LLC vs C-Corp for Romanian Founders: Which US Entity Is Right for You?
Romanian founders building a US business have a specific advantage: Romania has one of the lowest corporate tax rates in the EU (16% standard, 1% micro-enterprise rate for qualifying companies), which affects the optimal holding structure. This guide covers the Romanian-specific considerations for choosing between a US LLC and C-Corp.
The core difference
An LLC is a pass-through entity by default — no US corporate tax, profits flow to owners. A C-Corp is a separate taxable entity — 21% US corporate tax, then dividend withholding on distributions. C-Corps are the standard for venture-backed companies.
The Romanian tax dimension
Romania taxes Romanian residents on worldwide income. The treatment of a US LLC under Romanian tax law follows the standard European transparent-entity approach: Romanian tax applies to the LLC's profits directly, even if not distributed.
The C-Corp advantage: Romania treats a US C-Corp as an opaque entity. Romanian tax on corporate profits is deferred until you take a dividend or salary. The US-Romania tax treaty (in force since 1974) reduces dividend withholding to 10% for both corporate and individual shareholders. The treaty also provides foreign tax credits.
The SRL holding structure: Romanian founders often use a Romanian SRL (Societate cu Răspundere Limitată) as the holding entity that owns the US C-Corp shares. This structure — Romanian SRL → US C-Corp — can be tax-efficient. The Romanian SRL pays 16% corporate tax (or 1% micro-enterprise rate if qualifying), and dividends received from the US C-Corp may benefit from the Romanian participation exemption if the SRL holds 10%+ of the C-Corp for at least one year.
The micro-enterprise advantage: Romanian SRLs with annual revenues under €500,000 can elect the 1% micro-enterprise tax rate. If your Romanian SRL is the holding entity for a US C-Corp, the micro-enterprise rate on dividends received from the US can make the overall tax burden very competitive.
When to choose an LLC
- Simple service business, no retained earnings, no fundraising plans
- You have confirmed with a Romanian cross-border tax adviser that the transparent treatment does not create double taxation in your specific case
- You want the lowest administrative overhead
When to choose a C-Corp
- You plan to raise venture capital or angel investment
- You want to issue stock options
- You want to retain profits in the US entity
- You are using or plan to use a Romanian SRL as the holding entity
- You want to benefit from the micro-enterprise rate on dividends
Practical comparison
| Feature | LLC | C-Corp |
|---|---|---|
| US federal tax | Pass-through | 21% corporate rate |
| Romanian treatment | Transparent (double taxation risk) | Opaque (deferred until distribution) |
| US-Romania treaty | Limited benefit | 10% withholding (both corporate and individual) |
| SRL holding structure | Incompatible | Standard |
| Micro-enterprise rate | Not available | Available (1% on qualifying SRL income) |
| VC fundraising | Difficult | Standard |
What Keystone Bridge recommends
For Romanian founders, the C-Corp combined with a Romanian SRL holding structure is often the most tax-efficient option available — particularly for founders who qualify for the micro-enterprise rate. The LLC is only viable for the simplest service businesses with a Romanian tax adviser confirming the structure.
We handle formation, EIN, registered agent, and operating documents. For the Romanian-specific tax analysis, you need a cross-border specialist.
This guide is for informational purposes only and is not financial, tax, or legal advice. Consult a qualified adviser for your specific situation.