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How to Set Up Company in U.S.-Which Option to Prefer: LLC, S- Corp or C- Corp?

How to Set Up Company in U.S.-Which Option to Prefer: LLC, S- Corp or C- Corp?

How to Set Up Company in U.S.: Forming an LLC

Limited Liability Company (LLC) appears as one of the most appropriate alternatives when you ask how to set up company in U.S. The feature of LLC allows entrepreneurs and investors create business entity by keeping their personal assets more secure. LLC also provides a limited liability in terms of debts and legal responsibilities. “Limited liability” refers protection for owners against some unexpected consequences in case of a legal claim or bankruptcy. Moreover, LLC offers “pass-through taxation”. This refers to that the business or the company is not responsible for paying tax as a legal entity. However, it is compulsory for to report tax amounts through owner’s personal tax returns.

The outstanding advantages of the LLCs could be listed as follows:

  • Offers simplicity in formation process -even with one member- and easier ongoing reporting requirements.
  • Provides protection for personal assets against legal obligations concerning debts and liabilities.
  • There is no legal restriction for non-citizens or non-residents to open LLC.
  • Different companies, Corporations or other LLCs, can be members of LLC as legal entities.
  • Tax advantage is of high importance when you seek the best for how to set up company in U.S. LLC Ensures tax advantage by classifying net income/loss of the company as personal income. LLC also categorizes tax processes almost the same as a partnership/sole proprietorship at federal level.
  • The tax status of LLC corresponds to the one of partnership or sole proprietorship, by default. Nevertheless, LLC has an option to prefer to be taxed as a C- or S- corporation.
  • Provides flexibility in management and operation through simple financial requirements. Additionally, LLC ensures less administrative procedures and fewer board meetings.
  • Holds a separate form of legal entity. This enables to legally act in business transactions, enter into contracts, institute lawsuits, or own properties.
  • Credibility also plays significant role in processes of how to set up company in U.S. LLC brings along increased credibility. LLC also provides more formal structure among public opinion.

You may reach HERE the detailed information regarding how to open an LLC in U.S.

How to Set Up Company in U.S.: S- and C- Corporations

American laws offer another option when one seeks for how to set up company in U.S. This alternative form is called corporation. The corporation exists when several different shareholders put money or/and property in an incorporated business. Shareholders put money in exchange for shares of the corporation’s stock. A corporation demonstrates separate legal entity from the owners (stockholders) of the company.

In this sense, the corporation can operate by owning property and borrowing money. A corporation can also conduct and sign binding contracts. Besides, corporations can be part in lawsuit processes and pay taxes. Moreover, a corporation may be established as a profit making or non-profit organization, and may either be publicly or privately held. Finally, the liability of each owner is limited to the amount invested to the corporation.

C- Corporation is the default status which is provided to any freshly incorporated and created company. Nevertheless, a C-Corporation can choose to convert to a S-Corporation at any time. This is possible only after receiving the consent of shareholders for filing with S status.

How to Set Up Company in U.S.: Differences between S- and C- Corporations

The main difference between a C- and S- corporation arises in taxation methods. Questions regarding taxation are important for processes of how to set up company in U.S. C-Corporations bring along a default tax status. However, S-Corporations carry an optional tax status which is subject to some restrictions. Indeed, C-Corporation does not appear as a good alternative for U.S citizens. The main reason is that it allows double taxing. First, when a corporation earns income’; second ‘at the time the corporation issues a dividend’. On the contrary, if you are a non-U.S. resident, the C-Corporation may be a better option for you. That way you may easily transfer shares to investors or employees of your company.

On the other side, S-Corporation model may be good option for U.S residents. S- Corp avoids double taxing. Nevertheless, non-citizens are not eligible to open an S- Corp. The S-Corporation structure allows you to pay a reasonable salary to yourself. That way you may keep money in your business by not directly distributing it to income tax filing.

How to Set Up Company in U.S.: Which Company Type Should You Prefer?

Not preferring a sole proprietorship when establishing a new business may be advantageous. That way you will not to be legally liable for all your personal assets against the law. At this point, benefiting from the legal framework of an LLC seems a better alternative. LLC is also an available option for non-U.S. residents who seek for how to set up company in U.S. Besides, decision depends on the concept and type of the business which you plan to conduct. This is what to mainly consider in preferring to open an LLC or any type of corporation.

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