Selecting a business structure for your company.
Choosing the right business entity is a critical step in setting up your company. As experts in US company formation, one of the most often asked questions we get is, “What structure is the best fit for my business?” The answer is not always straightforward, since it is highly dependent on the nature of your business.
a Business Entity
LLC vs C-Corporation
|LLC Sole Proprietor / Partnership||C-Corporation|
|LLCs are not required to pay taxes directly. Rather than that, profits and losses are declared on the owners’ personal tax returns.||Company pays its own taxes. If the owners work for the same company, they are entitled to wages, compensation and dividends. In each of the above cases additional tax may apply.|
|To pay taxes company owner/owners are required to obtain an ITIN / SSN.||Company owners may not obtain SSN/ITIN numbers until they receive their wages or dividends. In the case of compensation of employees, the taxes are paid in their country of residence.|
|The owner of the business is subject to US scrutiny assessments, and his or her data may be shared with foreign regulatory agencies.||It is possible to attract investment, issue and sell company shares, sell the company itself or part of its shares to new partners.|
|It is difficult to raise funds or investment.||Access to public company positions for the company’s executives. Nominations for important roles within the company may become public.|
|Cannot be sold / In the event of dissolution of a partnership, the company gets liquidated.|
|No reinvestment of profits.|
|Federal income tax (10%-37%).||Fix rate 21%|
|The company may have a board of directors, each of which has the opportunity to receive a salary or compensation.|
|It is possible to choose the type of taxation (LLC or Corp). Foreign owners cannot file as an LLC due to the IRS requirement to file Form 5472.|
Do you have any questions? We will advise you on the business models available to your company, so you can choose the right structure for your line of work.
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