Business Formation: LLC vs S-Corp vs C-Corp Across 10 Industries

The right business structure depends on your industry more than most people realize. A tech founder raising VC funding needs a Delaware C-Corp. A construction contractor billing $400K a year needs an S-Corp or LLC taxed as S-Corp. A doctor opening a private practice has different rules in every state.

Here's the breakdown across 10 industries — not generic advice, but specific guidance based on how each industry actually operates.

The Three Structures (Quick Reference)

The most important practical difference: self-employment tax.

An LLC owner pays SE tax (15.3%) on all net profit. An S-Corp owner splits income into salary (subject to payroll tax) and distributions (not subject to SE tax). At $100K+ net profit, this saves $5,000–$15,000 annually — that's why S-Corp election is the default recommendation for profitable small businesses.

Technology: C-Corp (Delaware)

If you're building a VC-backed software company, you need a Delaware C-Corp. Full stop. Venture capital firms, especially institutional VCs, require it. LLCs and S-Corps cannot issue preferred stock — the instrument VCs use.

Why Delaware: Delaware's Court of Chancery specializes in business disputes, providing predictable case law. 70% of Fortune 500 companies are incorporated in Delaware for this reason.

When LLC makes sense: Solo consultants, bootstrapped SaaS under $200K revenue, and indie developers who will never raise institutional capital. An LLC keeps accounting simple and avoids corporate formalities.

The S-Corp window: Solo tech founders earning $100K–$500K who won't raise VC often elect S-Corp status to minimize SE tax while maintaining flexibility. Lose eligibility once you add non-US shareholders or need preferred stock.

Tech business formation → | Talk to an advisor →

Construction: LLC or S-Corp

Construction is the industry where the LLC → S-Corp upgrade path is most clearly worth the cost.

Solo contractor / small crew: Start as a single-member LLC. Liability protection from day one. Tax-efficient. Simple.

At $60,000+ net profit: Elect S-Corp status with your LLC (or form an S-Corp directly). A contractor netting $150,000 can split $75,000 as reasonable salary and $75,000 as distribution. At 15.3% SE tax, that saves roughly $11,475/year — enough to pay a CPA several times over.

Multi-owner construction firm: LLC with an operating agreement is more flexible than a partnership and cleaner than a corporation. Profit sharing, management authority, and buyout provisions can all be customized.

Don't form a C-Corp for construction. The double taxation (corporate income tax + dividend tax when you take money out) is punishing for a business where most profits are distributed to owners.

Construction resources →

Healthcare: PLLC (Professional LLC)

Healthcare is different because most states require licensed professionals to form a PLLC (Professional Limited Liability Company) or PC (Professional Corporation) rather than a standard LLC.

The key rule: in most states, non-physicians cannot own a stake in a medical practice. This affects structure significantly.

S-Corp election for healthcare: Many solo physicians use a PLLC elected as S-Corp to reduce SE tax on earnings above reasonable physician salary. A family medicine physician earning $300,000 can structure $180,000 as salary and $120,000 as distribution, saving $11,160/year in SE tax.

Warning: Healthcare professional corporations cannot have more than 100 shareholders, and all shareholders must be licensed in the relevant profession in most states. Confirm state rules before forming.

Healthcare business resources →

Real Estate: LLC (Every Time)

The LLC is the dominant structure in real estate for two reasons: liability protection and pass-through taxation. Holding real estate in a C-Corp creates double taxation on appreciation and rental income.

One property = one LLC. The standard practice for real estate investors is to isolate each property in a separate LLC. If a tenant sues over a slip-and-fall, the liability is contained to the property's LLC, not your entire portfolio.

Real estate professional S-Corp: Active real estate investors (agents, property managers, developers) with W-2 equivalent income over $60,000 often benefit from S-Corp election to reduce SE tax.

Real estate agent vs. investor: Agents (who earn commissions) benefit from S-Corp. Passive investors holding rental properties typically stick with LLC — rental income is not subject to SE tax anyway, so S-Corp offers limited advantage.

Real estate industry tools →

Finance / Professional Services: S-Corp After $80K Net

Accountants, financial advisors, insurance brokers, and consultants follow a similar pattern.

• Under $50K net profit: LLC (simple, no payroll overhead)
• $50K–$80K net profit: Evaluate — S-Corp may not be worth the payroll cost and accounting fees
• Over $80K net profit: S-Corp election almost always wins

The overhead of S-Corp: quarterly payroll tax filings, a separate corporate tax return (Form 1120-S), and a reasonable officer salary. Expect $1,500–$3,000/year in additional accounting fees. The tax savings should exceed this by $3,000–$8,000 annually at $80K+ net profit.

Personal service corporations: CPAs, attorneys, and financial advisors who form C-Corps face a flat 21% corporate tax rate — no graduated rates. For professional services businesses, the C-Corp is almost never the right choice.

Franchise resources →

Manufacturing: C-Corp for Scale, LLC for Smaller Operations

Manufacturing startups face a choice that few other industries do: the capital intensity often requires outside investors, which pushes toward C-Corp. But most small manufacturers — job shops, fabricators, niche producers — should default to LLC.

Under $1M revenue: LLC (or LLC taxed as S-Corp above $80K net profit). Capital equipment can be financed without VC.

VC or PE-backed: Delaware C-Corp. Investors will require it.

SBA 7(a) borrowers: Structure doesn't significantly affect SBA loan eligibility. Both LLC and S-Corp qualify equally.

Manufacturing tools →

The Full Decision Matrix

Costs to Form Each Structure

Delaware C-Corp adds registered agent fees ($50–$200/yr) and Delaware franchise tax ($400–$200,000/yr based on authorized shares — use the assumed par value method to minimize this).

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