7 types of corporations: Which business structure is right for your company?

There’s no one-size-fits-all structure for a growing company—but there are tried and true options. In this guide, we’ll break down the most common types of corporations, what sets them apart, and how to choose the right one based on your business goals, funding plans, and tax needs.

What is a corporation?

A corporation is a business entity that's legally distinct from its owners. This means it can own property, take on debt, be sued, or enter contracts independently. 

Most importantly, it offers limited liability—your personal assets are protected if the business faces legal or financial trouble.

Unlike sole proprietorships or general partnerships, corporations are designed to grow beyond a single founder or small team. Corporations can issue stock, attract investors, and formalize how decisions are made—essential elements for companies with high-growth ambitions. 

This structure makes it easier to attract shared financial backing, such as venture capital or outside investment, which is why corporations are built for scale.

The 7 main types of corporations

• C Corporation (C Corp): Separate legal entity, double taxation, extensive record-keeping, suitable for raising capital.
• S Corporation (S Corp): Avoids double taxation, profits pass through to owners, strict filing requirements.
• LLC (Limited Liability Company): Combines benefits of corporations and partnerships, protects personal assets, pass-through taxation.
• Nonprofit Corporation: Tax-exempt, organized for charitable purposes, cannot distribute profits to members.
• Benefit Corporation: For-profit with a mission, accountable for public benefits, similar taxation to C corps.
• Closed Corporation: Shares not publicly traded, run by a small group, less traditional structure.
• Professional Corporation: Formed by licensed professionals, subject to specific regulations.

Examples of corporations by type

To visualize these further, think about these brands and common business types.

• C Corporation: Google (Alphabet Inc.), Meta
• S Corporation: A local consulting agency or design firm
• LLC: An independent SaaS startup in early funding stages
• Nonprofit Corporation: Teach for America, Wikimedia Foundation
• Benefit Corporation: Patagonia, Kickstarter
• Closed Corporation: A small family-owned logistics company
• Professional Corporation: A medical or law practice with multiple licensed partners

These are just a few examples of how the types of corporations show up in real life, spanning everything from Silicon Valley unicorns to small professional firms.

All types of corporations explained

Let’s break each of these down.

1) C Corporation

Think of a C Corp as the heavyweight champ of business structures. It's a separate legal entity, meaning it can make a profit, be taxed, and be held legally liable—all without dragging you into the ring. 

Key characteristics include strong personal liability protection, the ability to raise capital through stock sales, and an independent life from its shareholders. 

However, it comes with higher formation costs and double taxation. For startups eyeing rapid growth and significant capital investment, a C Corp is a knockout choice.

2) S Corporation

An S Corp is designed to avoid the double taxation of C Corps. Profits and some losses pass through directly to owners' personal income, avoiding corporate tax rates. 

Restrictions include a cap of 100 shareholders, who must be individuals, certain trusts, or estates, and all must be U.S. residents. 

For example, a tech startup with a few U.S. resident shareholders can benefit from tax advantages while enjoying liability protections by choosing an S Corp structure.

3) LLC (Limited Liability Company)

LLCs offer startups personal liability protection, pass-through taxation, and operational flexibility. These benefits make them attractive for entrepreneurs looking to shield personal assets while enjoying tax advantages. 

LLCs are grouped with corporations due to their legal protections and tax options, allowing them to be taxed as C or S corps if beneficial. For instance, a tech startup with significant personal assets and a desire for lower tax rates might choose an LLC structure to balance legal protection and tax efficiency.

4) Nonprofit Corporation

Nonprofit corporations are organized to perform charity, education, religious, literary, or scientific work, benefiting the public. They can receive tax-exempt status, meaning they don't pay state or federal income taxes on profits. 

This structure allows them to attract tax-deductible donations and grants. For instance, a startup focused on providing educational resources to underprivileged communities would benefit from forming a Nonprofit Corporation, enabling it to support its mission through donations and grants while enjoying tax exemptions.

5) Benefit Corporation

A Benefit Corporation is a for-profit entity driven by both mission and profit. Key features include accountability to shareholders for public benefits and transparency through annual benefit reports in some states. Taxation is similar to C Corps.

