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USA Company Registration

company types in the usa

Before starting a company in USA, investors must first decide which business structure or entity type is best to choose. Each company type has key advantages and disadvantages. Typically, there are three types of business structures: C corporation, S corporation and LLC.

Usually, an investor chooses an entity type on the basis of its limited liability protection requirements. Generally, all businesses require protection from liability. Therefore, starting an LLC could be the best choice. Formal business structures such as LLCs and Corporations legally separate the company from the owner thus offering liability protection to the company.

A C Corporation is a separate legal entity, set up under state law, that protects the owner’s (shareholders’) assets from creditor claims. Since the C corporation is divided into stock which is held by shareholders, the owners of the company are called shareholders. Shareholders are responsible only to the proportion of shares held by them. Shareholders, meaning owners of the corporation, are typically not personally liable for business debts and liabilities. This protection is also extended to directors, employees and other officers of the company. At the federal level, a for-profit corporation is classified as a C Corporation or an S Corporation for tax purposes. In a C Corporation, income and expenses are taxed to the corporation and not to the owners. A C Corporation is managed by a board of directors. State law governs the minimum numbers of directors that are required on the board and other compliance and tax related requirements at the state level. Incorporating a corporation will automatically give the entity the status of a C Corporation. Corporations are useful for small businesses that seek to attract investors because it provides limited liability protection. Moreover, if you are not an owner and just an investor, you will be taxed only on the dividends. Although, you would require an in-state street address for the state to forward official legal and tax correspondence including service of process, known as the registered agent address, there are no citizenship or residence requirements for ownership of a Corporation. Many foreign business owners use a C Corporation structure because its profits and losses do not flow through to its owners and therefore, in some cases, foreign owners will not need to file U.S. personal income tax returns.

An S Corporation is a tax status applicable to LLCs and corporations (C Corporation). In order to achieve this tax structure, Form 2553, Election by a Small Business Corporation, is filed with the Internal Revenue Service (IRS), as provided under the federal tax law. The benefit in an S Corporation is that the profits, losses, and other tax items pass through the corporation to the owners and are reported on their personal income tax return. The company is not taxed at the corporate level. This means that the business itself will not be taxed and the owner(s) will only be subjected to income tax on the business’s net income. An S Corporation also provides the flexibility to set salaries for employees/owners to be “reasonable salary.” Most importantly, you must have no more than 100 shareholders to qualify as an S Corporation. The IRS also defines “eligible shareholders”. As per federal law, shareholders must be U.S. citizens or legal residents.

An LLC is a formal business structure owned by its investors. An LLC is a great way to protect investors’ personal assets in the unfortunate event that the company suffers losses. The tax benefits and more flexibility on important matters such as accounting, management, and profit sharing in an LLC also make it worth considering. In terms of management, unlike corporations, which are required to hold annual meetings of directors and shareholders and keep detailed documents and records of all corporate meetings and major business decisions, LLCs do not require such formalities. You could choose your LLC to be taxed as a corporation or as a pass-through entity. An LLC that is taxed as a corporation, pays income tax at company level and the owners pay personal income taxes as well. If your LLC is taxed as a pass-through entity, the owners of the company pay personal income taxes and do not have to file a separate business tax return. Although, you would require an in-state street address for the state to forward official legal and tax correspondence including service of process, known as the registered agent address, there are no citizenship or residence requirements for ownership of an LLC.

How to Open a Company in the USA

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Starting a business in the USA can be a very rewarding experience with many advantages. One of the biggest benefits is gaining access to the world’s largest consumer market. With its population of over 350 million and the vast majority having access to relatively high levels of disposable income, there are almost unlimited opportunities for businesses that can meet the needs of US consumers. Additionally, USA companies benefit from reduced risk due to relatively strong property rights laws, low levels of government corruption, and ready access to international standards of technology and services. Finally incentive programs such as tax credits and discounts on commercial rates make it attractive for foreign investors and entrepreneurs alike looking to establish their operations in this vibrant market.

In the United States, there are different kinds of business entities and it is important to understand the differences and implications between one another when choosing which to form. Differences between business entities include limited liability protection, tax treatment, and government requirements. There are 6 types of business entities in the US: Sole Proprietorship, General Partnership, Limited Partnership, S-Corporation, C-Corporation, and Limited Liability Company (LLC).

When opening a company in the United States, deciding which state to incorporate in is fundamental. This decision determines the regulations and taxes your company must abide by. 

The best way to make this decision is to consider the specific needs of your business. For example, if you plan on having a physical office or store location, you’ll need to choose a state that allows for commercial activity. Or, if you want to take advantage of certain tax benefits, you may want to choose a state with no income tax. 

Rules for selecting and reserving a name for your company vary depending on the company’s structure and the state in which you are seeking to do business. 

When setting up your company in the USA, you will need to appoint a registered agent. This is a person or company that lives in the state you are seeking to conduct business in (or is allowed to conduct business in that state) that will receive important legal and tax documents on behalf of your business. 

To file your company with the state, you will need to complete the necessary paperwork and submit it to the appropriate agency. The specific forms and procedures will vary by state and by your company’s structure

After filing your company with the state you have selected, it is time to apply for a Federal Employer Identification Number, or FEIN. 

A FEIN is a nine-digit number that is used to identify businesses for tax purposes. 

When starting a business in the United States, you will need to have a physical mailing address. This can be your home address, or you can set up a mailbox at a local UPS Store or other mail service. Another way is by establishing a physical office in the state where the company is going to be formed. To open a bank account for your company, on the other hand, you will need to provide your company name, FEIN, and physical mailing address.

Most states require companies to file an annual report with the state, providing updated information on the company’s officers, registered agents, and capitalization. The report is typically due in the late spring or early summer. 

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