GLS Law Company Services: Company Registration in America
Many entrepreneurs who aim to enter the market of the United States see it as a crucial goal and a tool for expanding their business boundaries. Given that the US economy always holds leading positions globally, and the corporate legislation is flexible and encouraging towards non-residents, the jurisdiction has become very popular and in demand across various sectors. Creating companies in the US offers such advantages:
The US is the world’s largest market for potential partners and clients.
Company registration in the US is available in various organizational and legal forms, allowing activities according to the goals of one’s business without tying to the founders’ residency.
The States as a jurisdiction have a positive image among many investors and contribute to attracting interest in business ideas and company activities.
Despite the US having quite a high tax burden, it is possible to reduce some tax obligations through so-called “zero-tax states.”
The US is a participant in the unilateral information exchange FATCA, under which the States receive information from foreign banks about the accounts of their residents but at the same time do not provide information about accounts opened by non-residents in America (the US is not a participant in the CRS agreement).
Company Registration in the US – Organizational and Legal Forms of Companies
As mentioned above, the jurisdiction has flexible corporate legislation, as it provides for various forms of companies. Non-residents of the US can establish the following types of firms:
Registration of a corporation in the US, specifically a c-corp – a company whose owners are called shareholders and own shares. The main features of corporations include:
For taxation purposes, the IRS (Internal Revenue Service) identifies c-corp as a separate entity subject to corporate taxes at fixed rates.
Corporations have a legally established structure in the form of a collegial body, which elects other officers (President, Secretary, Treasurer) for the daily management of the company.
The statutory capital of corporations consists of issued shares, of which there must be a minimum of 100. This number can be increased in the future.
Opening a company in the US as a c-corp obliges owners to prepare accounting reports annually and submit the financial report specified for this type of company by the Tax Service.
Registration of a company in the US as an LLC (Limited Liability Company) – a limited liability company, which the States’ legislation provides in several forms:
Single Member LLC – an LLC with one member, the peculiarity of which lies in the taxation system of such a company. Specifically, this type of LLC does not have incomes and pays corporate taxes, as they “flow through” to the personal income of the company owner. At the end of the reporting period, the founder of a Single Member LLC submits an individual tax declaration, according to which the company is part of all his incomes. Thus, for taxation purposes, the IRS does not consider an LLC with one member as a separate taxpayer.
Partnership LLC – an LLC in the form of a partnership for which several founders – partners are required. Each has a certain percentage of the enterprise. Similar to Single Member LLC, a partnership is not subject to corporate taxes, as its income is distributed among the company participants, and they are required to pay individual income taxes.
LLC as a c-corp – upon registering any of the two aforementioned LLCs, founders may choose to tax the company according to the principles of a corporation. This means that the LLC will be classified as a separate entity from the founder for taxation purposes and will pay corporate taxes at a fixed rate.
A non-resident wishing for a simplified company form can register a business in the US as an LLC, as its structure has no legislative requirements. All details of the company can be outlined in the Operating Agreement – a private document that is not provided to state agencies.
Registering a Business in the US and Associated Tax Obligations
All companies without exception are obliged to file reports and pay taxes. Since the States is a federal country, the country’s tax system is multi-level (taxes are paid at the federal and state levels). Before registering a company in the US, it is necessary to familiarize oneself with all nuances to avoid negative financial consequences for the business.
C-corp corporations are income tax payers at fixed rates. At the federal level, a rate of 21% applies to all such companies registered in the US. While at the state level, each determines the size of the tax independently. For example, in Delaware, the corporate income tax rate is 8.7%.
Companies formed as Single Member LLC and Partnership LLC are subjects of corporate tax since the firms’ income flows into the personal income of the founders. After its distribution, each shareholder must pay personal income tax, which at the federal level is levied at a progressive scale from 10 to 37%. Each state sets its rates independently. For instance, the individual income tax rate in New York is 8.82%.
Considering the mentioned rates, registering firms in the US still allows for reducing the tax burden through choosing zero-tax states – states with zero taxation. These include Wyoming, Nevada, Florida, Texas, and others.
Registering offshore companies in the US is impossible because even if the firm does not conduct activity within the country, it must annually pay a franchise tax for the company’s existence. Its amount depends on the specific state and the type of company. LLCs pay tax at a fixed rate, while companies depending on the number of issued shares.
The cost of registering a company in the US also depends on many factors, including the state and form of registration. You can get a specific offer by leaving a request on the GLS company’s website.
