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How to Start a Business in US: Types of Business Entities
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The United States has no federal business law and, therefore, corporations are exclusively regulated by state laws. There are four main types of business entities in the U.S. i.e. Sole Proprietorship, Partnership, Limited Liability Company (LLC), and Corporation. For establishing a new office in the U.S. usually the LLC or the corporate structure is recommended.

Limited Liability Companies (LLCs)
Incorporations
Strategic considerations in selecting appropriate structure


 
I. Limited Liability Companies (LLCs)
   
  Limited Liability Companies (LLCs) are a hybrid of corporations and partnerships, combining the features of both. LLCs are extremely flexible, and can be used for a very wide range of businesses. The members (equivalent to shareholders or partners) can, but need not, have limited liability; can, but need not have, managers (equivalent to directors and officers) and can elect to be taxed either as corporations, or as partners (if they have two or more members) or be disregarded for tax purposes like a sole proprietorship. Like partnerships, LLCs can be as simple or complex as the members desire.

Depending on state law, an LLC can have the same limited liability for members as a corporation, or have some members with limited liability and some without limited liability (like a limited partnership), or even have no limited liability for any members (like a general partnership). Unlike corporations, some States require that their LLCs designate a date in the future at which the LLC will automatically dissolve. Some States also require that if a member dies, goes bankrupt or meets some other calamity the remaining members of the company must either dissolve or vote to continue.
   
   
  LLC FAQs

1. What is a limited liability company?
   
  Limited Liability Company (LLC) is a hybrid of corporation and partnership, combining the features of both. LLC is extremely flexible, and can be used for a very wide range of businesses.

2. What papers do I need to file to form an LLC?
   
  You need to prepare and file the Articles of organization with the state along with the requisite filing fees, initial franchise taxes, and other initial fees.

3. Do I need an attorney to form an LLC?
   
  It is not necessary to employ the services of an attorney to form your LLC. However, it is advantageous to have a discussion with an attorney/tax advisor to avoid errors and ensure that you choose the correct legal entity for your situation and file appropriate documentation.

4. Are there any guidelines for naming my entity?
   
  Yes. The name of your business entity must not match or be too similar to the name of an existing company established in your desired state. The chosen name must also contain the indicator that the business is a distinct and separate entity. Almost every state requires and accepts the identifiers such as Incorporated, Corporation, Company, Limited etc.

5. Can I be the sole member of my LLC?
   
  Most of the states are now allowing single member LLCs. However, the IRS may treat a single member LLC different for the one which has more than one member and tax them differently.

6. How is an LLC managed?
   
  An LLC is generally managed by its members; however, it may also be managed by selected managers. Management by members operates much like a partnership where each member has equal rights in the management decisions. In certain cases the members may choose or elect a manager or managers. This is more like a corporation’s board of directors and the managers are in charge of the management of affairs of the LLC.

7. What are the advantages of an LLC?
   
  The main advantages of an LLC are:
   
 
Limited liability of members
Flexible Management Structure
Flexible Ownership is Permitted
Transferability of ownership may require consent of majority members
Tax benefits in certain situations


    
II. Incorporations
   
  Incorporations (also called corporations) are more complex than partnerships or sole proprietorships, in that a new legal entity is created. A corporation is an entity that is separate from its owners, so that regardless of what happens to shareholders, the corporation continues until it is legally dissolved. Depending on state law, a corporation can be owned by just one person and have just one director and officer. The owner(s) of a corporation are known as shareholders. The shareholders elect directors to set the policies of the corporation and represent their interests. The directors appoint the officers of the corporation to manage day to day operations.

Corporations are legally required to follow more formalities than any of the other entities, including annual meetings of the shareholders and directors, as well as board approval of most significant acts by the corporation. Because a corporation is separate from its shareholders, for example, even if one person is the sole shareholder/director/officer, that person cannot just take company funds for him/herself without documenting the reason and entering a board resolution into the corporate records.

Taxation of corporations is much more complex than sole proprietorships or partnerships: depending on the number of, residency of and type of shareholders, a corporation can elect to be treated for tax purposes as a if it were a partnership (an S corporation) and therefore not pay taxes itself, or it can be treated as a taxable entity (a C corporation).
   
