Understanding the U.S. Incorporation Process
Q: Can a foreign national entrepreneur who is not a US citizen or US resident be a shareholder in a US corporation?
Thus. US law allows a foreign national to establish a company in the US They can open their business in the US and be a sole shareholder.
Q: Can a foreign company (corporation) be the sole shareholder of a US corporation or limited liability company?
Thus. A foreign company can own 100% of the shares of a US corporation and / or a US limited liability company. The US entity will be a subsidiary of the Foreign Corporation.
Q: What should I consider when choosing the entity type in the US?
A: The laws of the United States and the states offer several types of business entities for a foreign national entrepreneur. When choosing your US entity, you should consider the following:
1) Ownership structure (Who are the shareholders? Individuals or corporations? US Residents or Foreign Nationality?
2) Tax planning (which type of entity will provide you with the most tax advantages in the US AND in your own country?
3) Business purpose (what will be the nature of your business in the US: Online trading, real estate, retail, manufacturing, consulting, R&D, wholesale, marketing.
4) Future fundraising plans and / or incorporation of new shareholders. Planning to raise capital by going public? Will you have more shareholders in the future (US residents and / or foreign nationality)?
Q: What are my options as a non-US resident when it comes to entity types?
A: Non-US residents have the following options for setting up a US entity:
1. C. Corporation, known as Sample Company Name, INC.
2. Limited Liability Company, known as Sample Company Name, LLC.
NOTE: There is another type of corporation available in the US (S. Corporation). However, the shareholders of S. Corporation must be residents of the United States.
Q: What are the similarities between corporation and limited liability company?
A: Corporation and LLC have mutual advantages:
1. Separate entity (from its shareholders) incorporated under state law.
2. Provide limited liability to its shareholders. The entity is responsible, not the shareholders.
3. The owners of the entity can be natural or legal persons, even if they are not US residents.
4. There is no limit on the number of owners / shareholders. Allow the entity to “go public” or add an unlimited number of shareholders.
5. Allow different classes of shareholders or property (preferred, common, etc.)
6. May be a US employer.
Q: What are the differences between a Corporation and a Limited Liability Company?
A: An important difference between Corp & LLC is the tax treatment of the entity’s earnings and the way each entity reports its taxes to the tax authorities.
The Corporation is a “Separate Entity” in terms of liability and taxes. C. Corporation’s earnings are subject to the corporate tax rate (federal and state level) and the corporation is responsible for its own taxes. Dividends are subject to “dividend tax rates.”
The Limited Liability Company is a separate entity in terms of liability, BUT in the eyes of the tax authorities it is a “pass-through tax entity”. LLC profits are not subject to LLC level corporate tax filing. They are added to the owner’s taxable income. If the owner is an individual, the LLC’s earnings are subject to individual tax rates and if the owner is a corporation, the earnings will be subject to corporate tax rates.
For instance:
Corporation C
(Individual owner)
Annual profit: $ 100,000
Individual tax rate: 26%
Income tax: $ 26,000
Net profit: $ 74,000
Owner’s Net Cash Flow: $ 74,000
Effective tax rate: 26%
Limited liability company
(Individual owner)
Annual profit: $ 100,000
Corporate tax rate: 34%
Income tax: $ 34,000
Net profit: $ 66,000
Dividend: $ 66,000
Dividend tax rate: 15%
Dividend tax: $ 9,900
Owners Net Cash Flow: $ 56,100
Effective tax rate: 43.90%
Tax reports:
C. The corporation must report income, expenses, and profits as a separate entity using Form 1120 (Corporate Tax Return).
The LLC must inform its members (owners) of their share of the LLC’s profits using Form K1. Each member will add their share to their taxable income. The individual member will file the individual tax return (Form 1040), the corporation member will file the corporate tax return.
Q: How do I choose the best option for my situation (Corporation or LLC)?
A: As you can see, there are many considerations when choosing the type of US business entity. We highly recommend consulting with our experts to achieve the best business and tax benefits for your individual circumstances. You can contact us at: + 1-202-742-6311
Q: Where do I incorporate my business in the US? Is it important in what state?
A: The United States is a federation. There are fifty states and one district (District of Columbia). When you incorporate a US entity, you have to incorporate your business under state law – state of incorporation.
