Lots of businesses and start-ups in India are targeting the American market and need to establish a company in the US due to many reasons, including: reputation with partnerships and potential customers, money transfer and business activity in US countries, tax savings and more. A company in the US encounters bureaucratic difficulties but more so a lack of knowledge and transparency regarding procedure / prices / fees / various incorporation structures. USAIndiaCFO is here to put things in order and help you set up a US company in a convenient and easy way.
Overview of Corporate Types in the United States
- Limited partnership LP – a transparent body for tax purposes in the United States (passed through). This means that the tax liability of the entity applies at the level of the partners, who do not bear personal responsibility for the obligations of the partnership similar to the limited liability of shareholders in Ltd.
- LLC Company – Limited Liability Company. The rights holders in LLC are called members and not shareholders, while the rights granted in LLC are called membership interests and not shares. The members do not bear personal responsibility for the obligations of the LLC, this is similar to the limited liability of shareholders in the company and that of partners in a limited partnership. Under U.S. tax law, the LLC corporation is treated as a transparent entity and taxation is on the individual side according to the marginal tax rate applicable to individuals in the United States. If the corporation chooses to be classified as a transparent entity in the United States, it would be advisable to apply to treat the company as a transparent entity in India as well in order to obtain a credit for the tax paid in the United States. By a sole proprietor and an LLC held by two or more members.
- S-corp – an entity classified as S-corp is a transparent company for American tax purposes (equivalent to a partnership in India) and accordingly its income is taxable by the shareholders.
The corporation submits its choice to be considered a corporation to the IRS and is required to report to the U.S. tax authorities at the end of the tax year on the company’s income in Form S1120 but does not bear the tax liability. On the other hand, shareholders of this type of corporation are required to report their corporate income and pay taxes to U.S. authorities according to their tax rates in the personal statements.
The corporation must first be established as a C-corp and apply to become an S Corp within 75 days of its establishment. The classification cannot be revoked, but only after 5 years. The shareholder must be a US citizen, hold a green card or special visa, the company must be a US company, no more than one hundred shareholders, and the shareholder can not be a transparent company (LLC) or a trust but only an individual.
- C-corp – This is a limited company in the classical sense (INC). The incorporate company in Delaware is taxed separately from its owners, most of the large companies in the US are taxed as C-corp. As stated above, a uniform tax rate of 21%. This is a limited company that provides legal protection to shareholders. It is necessary to issue an EIN tax number and a registered agent – a registered agent. The number of shareholders is unlimited and they can also be foreign citizens.