   
  Incorporation FAQs

1. What are the advantages of incorporation?
   
  The main advantages of incorporation are:
   
 
Limited liability of shareholders
Perpetual succession i.e. unlimited life independent of its members or owners
Raising of capital is comparatively easy
Easy transferability of ownership
Centralized pool of management

2. Is it necessary to hire attorney for incorporation?
   
  Though, it is not necessary to employ the services of an attorney to form your corporation, incorporation of an entity is a complex process and involves handling a lot of issues that have legal implications. It is advantageous to have a discussion with an attorney/tax advisor to avoid errors and ensure you choose the correct entity for your situation and get proper documentation.

3. Is there any minimum capital requirement to start a corporation?
   
  In most of the states there is no minimum requirement of capital for starting a corporation, other than the state filing fee for incorporation.

4. How long does this entire process of incorporation take?
   
  Different states have different processing times depending upon the workload at the state office. The time taken for the incorporation process depends upon the state the business is incorporated. A few states require a notice to be published in the newspaper upon the formation of a corporation.

5. Are there any specific guidelines for selecting the name of the corporation or other entity?
   
  Yes. The name of your business entity or corporation must not match or be too similar to the name of an existing company established in your desired state. The chosen name must also contain the indicator that the business is a distinct and separate entity. Almost every state requires and accepts the identifiers such as Incorporated, Corporation, Company, Limited etc.


 
III. Strategic considerations in selecting appropriate structure
   
  Selecting the most suitable legal business structure is the first and foremost step in starting a business entity. The decision depends upon various factors such as the capital involved, the nature of business, the nature of ownership, legal formalities involved, tax issues, management and control etc. The following points highlight the distinction between the major types of business structures:
   
  Formation

Sole Proprietorship and Partnerships may not require filing in some States; however for establishing a LLC or a Corporation, State filing is required.

Management

In Sole Proprietorship full control of management and operations rests with the proprietor, whereas in Partnership generally each partner has equal control, unless there is an agreement to the contrary. The management and control of an LLC is outlined by the operating agreement between the members. A Corporation is managed by directors, who are elected by the owners i.e. the shareholders of the corporation.

Raising Capital

Raising of capital from external sources is often difficult for a sole proprietor and he has to depend on his own contributions. In a Partnership, contributions can be invited from the partners or a new partner may be added who may bring his share of the contribution. LLC members can raise capital by selling interests, however it is subject to the operating agreement. A Corporation has the option of raising external capital through issue of shares.

Liability

Sole proprietor and partners have unlimited liability, whereas members of an LLC may not be liable for the debts of the LLC. In a Corporation, the liability of shareholders is generally limited to the extent of value of shares purchased. They may not be held personally liable for the debts of the corporation.

Existence


A Sole Proprietorship dissolves if the sole proprietor dies or discontinues with his business. A partnership dissolves with the death or withdrawal of a partner, unless partnership agreement contains contrary provisions. The duration of an LLC depends upon the requirements imposed by the state where it has been formed. The major advantage of a Corporation lies in its perpetual existence.

Tax Issues

There are different tax rules that apply to each different type of entity. Generally sole proprietorships, partnerships, and LLCs are taxed at the individual level, while the corporation is taxed at the corporate level with dividends being taxed a second time at the individual level. There are several taxes you have to account for when establishing a business in the U.S. The taxes could be at the city, county, state and federal levels.



Conclusion


Setting up a new business in US can be quite exciting. But there are also many challenges. In-depth market research and planning can minimize the risks. You must weigh all your options, analyze all the possible situations and select a reliable service-provider who will guide you through the entire process.

Generally L-1 intra-company transfer visas are used for setting up new business in US when it is a subsidiary, parent, branch or affiliate of an overseas company. However, foreign nationals from countries with certain treaties with the US have the choice of using E-1, E-2 or L-1 visas for establishing a new office in US.

VisaPro handles the formation requirements of your new business in the US, and also helps you obtain new office space and file your visa petition to enable you to enter the US to take care of your newly established business. Our team of professionals, strong service culture, quality service and timely response ensure that everything related to your new office is handled professionally, completely and in a timely fashion. Any Questions? Contact VisaPro to learn more about how we can help you.


The above article is brought to you by "VisaPro.com". VisaPro’s US Immigration Lawyer Services include H-1B, K-1 Visa, K-3, L-1, Green Card, and over 100 Immigration Services.

The information in this article is not intended to be legal advice. If you have questions specific to your case, we suggest that you consult with the experienced immigration attorneys at http://consultattorney.visapro.com

Visit VisaPro regularly for updates and the latest immigration news at http://www.visapro.com


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