Company incorporation in the United States

If you do business in the United States there may be a point that it makes sense to set up a local company. Then you need to know how to comply with local regulations and who can help you.

This article describes:

the most likely types of company to set up;
how you do this and who can help you;
a few important fiscal regulations.

Your legal entity in the United States

The United States offers a large consumer market, diverse industries, and a business-friendly environment, making it a prime location for foreign entrepreneurs.

Most Common Business Forms for Foreign Companies

The most common legal entity for foreign businesses in the USA is the Limited Liability Company (LLC).

Similar to a private limited company in other countries.
Provides limited liability protection to owners, known as members, meaning their personal assets are protected from business debts.
Requires no minimum capital and offers flexibility in management and taxation.

Another option is the Corporation (C-Corp), which is ideal for companies seeking to raise capital through stock issuance. The C-Corp has more formal requirements and is subject to double taxation: corporate income is taxed, and dividends paid to shareholders are taxed again.

Setting Up a Company in the USA

The process of incorporating a Limited Liability Company (LLC) in the USA generally involves the following steps:

Choosing the state in which to incorporate. Each state has different laws and tax regulations, with Delaware and Nevada being popular for their business-friendly environments.
Selecting a company name and ensuring its availability in the chosen state.
Filing the Articles of Organization with the state’s Secretary of State office.
Designating a Registered Agent, a person or company that will receive legal documents on behalf of the company.
Obtaining an Employer Identification Number (EIN) from the IRS, which is required for tax purposes and to open a bank account.

Foreign nationals can serve as directors or members of an LLC. There are no citizenship or residency requirements to own or manage an LLC, but a US-based address for the Registered Agent is required.

Taxation and Withholding Taxes

US companies are subject to federal corporate income tax, which is currently set at a flat rate of 21% for C-Corporations. LLCs are generally treated as pass-through entities, meaning the company’s profits and losses are reported on the owners’ personal tax returns.

Regarding dividends:

Dividends distributed by US corporations are subject to a 30% withholding tax, though this can be reduced under tax treaties between the USA and other countries.
For LLCs, profits are passed through to owners, and they are taxed individually on their personal tax returns.

Service Providers for Company Incorporation

These service providers assist with company registration, tax compliance, and other legal aspects of incorporation in the USA.

Are you ready to convince foreign distributors?