Business Formation and Business Structure in the US

The best legal structure for your U.S. business depends on various factors, including your business goals, industry, size, ownership structure, taxation preferences, liability concerns, and more. Here are some common business structures and their key considerations:

(1) Sole Proprietorship:

• Simple and easy to set up.
• You have complete control over the business.
• Your personal assets are at risk since there’s no legal separation between you and the business.
• Typically suitable for small, low-risk businesses.

(2) Partnership:

• Similar to a sole proprietorship, but involves two or more owners.
• Partners share profits, losses, and responsibilities.
• Personal assets of partners are at risk.
• May require a partnership agreement to outline roles, responsibilities, and profit- sharing.

(3) Limited Liability Company (LLC):

• Offers limited liability protection for owners’ personal assets.
• Provides flexibility in management and taxation (can be taxed as a pass-through entity or a corporation).
• Suitable for small to medium-sized businesses in various industries.
• Less formalities compared to a corporation.

(4) Corporation:

• Provides strong limited liability protection.
• Offers a clear separation between ownership and management.
• Can attract investors by issuing shares of stock.
• More formalities, including annual meetings, record-keeping, and corporate governance.

(5) S Corporation:

• Corporations can elect to become S Corporations
• Combines the limited liability protection of a corporation with the pass-through taxation of an LLC.
• Suitable for smaller businesses (with specific eligibility requirements) that want to avoid double taxation.

(6) C Corporation:

• Upon set up, corporations are C Corporations by default
• Offers strong limited liability protection.
• Suitable for businesses planning to seek venture capital or go public.
• Subject to double taxation (corporate profits and shareholder dividends are taxed).

(7) Nonprofit Corporation:

• Formed for charitable, educational, religious, or other nonprofit purposes.
• Eligible for tax-exempt status, allowing donors to deduct contributions.
• Must adhere to specific IRS rules and regulations.

(8) Professional Corporation (PC) or Professional Limited Liability Company (PLLC):

• Reserved for licensed professionals (e.g., doctors, lawyers, accountants) in certain states.
• Depending on the state, can provide limited liability protection for non-malpractice related claims while allowing professionals to work together.

Choosing the right legal structure involves weighing the pros and cons of each option in the context of your business objectives and individual circumstances. It’s strongly recommended to consult with legal, financial, and tax professionals who can provide personalized guidance based on your specific situation. Additionally, the specific regulations and requirements may vary by state, so be sure to consider your state’s laws when making your decision.

We can guide you to make the right decision.

You do not necessarily need to be a U.S. resident to set up a U.S. bank account for your business. However, the specific requirements and processes can vary from bank to bank.

Many U.S. banks offer business banking services to non-resident individuals and foreign businesses. Some common requirements and considerations might include:

• EIN (Employer Identification Number): You will typically need to obtain an EIN from the Internal Revenue Service (IRS). This is a requirement for tax purposes and is needed to open a business bank account.
• Business Entity Type: The type of business entity you have (such as a corporation, LLC, or partnership) may affect your eligibility to open a bank account as a non- resident.
• Business Documents: You may need to provide various business documents, such as the business formation documents, business license, and articles of incorporation.
• Personal Identification: You will likely need to provide personal identification documents, such as your passport and sometimes a U.S. visa if applicable.
• Physical Presence: Some banks might require you to visit a branch in person to open the account, while others might allow you to complete the process remotely.
• Minimum Deposit: Some banks might require an initial minimum deposit to open the account.
• International Restrictions: Depending on your home country and the bank’s policies, there could be certain restrictions or additional requirements for non-U.S. residents.

It’s important to note that banking regulations can change, and each bank may have its own specific requirements. It’s advisable to directly contact the banks you are interested in to inquire about their current policies and procedures for opening a U.S. business bank account as a non-resident.

Additionally, consider seeking advice from legal and financial professionals who specialize in international business and banking matters to ensure you navigate the process correctly and comply with all relevant regulations.

Contact Entrepreneur Legal™ US to find out more.

Out-of-state registration, or foreign qualification, is the process of registering your business to conduct business in a state other than the one where it was originally formed.

The best US state to set up your business depends on a variety of factors, including the nature of your business, industry, target market, financial considerations, and personal preferences. 

Here are some states that are often considered favorable for business, along with some of their key advantages:

• Delaware: Known for its business-friendly laws and well-established corporate infrastructure, Delaware is a popular choice for incorporating businesses, especially for startups and large corporations. It offers favorable tax regulations, a specialized court system for business disputes, and a strong legal framework for corporate governance.
• Nevada: Nevada is often chosen for its favorable tax environment, with no corporate income tax or personal income tax. It also offers strong privacy protections for business owners and a relatively quick and straightforward incorporation process.
• Texas: Texas has a diverse economy, a business-friendly regulatory environment, and no state income tax. Its central location in the U.S. can be advantageous for businesses with nationwide operations.
• Florida: With no state income tax and a growing economy, Florida is attractive to many businesses. It also benefits from a large consumer base, tourism industry, and access to international markets.
• Wyoming: Wyoming offers low taxes, minimal regulatory burdens, and strong privacy protections. It’s particularly popular for small businesses, entrepreneurs, and professionals.
• South Dakota: Like Wyoming, South Dakota is known for its low taxes and business-friendly environment. It doesn’t have a corporate income tax, personal income tax, or personal property tax.
• North Carolina: North Carolina boasts a skilled workforce, research universities, and a variety of industries including technology, finance, and healthcare.
• Georgia: Atlanta, Georgia, is a hub for various industries and offers a relatively low cost of living compared to other major business centers.
• Utah: With a strong economy, a young workforce, and a growing technology sector, Utah is becoming an attractive destination for startups and tech companies.

