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Today, most startup Businesses and budding Entrepreneurs prefer to set up their businesses in the USA. Why the USA? The answer is obvious, but let us explain the preferential choice for Company Incorporations in the USA again. The United States of America is the most technologically developed nation on the planet. It is the source of the major scientific innovations in the world.
Withholding the record as a birthplace for most Multinational Corporations in the world, the US becomes a conducive ground for many budding startups to sprout and grow into major Corporations of the world. But are we aware that setting up a Business in the USA requires the Corporate applicant to choose from a wide variety of Company Incorporation types offered by the USA’s corporate legislature?
To register a Company in the USA, the corporate applicant is required to choose from the Company Types, such as the following:
Each of such Company Types has a specific purpose. But do you know that subscribing to such a Corporate Model is not limited to US nationals alone? Foreign Residents, Nationals, or Organizations can also subscribe to one of the Company models stipulated by the US Corporate Legislature. Regarding the S-Corps, such business models are unavailable to non-US residents. So to apply for the S-Corp or Special Company Registration in the USA, the applicant must relocate to the States.
Now, the following sections are dedicated to comprehending the various US Company Types in detail.
The following types of Corporations are laid down by the US Corporate Legislature commonly adopted by budding businesses in the United States:
Let us explore them in detail.
Limited Liability Company or an LLC
A Limited Liability Company, also known as an LLC, is a US Corporation featuring the benefits of a Partnership as well as a registered Company. Each member partner in an LLC has limited liability. The members choose the LLC corporate structures to protect their assets from the LLC’s undertaken debts and obligations, such as their houses, vehicles, personal assets, etc. The US Law considers LLC members self-employed and liable to pay taxes on their employment. A registered Limited Liability Company in the USA can have multiple owners non-liable for its obligations. But they are liable to pay the Corporates taxes, such as a Self-Employment Tax, Personal Tax, or Corporate Tax.
The Corporate Legislatures of Individual States in the USA do not permit an LLC to have perpetual existence. However, they have not considered the best jurisdictions for LLC Company Registrations in the USA, such as New Jersey, New York, Ohio, California, etc.
What if an LLC Member leaves the Company?
But states of the US Federation mandate LLCs to sign a new Agreement on the exit of its Company’s member(s). Ideally, the Entrepreneur chooses the LLC structure to protect their assets in case of bankruptcy or debt obligations. The LLC Regulations also employ lower tax regimes than other Corporations.
Corporation
A Corporation or a Corp is a separate legal entity from its members. You can think of a Corp as a distinct legal person in the eyes of the Law. Every Corp can own as well as sell the property as a breathing legal entity in the United States. They can also sue or be sued like a person.
Stronger Member Protection and Perpetual Existence of a Corp
Corp, unlike an LLC, can perpetually exist. The structure offers stronger protection to its Members against debt obligations, but the cost of Corp Company Incorporation in the USA is high. Multiple persons can apply for Corp registration, and each is not personally liable for any of the Company’s Acts.
The Corporation can be thought of as a Public Company
Corp must pay nothing but Corporate Tax, but such taxes must be levied on the earned profits and dividends paid to its shareholders. You can raise investment by opening shares to the general public. It is an ideal business model for Businesses wanting to raise investment by going public with an IPO.
Special Corporations or S-Corp, as Americans believe in Reductions
S Corp or Special Corporation is a specialty among Company Incorporation in the USA because it is not liable to double taxation. All the profits earned by an S Corp are liable to their income. S Corps in the USA are not subjected to Corporate Taxes. This is why many US States do not recognize S Corp as a legal entities. A Company is allotted an S Corp status when it reaches a certain profit threshold. On overflowing from such a threshold, S Corp becomes a Corp.
Shareholding Capacity of an S-Corp
An S Corp can hold a maximum of 100 shareholders, each being a US citizen. The owners here are not liable for the Corporation’s debts obligations. Such corporations are subject to personal Tax only and function independently from their shareholders as a subset of a Corporation.
Benefit Corporation or B-Corp
A Benefit Corporation or a B Corp is a business entity specifically suited for a profit organization dedicated to the public good and charity. Although it works like a Charitable trust, a B Corp is driven by profit as well as a mission.
It is liable to submit benefit reports in some states to demonstrate its public sector contribution. A B Corp differs from a Corp in terms of its purpose and accountability. Still, it is not taxed as a Corp., and Multiple owners can opt for B Corp Company Registration in the USA. Still, such a model limits the liability of its owners to their activities.
Closed Corporations or C-Corps
Closed Corporations or a C Corp is similar to a B Corp structure but less formal. A C Corp is not required to follow many formalities. A C-Corp has a smaller structure, which becomes incompatible with bigger organizations, so they don’t prefer it. A C Corp limits its shareholders to managing its operations.
A C Corp is restricted to having a Board of Directors as well as share trading with the public.
Non-Profit Corporations or NPCs
A Non-Profit Corporation or an NPC is a charitable organization that does not seek to earn profits from its activities. It functions for the benefit of society. Any of the following organizations is suited to apply for NPC Company Registrations in the USA:
The US Corporate Laws exempt NPC from all kinds of taxes. But it must disclose its profit-spendings for that financial year. An NPC distributes its profits among its members.
Still, confused about which model to choose?... Choose Registrationwala first
With such distinction in each of the corporate models, there can still be confusion among business persons into which model to adopt for their Businesses as per its to-be-undertaken commercial activities. We blame the overlapping functionality and nature of the Corporate Models for this. If you have issues with which Corporate model to choose for Company Registration in the USA from India, you can avail of Legal Consultancies from the Incorporation Experts at Registrationwala. Our seasoned professionals can explain every pros and cons of choosing a particular business structure and then make an informed decision. We make our clients sail through the Company Incorporation procedures in the USA.
Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.
