Types of Business Entities that you can consider while opening a company in USA

When it comes to expanding into the United States, each company and investor may have different goals and initial objectives. 

  • Those who are considering only market research or product purchase. 
  • Those who are considering full-scale expansion by establishing a new office in the United States for sales and marketing. 
  • Those who have established a foundation and devote themselves to artistic contribution activities. 
  • Those who simply invest in US companies and assets from India and receive only income such as interest and dividends in India.

Sole Proprietorship

  • A sole proprietorship is the most common business entity. The must obtain an EIN Number to begin with.
  • A sole proprietorship is not legally a legal entity, and the owner and business are considered one.
  • Business income and expenses are filed with your personal tax return (Form 1040) using Form Schedule C.
  • The owner has unlimited liability for the business. It refers to being responsible for paying the full amount of the debt to the creditors of the business. If all the claims cannot be paid off, the sole proprietor with unlimited liability must pay the debt, even if it means taking out the personal property.
  • You can easily start your own business without submitting any prescribed documents.
  • The business itself cannot be transferred.

C corporation

  • Owners of a corporation have limited liability upon incorporation, and their personal assets are protected from creditors. For debt repayment, creditors will only consider the assets of the Corporation as the basis for debt repayment.
  • A common type of corporation is called a C corporation.
  • A disadvantage of corporations is double taxation. The first tax is levied on profits made by the corporation, and the second tax is levied on dividends when those profits are distributed to shareholders.
  • Corporation tax returns are filed separately from individual owner tax returns. The application date is 4 months and 15 days after the end of the corporate fiscal year. (For example, if the fiscal year is a calendar year, the application date is April 15th.)

Limited Liability Company (LLC)

  • Each owner of the LLC is called a member for tax purposes. If there is only one member, the member is separated from the business and is not considered a company. For federal tax purposes, a partnership is considered if it has two or more members.
  • The benefits of an LLC are that it is an unincorporated hybrid entity that combines the limited liability of a corporation with the tax benefits of a general partnership (the LLC itself is not taxed).
  • An LLC is a domestic business entity, but it is not classified as a corporation, but as a partnership. (if there are 2 or more members)
  • LLCs do not pay taxes directly to the IRS, as they are subject to pass-through taxation and the LLC itself is not taxed. Each member has the benefit of taxing the LLC’s profits on their individual tax returns and can operate flexibly like a partnership. In order to manage the tax, hiring the CFO India is really important. There is no limit to the number of members, and all members can participate in the operation. Individuals, companies and foreigners can also be members of LLCs.

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