Q: How do I know what state to join?
A: There is a basic rule of thumb for choosing your status of incorporation: “physical presence” or “nexus.” Under state law, if you have a physical presence in the state, you must join it. The meaning of “Physical Presence” or “Nexus” is usually if you are going to have an office, showroom, manufacturing or retail facilities, worker employees, product delivery or installation.
Q: Our company does business using our website (online sales). We don’t need an office and we don’t need to employ in the US Where should we incorporate?
A: If you do not have a “nexus” in any state, you can choose to join in any state. Incorporating your business in the state of Delaware will provide you with many tax, legal, and financial advantages.
Q: What are the requirements for a non-US resident to join Delaware?
A: To join Delaware (or any other state) you must follow these steps:
1. Complete our incorporation application form at: GlobesAmerica.com
2. You should have available:
Copy of your passport (with photo identification and proof of address in your country)
3. You must provide us with two name suggestions for your US entity, and we will verify with the State that the name is available.
4. The state does not require any amount of capital stock.
Q: What happens after I receive my onboarding application form?
A: Our Processing Department reviews your application and gives it initial approval. Your request now goes to our Onboarding Team to continue with the Onboarding Process. At this point, you will receive your onboarding invoice and a credit card authorization form to complete, sign, and return to us. After processing your payment, we will send you an email confirmation and continue with the process.
Q: What are the onboarding steps?
A: These are the steps included in the onboarding process:
1. Name Verification: We perform a name verification with the state. If the name you requested is available, we will move forward with incorporation. If the name is not available, we will ask you to provide a new name suggestion.
2. Submit your Application for Incorporation to the State: We prepare your application for incorporation to the State. One of the main documents that all states must include in the application is the article of incorporation (if you set up a corporation) or the article of organization (if you set up an LLC). As part of the process, we will prepare the items and ensure they are in compliance with state laws and regulations.
3. Resident Agent: We hire a Resident Agent for your entity, which is a business or individual designated to receive service of process (SOP) when a business entity is a party to legal action such as a lawsuit or subpoena. The address of the registered agent may also be the place where the state will send the documentation for the annual renewal of the business entity’s charter.
4. Tax Identification Number: We obtain from the Internal Revenue Service (IRS) an Employer Identification Number (EIN), which is also known as a Tax Identification Number. The EIN is a legal requirement if you need to conduct business in the US, open a bank account, file a tax return, apply for a credit, or hire workers.
5. Business address: Your entity will be assigned a business address in the state of incorporation. The business address will be used to receive mailings and forward them anywhere in the world. You can also use the business address on your letterheads, official corporate correspondence, and legal documents.
6. Corporate Kit – We prepare a corporate kit for your US entity that includes the necessary documents: Certificate of Incorporation / Organization, Proof of Status Compliance, Shareholders Agreement / Member Sending Agreement, Stock Certificates / Certificates Membership (Proof of Ownership) and Share the Registered Record.
Q: How long does it take to complete the onboarding process?
A: We prepare and submit your onboarding application within 24 hours of receiving your payment. Most states will take 24-48 hours to process and approve the application. It will take another 24-48 hours to retrieve your EIN and prepare the Onboarding Kit.
Q: Are there annual fees to keep my corporation current?
A: Each state is required to maintain the corporation or limited liability company by paying annual fees. Annual fees range from $ 50 to $ 800 depending on the state of incorporation. We will notify you on the due date and help you properly complete and pay the annual fees to keep your entity current.
Q: Do I need to file a tax return?
A: Yes, all entities must file an annual tax return with the IRS and the state in which they operate. Some states also require franchise tax filing. Our tax specialists will help you prepare and file the required tax return.
Q: Can my Corporation / LLC employ workers in the US?
Thus. Every entity in the US can be an employer. You will need to register the entity in employment status as an employer and make the proper payroll arrangements. Our Payroll Department will help you register your entity as an Employer and will make the necessary payroll arrangements to allow you to employ workers in the US.
Q: What do I do if I have questions about taxes, accounting, and business transactions related to my US corporation / LLC?
A: Each client has a Dedicated Business Advisor (DBA) who is their corporate consultant at Globes America. You have unlimited access to your DBA via email, phone, and online chat. You can consult with your DBA on all matters related to your business activities in the US.