By far the most important decision an entrepreneur has to make while starting a business in the States (or pretty much anywhere) is opting for the right legal structure, conducive to their venture’s growth.

Your choice of legal structure will not only have a direct impact on taxes, liquidity, liabilities & flexibility in operations but also on the diversification and scalability of your business.

Sole Proprietorship

Simplest business structure, only one person owns the business. Especially appealing because the losses your business might make will cancel out the income you made from other sources. Though the owner is personally responsible for the company’s liability and it is difficult to raise for it.

General Partnership (GP)

Multiple owners, i.e. partners. Partners own and manage the business and are responsible for its liabilities. It is expensive and attracts more regulation that sole proprietorship.

Limited Liability Partnership (LLP)

This structure is similar to a general partnership, except for the fact that partners don’t actively manage the business but act as the investors in it. LP can have both general and limited partners. The liability of limited partners is limited to their share in the business.

C Corporation

Unlike the previous two structures, it is an independent legal entity, separate from the owners, shielding them from personal liability. These provide better prospects for raising capital. However, there is double taxation involved: federal tax on profits and income tax on profits distributed. These structures have high compliance and accounting costs.

S Corporation

This is best for small businesses, providing great tax benefits with the protection of the corporation. Profits/ losses are passed onto shareholders as individual income, resulting in no double taxation. However, unlike a regular corporation, S corporations can only issue one class of stock. These are more expensive than a regular C Corporation, with a maximum of 100 shareholders.

Limited Liability Corporation (LLC)

This is a blend of Partnership and corporation. No double taxation. No personal liability of the owners.  LLC is costlier to sustain than any of the previously discussed business structures.

• • Legal liability (the extent to which owners can be held liable for the company’s liabilities); 
  • Tax implications (cash flow requirements and double taxation); 
  • Cost of formation (incorporation, administrative, compliances and accounting costs to be considered); 
  • Flexibility (owners goals and business requirements are needed to be synced);
  • Future needs (what will happen to the business if owners’ demise, do you wish to sell your business in future, how would you scale your business, plans for any international expansion).

Please take note that all the business structures exist to cater to various organisations of different sizes existing in different industries and targeting a different market segment and no business structure is per se superior to another. Members are allowed full participation in management.

From January to April, the IRS has the highest processing work but outside it, it usually takes 42 days for ITIN to arrive. However, as the majority of the ITIN applications are needed to be filed with a tax return, they are usually filed in the time period of January to April which increases the time by 56 to 70 days. After your ITIN application is approved by the IRS, it takes them between 42 to 56 days to process tax returns.

Thus, one can’t afford to make mistakes in Form W-7/Form W-7 (SP) and get their application back. It’s always better to seek professional help from financial experts like ourselves from the very beginning and get done with all the tax hassles. Not to forget all the leg-work involved and the confusions it creates, like:

• • How to ascertain if one has received some benefits of a reduced tax withholding rate under an income tax treaty?
  • What are the limitations of ITIN?
  • How to get certified copies of identity documents from the concerned authorities? How to get a letter of denial from the Social Security Administration (SSA)?
  • How to e-file the tax return using ITIN?
  • Do you fall under the exceptions for an ITIN?

SSN is for the US citizens and for authorized non-citizens residents (students on F1 visas, Green Card holders, etc). ITIN is for foreign-status residents including undocumented aliens, non-resident aliens, foreign companies, partnerships, and trusts require an ITIN.

SSN is needed to work, collect Social Security benefits and pensions, and are required in order to be eligible for other social services and every American has one as it serves National ID number for the purpose of various financial and medical services. ITIN is required to file for taxes by the non-residents.

We have assisted 1,500+ organisations from various industries and of various sizes to structure their business in such a manner that it’s not only optimal but also resonates with the ultimate vision and mission of the founders. We incorporate thirty to forty companies EVERY MONTH, and we have a global presence allowing us better exposure and thus better insights on industries.

We are your one-stop destination for all the financial, accounting, taxation and compliance needs of your business saving you on the cost of coordinating with multiple service providers and changing the service provider once the business outgrows their competence. 

To know how we can help you in laying the foundation of your entrepreneurial journey, give us a call on 7727887799 (also available on WhatsApp) or drop us an email containing your business requirements at hello@usaindiacfo.com and our team will reach out to you within 2 hours.

We help you in structuring your business, along with providing a range of other services to take full accountability as the virtual CFO to your business.

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