How Can I Start (C Corp, S Corp and LLC) in the USA?
Building your business from the ground in the USA (C Corp, S Corp, and LLC) can be thrilling and lead to business diversification. From an extensive customer base and audiences to a more profitable market and interest rates, a business setup in the USA will give it all. A Business setup in the USA requires planning, budgets, investment, a business model, and much more. Individuals need to focus on the framework of US organizations, taxation policies, economic framework, setting up US bank accounts, and more.
Read more about a Business setup in the USA, the steps, guidelines, rules and regulations, company registrations, laws, types, and more.
THIS IS WHAT YOU NEED TO KNOW ABOUT THE REQUIREMENTS FOR BUSINESS REGISTRATION (C Corp, S Corp and LLC) IN THE USA
The USA is one of the most economically strong and developed nations for business setup. With a wide variety of natural resources, advanced infrastructure, and technology, the USA has been growing with rapid development and globalization, making it ideal for business setup, regardless of residency status and company structure. Now that you have decided to set up a business in the USA, you will need multiple documents to register it. Note that the documentation process and requirements may vary depending on the type of company structure you opt for, the size of the company, and the state.
Here are all the general requirements for Company registration in the USA.
- Type of organization you want to set up (S corp, C corp, LLC)
- Get in touch with a local registered agent
- Apply for an Employer Identification Number (EIN with IRS)
- Obtaining a US bank account and merchant account for payments.
- Get business insurance for maximum safety.
- The documentation process (Permits, licenses, registration, tax registration, etc.)
- Obtain a local US phone number for business-only tasks.
- Obtain a required business license for running a business in the USA.
- Determine that you are in observation with the city, country, state, and federal necessities.
- Setting up annual and remaining fees, along with staffing and investment, contacting a licensed US business lawyer in the state of your business location.
TYPES OF COMPANIES
The company registration process in the USA allows you to decide the company formation structure, depending on your preferences. Some of them include S-corp, C-corp, LLC, and more. We will be discussing all of them in detail. Note that the S-corporation company structure is not available for non-US residents. To apply for an S-corp structure, one must relocate to the USA, or they have the option to choose a different company structure.
DETERMINING THE COMPANY STRUCTURE
LLC - Limited Liability Corporation
LLC can be defined as a company structure that suits perfectly for businesses looking for protection from personal liability. It is one of the most widely used business entities. It is less complex and easier to set up and operate than S- corporation and C corp. The state statute allows it, and every area may use different regulations. Here, the owners are called members. You don't have to be a US resident to register a limited liability corporation.
Key characteristics: The LLC structure guarantees no double taxation and is flexible regarding taxation. Moreover, it acts as a legal entity because it holds a distinct legal identity from its members.
Benefits: LLC offers excellent benefits to the members. There are no restrictions on the company's ownership. Any foreign company can establish LLCs in the USA, as the documentation process can be prepared in English. Besides this, a Limited liability corporation establishment requires minimal capital compared to other structures.
S - Corporation
This company structure allows corporate profits to flow through the owner's tax returns. You need to register a C corp first to switch to an S-corporation. This type of entity limits the chances of double taxation and is strict with the legal guidelines and IRS scrutiny. Here, the profits and losses of businesses are passed through and reported directly to the owner's personal tax returns, hence paid individually.
Key characteristics - When it comes to the structure of an S corp, they may not hold more than 100 stockholders. Neither do they hold partnerships nor non-resident aliens as stockholders. These corporations do business more ordinarily, including paying salaries, social security insurance taxes, withholding unemployment, etc. Here the wages are subjected to withholding, whereas the distributions to any shareholder are not.
Benefits: S-corporations provide the advantage of protecting the assets of their shareholders. A shareholder is not responsible for business debts and liability without a personal guarantee. Moreover, S-corporations use the cash method for accounting until and unless organizations are small and they meet the IRS gross receipts test. These corporations also offer higher credibility and help businesses establish strong relationships with their customers, partners, and employees.
C - Corporation
This legal business entity exists as a default corporate tax structure. One of the most common types of company formation structure, C corp is highly recognized by the federal government. To set up a C corp one needs to issue an EIN with IRS with the IRS and file articles of incorporation within the state. They are the most prevalent ones and are subject to corporate income taxes. They do not avoid double taxation, as the profits are taxed at corporate and personal levels.
Key characteristics: C corp legally separates the shareholder's assets from the owners and the business's income. Here, the liability of investors is limited, and they are required to conduct an annual meeting. They have voted on boards of directors by stakeholders.
Benefits: C corp provides the advantage of functioning smoothly even If the owners or the members of management are changed. Also, these corporations can have as many owners and shareholders as possible. However, it is vital to register with the “SEC (“securities and exchange commission”)”. The power to provide stock portions allows the business to save a lot of funds to use further in new ventures and future extensions.
