Setting up your own business can be overwhelming, but it may seem that much more challenging when you have to choose from the various forms of business models. Of course, a corporation and and a limited liability company aren’t really business models, per say.
An LLC, or limited liability company, is often considered to be an especially beneficial form of business for a startup company. These types of businesses are easier to set up. But what is an LLC and and what are the tax advantages of choosing this option?
What is an LLC?
Depending on the number of owners, the IRS automatically sees a LLC as a “disregarded entity” or partnership. This kind of business structure brings the limited liability of the company’s owners together in much the same way a corporation would have, with that of the pass-through taxation that a partnership would have. LLC advantages in this area involve minimal taxes with generous legal protection.
LLC advantages with taxes
LLC advantages involving taxes include only filing for taxes once, reduced tax rates, and no double taxation. An LLC is only taxed once regardless of the number of owners. The net income of the business is taxed via a single owner of the company and in some cases the owner can file taxes for the business through their own personal tax return.
Depending on the total income of the LLC and the owner, the tax rates of the company may be lower than that of a corporation. This is because an LLC’s tax rate is typically figured according to the personal tax rate of the owner. A personal tax rate is often reduced significantly in comparison to that of a corporate tax rate.
In addition to the LLC benefits of reduced tax rates, an LLC doesn’t have to pay a double taxation as a corporate owner does. Corporate owners pay taxes on their dividend income as well as their corporate net income. An LLC on the other hand does not have to do this.
It should be noted that laws regarding the taxation of LLC varies from state and state. What one state does not require an LLC or corporation to pay may be required by another. If you are considering forming an LLC or have questions regarding the benefits of an LLC, be sure to check with the state law requirements for this business option before making a decision.
American business entities can have one of many different types of legal structures. The size of one’s company does not define the type of legal structure chosen by the business owner. For instance, there were 27.9 million small business in the United States in 2010 alone, but not all of these businesses worked under the same legal structure.
If the size of a business doesn’t determine their legal structure then what is an LLC? An LLC, or limited liability company, is one type of business entity that allows the business owner to have fewer tax difficulties with the same legal protections a corporation would have.
So how do you determine whether or not you should be forming an LLC or starting a corporation? It all comes down to what you would like covered and protected by the law.
LLC Vs Corporation And The Small Business Owner
There’s a reason why LLCs are often presumed to be small businesses. This is because it’s typically easier for a small business that has a limited number of owners for an unlimited amount of time. For instance, family businesses where the business is intended to pass down from the parent to the child over a period of time may find running an LLC to be an easier legal choice.
However, an LLC may not be the best choice for every small business either. It may be a better idea to start your business as a corporation if you have multiple people buying stock from your company or if you have outside investment offers.
Benefits Of An LCC
There are many benefits of being a member of an LLC. Benefits include protection of the business owner’s assets should a fault result in a lawsuit, a more relaxed requirement for tax filing, and the ability to file for business taxes on one’s own personal income tax return.
It may be a challenge to convert your business to an LLC if your business isn’t being built from scratch. However, this is also determined by the state in which you are converting your business to an LLC. Fortunately, the challenge of converting to an LLC is predominantly found in the transferring of assets from one type of legal entity to another.
Many businesses in their beginning stages tend to use the benefits of an LLC because of the legal precautions that exist. LLC advantages also allow for the running of your business without the hassle of tax and financial burdens. If you are considering starting an LLC, contact My USA Corporation for more information today.
If you’re interested in opening a business in the United States, you may be surprised to hear that you don’t actually have to be a resident. However, there are a number of technical factors that differ from those that apply to U.S. residents and citizens. Here are some answers to common questions about opening a U.S. business as a non-resident.
What are some of the benefits of starting a U.S. business as a non-resident?
There are a multitude of benefits U.S. business can provide to non-residents. First, there’s the possibility of significantly lower taxes on any income generated in the United States. Should your company go public, you’ll also have the ability to list your company on the official U.S. stock market, which has countless advantages in and of itself. If after a few years you’re considering selling your business, you’ll often have a much easier time finding a buyer than you would with businesses incorporated elsewhere. That’s because U.S. companies often carry higher prestige, and not just among American citizens. In general, a U.S.-based company will make it easier to access U.S. investors, public markets, and venture capital funding.
Finally, if you hope to become a resident of the United States in the future, then owning a U.S. business may make it easier to get a visa.
Are there any negative implications to starting a U.S. business as a non-resident?
Just as U.S. businesses have their advantages, there are a few things non-residents should be aware of. For instance, Business.com writer Jimmy Rodela says, “Although non-residents are expected to undergo the same process as those living in the U.S. when forming a business, there are conditions and limitations specific to foreigners that you must be aware of. For instance, setting up a bank account, securing a visa, and international tax regulations are three of the procedures that non-residents find the most complicated.”
What are the main company structuring options?
Those who are not citizens have two primary structuring options: They can either create an LLC or a corporation. LLC benefits are centered around convenience, as you can learn how to form an LLC online very easily. However, it’s important to understand that S corporations are exclusive to U.S. citizens, even when it comes to shareholding: S corporations can have no more than 100 shareholders, and each one must be a resident of the United States.
What is a registered agent?
When you create an LLC or corporation in the United States as a non-resident, you will need to establish a registered agent. Both corporations and LLCs require an official who can receive paperwork, such as service of process, on behalf of the company, and this requires a physical U.S. address. However, this registered agent can be virtually anyone, and there are many companies offering registered agent services to non-residents.
Ultimately, corporation and LLC benefits for non-residents usually outweigh the risks. For more information about starting an LLC or corporation from outside the United States, contact My USA Corporation.