Benefits include the ability to pursue dual missions, enhanced public image, and attracting mission-driven talent and investors. Obligations involve producing public benefits and, in some states, submitting annual reports.

For example, a startup creating eco-friendly packaging solutions could register as a Benefit Corporation, focusing on profit and environmental impact, appealing to eco-conscious consumers and investors.

6) Closed Corporation

A Closed Corporation, also known as a close corporation, is a type of business structure that resembles B corps but with a less traditional setup. 

It is designed for smaller companies and sheds many formalities that typically govern corporations. Shares are usually barred from public trading, simplifying management and allowing a small group of shareholders to run the company without a board of directors.

For example, a family-owned tech startup wanting to maintain control and avoid the complexities of public trading could benefit from this structure.

7) Professional Corporation

A Professional Corporation (PC) is a business structure designed for licensed professionals such as lawyers, doctors, and architects. It offers liability protection, ensuring that individual members are not personally liable for the malpractice of other members. This structure is ideal for startups in professional fields, providing a formal business entity while maintaining individual professional licenses.

For example, a group of doctors starting a new medical practice can form a PC to protect their personal assets while benefiting from a structured business environment.

So which type of corporation should you choose?

Choosing the right corporation type can feel like navigating a maze, but it doesn't have to be a headache. Here’s some sharp, actionable advice to help you decide:

If you’re a startup: 

If you're just getting your feet wet, consider an LLC. It offers personal asset protection and pass-through taxation, which means you avoid the double taxation headache. Plus, it's flexible and less formal than a corporation. 

If you’re eyeing rapid growth and need to attract investors, a C Corp might be your best bet. It allows you to sell stock and scale quickly, though it comes with double taxation and more regulatory requirements.

If you’re a small and medium-sized business (SMB): 

For SMBs, an LLC is often the sweet spot. It provides liability protection and tax benefits without the complexity of a C Corp. If you have multiple owners, a Partnership could work, but remember, shared liability means shared risk. If you’re looking to avoid double taxation and meet the eligibility criteria, an S Corp offers a good balance of liability protection and tax advantages.

If you’re part of an enterprise: 

For larger enterprises, a C Corp is usually the go-to. It’s ideal for raising capital through stock sales and offers robust liability protection. If you want to combine profit with a social mission, a Benefit Corporation can help you attract mission-driven investors and talent. Just be prepared for additional reporting requirements.

Ultimately, your choice should align with your business goals, growth plans, and fundraising needs. Consult with a business counselor or attorney to ensure you’re making the best decision for your specific situation. For more detailed guidance, you can also check out the U.S. Small Business Administration's guide.

Corporation types most common with Rho customers

For most companies that work with Rho—including venture-backed startups, fast-growing tech companies, and agile SMBs—the choice usually comes down to C Corporations, which align well with venture capital standards and support equity programs. 

LLCs and S Corporations are also common among early-stage and service-oriented businesses due to their tax efficiency. 

As businesses grow, many transition from an LLC to a C Corp to meet investor expectations and expand equity offerings. Rho also supports these transitions with tools for managing multi-entity operations, spend controls, and treasury workflows.

Final questions to help you choose the right corporation type

Asking yourself these questions:

• Do you want to raise capital through shared financial backing?
• Are you prioritizing tax simplicity or scalability?
• Do you plan to reinvest profits or distribute them?
• Do you want to operate with a social mission?
• Are there industry-specific regulations that affect how you must incorporate?
• Will you eventually want to take the company public?
• Do you plan to offer equity to employees?

Each type of corporation carries different legal structures, tax classifications, and ownership rules, so think ahead. Many companies also evolve over time, starting as an LLC and later converting to a C Corp as they scale. It’s not uncommon for early-stage founders to form an LLC for speed and simplicity, then incorporate in Delaware as a C Corporation ahead of a funding round.

If you’re unsure, Rho's startup resources can help you evaluate your business structure alongside your financial operations.

Simplify your corporation’s finances with Rho

Whether you're launching, growing, or restructuring your corporation, Rho supports you every step of the way. 

Our platform makes it easy to manage your banking, track spending, and optimize cash flow—all in one place. 

Designed for modern businesses, Rho helps you stay focused on building, while we handle the financial complexity.

Get started with Rho today.