The difference between an S Corp, a C Corp, and an LLC
It avoids double taxation at both personal and corporate levels. It taxes as a pass-through entity.
C corporation profits hold taxes that show up on the business's tax returns. It taxes as a separate entity.
They are pass-through entities and do not pay taxes on their business income. Members are liable to pay taxes on their self-employment.
S-corporation allows the flow of profits or losses to the shareholders, who are liable to pay the taxes and report them on their personal tax returns. They can only have one class of stock.
They can have multiple stock classes, placing shareholders on a hierarchy.
Do not have shareholders, instead, have members who share profits. Each member must pay any of the taxes - Self-employment, personal, or corporate tax.
Do does not allow more than 100 shareholders, all must be US citizens.
Allow multiple shareholders with no restrictions on ownership.
May have more than one owner who is not liable for the Company’s obligations.
HOW TO CHOOSE THE RIGHT STATE?
Determining the business location is crucial and wonders for your business activities and revenues. One should look to states where the market dominates and has a good business position with the target customer base. Every state in the US has its own regulations and tax schedules.
Some factors to consider while locating the right area -
- Demographic location of your target audience
- Market competition,
- Location close
- Properties and rentals
- Essential utilities
- Corporate taxes
- Local laws
- Taxes and regulations
- Quality of living
- Risks included
- Connectivity and travel
THE TOP AMERICAN STATES FOR BUSINESS SETUP IN 2023, ACCORDING TO FORBES
Indiana tops the list with an 80.6% national average Business survival rate. With an Income tax rate of 3.23% and 25% corporate tax, Indiana offers a business-friendly environment, a healthy amount of funding options, especially for startups and small businesses, and a low cost of living. Other benefits include a lower-than-average unemployment rate of 2.8% and a good workforce.
With an 80.6% national average business survival rate, Colorado provides an income tax rate of 4.55% and 24% corporate tax. With a $50 LLC fee, the second-best state is a haven for outdoor activities, has a good startup rate, is entrepreneurial, and has a higher focus on startups.
North Dakota has a business survival rate of 78.3% and an income tax rate of 2.90%. They charge a $135 fee for LLC formation and a corporate tax of 24%. The state is not widely recognized; however, it has significantly impacted businesses over the last few years. It offers an excellent business-friendly climate with a personal income tax rate of 2.1% (the lowest in the nation). The location is excellent for owners wanting to limit their tax rates.
A CHECKLIST FOR DOCUMENTS AND LICENSES REQUIRED FOR BUSINESS SETUP IN THE USA FOR NR
LEGAL DOCUMENTATIONS FOR BUSINESS CORPORATIONS
LEGAL DOCUMENTATIONS FOR LLC
LICENCES REQUIRED FOR BUSINESS SETUP IN USA
Certificate of Incorporation, or Articles of Incorporation
Articles of Formation or Articles of Organization
Business license ( General business license, DBA, Tax ID, Sales tax permit, Health license, Environment license, etc.)
Organizational Minutes and bylaws optional: shareholder agreement
Government licenses ( for operating in specific areas, collecting sale taxes, filing taxes, and meeting health and safety standards)
For ownership - Share Certificate for each shareholder
Member Certificate for each Member
Operational licenses ( for fields like medical, auto repair, tax services, insurance, legal, cosmetology, and real estate)
IRS Form SS4 – Application for Employer Identification Number (for tax)
OBTAINING EIN with IRS
An employer identification number is crucial for opening a bank account, tax filing, business licenses, hiring workers, and more.
- The first step is to determine your eligibility. You can apply for the EIN with the IRS online.
- One must have a legitimate Taxpayer Identification Number (SSN, EIN with IRS, ITIN)
- You can get only one EIN with the IRS per responsible party (a person who owns or controls the entity) daily.
- You are required to complete the online application in one session, as it does not save progress. (Expires every 15 minutes of inactivity)
- Apply. You will receive your EIN from the IRS after all the validations are completed. One must save and print the EIN with the IRS confirmation notice.
- After obtaining the EIN with the IRS, one may consider finding a business bank account for business activities, payments, taxes, profits, losses, and dividends.
OPENING A US BUSINESS BANK ACCOUNT
A USA bank account is required when registering your company in the USA. It can track financial transactions, document financial activities, and pay taxes, wages, and dividends. A bank account helps you keep records, formulate future decisions, and plan costs accordingly.
WHY NSKT GLOBAL?
NSKT Global is a leading organization with a dedicated team that works on your business's goals. We understand your needs and long-term aims and will work on that. We provide company formation services for your business, consulting services, financial management guidance, Business advisory services, and more. The experts at NSKT Global overview your business needs and provide relevant guidance. If you are a beginner, want to set up your business in the USA, and are looking for guidance, check out NSKT Global's official page and find the perfect service.