It’s important to thoroughly research each state’s regulations, tax structure, labor market, infrastructure, and industry ecosystem to determine which one aligns best with your business goals. Consulting with experienced legal, financial, and business advisors is highly recommended before making a decision.

Contact Entrepreneur Legal™ US to find out more.

Yes. We can assist with the formation of a wide variety of business entities in all 50 states.

A limited liability company (LLC) and a corporation are two distinct business entities, each with their own characteristics, advantages, and disadvantages. Here are the key differences between the two:

(1) Legal Structure and Formation:

• Limited Liability Company (LLC): An LLC is a flexible business structure that combines elements of a partnership and a corporation. It provides limited liability protection to its owners (members), shielding their personal assets from business liabilities. The specific requirements for forming LLCs vary from state to state, though typically they are formed by filing articles of organization with the state and creating an operating agreement that outlines the management and operating structure.
• Corporation: A corporation is a separate legal entity from its owners (shareholders). The specific requirements for forming corporations vary from state to state, though typically they are formed by filing articles of incorporation with the state and issuing shares of stock to shareholders. Corporations are governed by a board of directors and follow specific legal and regulatory requirements.

(2) Ownership and Management:

• LLC: An LLC can have one or more members, and ownership is typically represented by membership interests. LLCs offer flexibility in management, allowing members to manage the company themselves (member-managed) or appoint managers to handle day-to-day operations (manager-managed).
• Corporation: A corporation has shareholders, and ownership is represented by shares of stock. The shareholders elect a board of directors, which in turn appoints officers to manage the company’s operations. This hierarchical structure provides a clear division between ownership and management.

(3) Taxation:

• LLC: By default, an LLC is considered a “pass-through” entity for tax purposes. This means that the company’s profits and losses are passed through to the members’ personal tax returns, avoiding double taxation at the entity level. However, LLCs can also elect to be taxed as a corporation if desired.
• Corporation: A corporation can be taxed as a C corporation or an S corporation. C corporations are subject to double taxation, where corporate profits are taxed at the entity level, and dividends distributed to shareholders are taxed again at the individual level. S corporations, on the other hand, enjoy pass-through taxation similar to LLCs, but they have stricter eligibility requirements.

(4) Formalities and Record-Keeping:

• LLC: LLCs generally have fewer formalities and record-keeping requirements compared to corporations. They are not typically required to hold annual meetings or maintain extensive records.
• Corporation: Corporations have more formalities, such as holding annual shareholder meetings, keeping detailed records of meetings and decisions, and adhering to other corporate governance requirements.

(5) Limited Liability Protection:

• Both LLCs and corporations provide limited liability protection to their owners, which means that the owners’ personal assets are generally shielded from the company’s debts and liabilities. However, limited liability protection is not absolute and there can be differences in the extent of protection afforded by LLCs versus that provided by corporations.

The choice between forming an LLC or a corporation depends on several factors such as the nature of your business, your desired management structure, taxation considerations, and legal protection. It’s advisable to consult with legal and financial professionals to determine the best option for your specific circumstances.

Contact Entrepreneur Legal™ US to find out more.

A registered agent, also known as an agent for service of process or statutory agent, is a designated individual or entity responsible for receiving legal documents and official correspondence on behalf of a business entity, such as a corporation, limited liability company (LLC), or other similar entities. The registered agent is a point of contact for government agencies, courts, and other parties seeking to deliver important documents to the business.

The primary responsibilities of a registered agent include:

• Receiving Legal Documents: The registered agent receives important legal documents, such as lawsuits (service of process), tax notices, and other official notices from state and federal agencies.
• Maintaining Compliance: The registered agent ensures that the business entity remains in compliance with state requirements by receiving and forwarding annual reports, renewals, and other regulatory filings.
• Privacy and Consistency: Having a registered agent helps maintain the privacy of business owners, as the registered agent’s address is used for public records, rather than the business owner’s personal address. This also ensures a consistent and reliable point of contact for legal matters.
• Timely Communication: The registered agent promptly informs the business of any received documents or notices, allowing the company to respond appropriately within legal timeframes.

Whether or not you need a registered agent depends on your business’s legal structure and the state where you are operating. Here are some key considerations:

• Legal Requirement: Many states require business entities (such as corporations and LLCs) to have a registered agent with a physical address within the state. This ensures that the business can be properly served with legal documents.
• Physical Presence: If your business operates in a state where you don’t have a physical location or if you’re a foreign entity (operating in a state other than where you were originally formed), you will likely need a registered agent with a local address.
• Reliability and Availability: A registered agent should be available during normal business hours to accept legal documents. This ensures that important notices are received in a timely manner.
• Out-of-State Entities: If you’re forming an LLC or corporation in a state where you don’t have a physical presence, you’ll likely need to appoint a registered agent to fulfill the state’s requirements.
• Privacy: A registered agent’s address is publicly available, so having a registered agent can help protect your personal address from being listed in public records.

It’s important to note that some business owners choose to act as their own registered agent, while others opt to use a professional registered agent service. Consider your business needs, location, and legal requirements when deciding whether to appoint a registered agent. 

Consulting with legal and business professionals can help you make an informed decision.

Yes. Entrepreneur Legal® UK can provide legal guidance on, and help you set up and manage, a wide variety of business structures in the UK.

We can also assist with the set up and management of business entities in several other jurisdictions through the use of reliable local counsel.

Contact Entrepreneur Legal™ US to get your business structured for success.