Reply To: LLC vs C-Corp and tax burden

Great question. I generally recommend that companies stick with the flow-through taxation of an LLC until they are awarded grant funding. Founders then get to take advantage of any business tax deduction on their personal return and use the less complex LLC legal structure. After a grant award, they can elect to have their LLC taxed as a C-Corp and begin paying themselves a salary via a W-2. Now that 174 has been amended to allow full expensing of Domestic R&D expenditures again, you likely will not face too much of a tax burden under the C-Corp. All that said each person’s circumstances is unique, and it’s best to seek tailored advice to your specific tax situation.