitions. For bootstrapped SaaS founders, an LLC often makes sense initially. For VC-funded startups, a Delaware C-Corp is the standard.
Decision Framework
| Factor | LLC | C-Corp |
|---|---|---|
| Taxation | Pass-through | Double taxation |
| Fundraising | Difficult (no stock) | Standard (preferred stock) |
| Equity grants | Membership units | Stock options (IRS 409A) |
| Complexity | Low | High |
| Cost to maintain | $500-1,000/yr | $2,000-5,000/yr |
| Best for | Bootstrapped, stable | VC-funded, high growth |
Stripe Atlas Process
The Stripe Atlas platform streamlines Delaware C-Corp formation. Here are the key inputs and expected timeline for solo founders:
# Stripe Atlas handles Delaware C-Corp formation
# Required information:
1. Company name
2. Founder details (name, address, SSN/ITIN)
3. Stock allocation (10M shares authorized)
4. EIN (Employer Identification Number)
# Timeline: 3-7 business days
This checklist covers the four pieces of information you need to prepare before starting the Stripe Atlas application. The entire process typically completes within a week, after which you will receive your EIN and Delaware incorporation documents.
Conclusion
For most solo SaaS founders, start with an LLC if bootstrapping, or a Delaware C-Corp via Stripe Atlas if raising venture capital. You can convert LLC to C-Corp later, but it's tax-advantageous to get right from the start.
Before incorporating, review the SaaS Legal Essentials for terms of service and privacy policy requirements. If you are choosing between bootstrapping and fundraising, our Bootstrapping vs Venture Capital guide breaks down the trade-offs. Once incorporated, the SaaS Pricing Strategy Playbook helps you monetize your product, and for enterprise customers, Building SaaS for Enterprise covers the security and compliance standards you will need to meet.