Key takeaways
- Pass-through means profits hit your personal return (LLC taxed as sole prop, S-corp, partnership).
- C-corps pay entity tax; dividends can be taxed again at the owner level.
- State rules, self-employment tax, and fundraising plans change the answer. Use a CPA.
Side-hustle tools got easier in 2026. Entity choice did not. A default single-member LLC is usually a disregarded pass-through: Schedule C, self-employment tax on net profit. An S-corp election is still a pass-through but can change how wages vs distributions are split if you run a real payroll. A C-corp is a separate taxpayer.
Why startups talk about C-corps
Venture investors often want a Delaware C-corp for stock and option mechanics. That is a fundraising constraint, not a badge of sophistication for a freelance designer with one client.
What this page is not
It is not an election form and not a substitute for an accountant who has your state and your numbers. The IRS and your secretary of state publish the actual checklists.
