Benefits and problems

Benefits and problems of registering a company in USA

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  • Benefits and problems

    Benefits of USA company registration

    1. USA company incorporation is very easy because:
        USA business registration advantages for foreign entrepreneurs
      • American LLCs can be incorporated in many states within a day, with only one shareholder and one director of any nationality. Also, no minimum paid up share capital is required and our Clients will not have to travel for company registration;
      • A foreign-owned USA company formation requires minimal licensing and is allowed to purchase property, assets, and securities without any restriction. Consequently, the US ranks 4th globally on the Ease of Doing Business survey conducted by the World Bank.

    2. USA company incorporation allows 100% tax transparency:
      • USA LLCs are by default taxed as partnerships at the federal level, which impute the company’s profits and losses onto the owners’ personal tax returns;
      • Corporations in the US can make an “S-Corp” election under certain circumstances to be tax transparent like a partnership;
      • This tax treatment removes the intermediate layer of tax imposed by most countries’ corporate tax laws, saving our Clients money;
      • The United States boasts 293 free zones that allow for i) 100% duty exemption on re-exports ii) deferral of duties on imports and iii) exemptions from state inventory taxes for exports.

    3. A USA company enjoys multiple tax advantages including:
      • To conduct business throughout the country, foreign entrepreneurs can incorporate a company in one of the lowest taxed states in the Union like Delaware, Texas and Nevada. For example, a company incorporated in Delaware enjoys 100% tax exemption on state taxes if it does not operate within the state;
      • A USA company can be transferred to successors indefinitely without suffering capital tax or estate taxes. This is an efficient way to transfer family assets while avoiding inheritance taxes;
      • A USA business setup has access to 68 double taxation agreements. These materially reduce the withholding taxes of payments to and from the US and allow for preferential access into foreign markets.

    4. The government offers several incentives for a USA business setup including:
      • The Small Business Administration grants subsidized loans up to US $5 million and also guarantees at least 25% of government contracts to companies deemed beneficial for the economy;
      • The government offers grants and tax incentives for virtually every industry, especially those that create jobs or are deemed helpful to the US economy (green energy, education, health, technology, real estate, etc.). On average, more than $500 billion is paid in annual awards;
      • A myriad of corporate tax deductions are available which, on an average, lower the effective corporate tax from 35% to just 15%. In total, there are over US$1 trillion dollars’ worth of deductions granted nationally each year;
      • US bankruptcy laws hold no grudge against past failures. Resident firms can shed pension obligations and limit creditors’ immediate claims by declaring “Chapter 11” bankruptcy. Plus, the management may retain their positions after bankruptcy;
      • American E1 and EB-5 programs allows foreign entrepreneurs investing a minimum of US$500,000 to gain permanent residency status, known as “green cards”. Examples include investments in manufacturing facilities, large businesses employing US citizens, and investments in economically depressed regions (Detroit, Buffalo).

    5. United States is the world’s biggest consumer of products and services because:
      • US consumers spend US$11.9 trillion per annum with per capita income of US $53,750. Plus, with Americans preferring to do business locally, it is critical to establish a presence in the country to connect with 316 million residents;
      • The American shale gas revolution will make the country energy independent by 2025. This trillion dollar industry will significantly reduce the national debt, raise GDP, and create an upwards of million jobs. As a result, the consumer market will be bigger than ever;
      • 78% of the US GDP is generated from the services sector, valued at more than US$13 trillion per annum. Consequently, we encourage our Clients to engage in USA company incorporation to increase global sales;
      • As it emerges from the recent depression, Healy Consultants predicts USA business confidence will peak over the coming 7 years. This will be a great opportunity for our Clients to expand their operations in the US.

    6. The USA is the world’s largest corporate finance market because:
      • US boasts the world’s deepest and most liquid financial markets. Most business loans above US $100,000 are available at 6-7 percent interest rates and are guaranteed up to 85% by the Small Business Administration;
      • The US is also the home to the world’s largest IPO listings, based on flexible exchange regulation and massive investment banks. Consequently, it is advantageous to have a presence in the US to secure public equity.

    Problems with USA company registration

    1. Hiring workers in the US is expensive for young businesses because:
      • The average monthly wage for high-skilled workers is US $6,000, including health care and retirement benefits;
      • There are also strict legal rules regarding hiring and firing of workers. Consequently, countries like China and Mexico have completely replaced the United States as the hub for low-end manufacturing.

    2. Setting up operations across multiple states is complex because:
      • Incorporation is handled at the state level, meaning that your company needs to make new registrations in each state it enters;
      • Setting up operations in a new state requires either the incorporation of a new company, or registering a branch of your “foreign company” in this new state and making filings with each state’s companies registrar (usually the Secretary of State).

    3. Managing taxes for a US company is difficult and time-consuming because:
      • Taxes apply at the federal, state and even municipal levels, requiring knowledge of, and compliance with, a large number of tax regulations;
      • The federal tax code is huge, complex and constantly changing, making it extremely difficult to know how to file for what income and when;
      • Companies with income from multiple states have a higher tax compliance burden due to a requirement to file tax returns in each state from which they derived income;
      • US tax law has a huge number of deductible items, meaning that companies have to spend time planning their expenditure in a tax-efficient way, then reporting that in their tax filings. The need to make use of these deductions is made greater by the high 35% corporate tax rate;
      • There is no participation exemption for income from foreign subsidiaries, meaning that dividends are taxed at 35% when paid to the US parent company (with deductions for tax already paid on that foreign income). Because the 35% rate is high compared to the rest of the world, this can mean an additional 15-20% tax on foreign income for US-headquartered businesses.

    4. A USA company setup can incur losses due to high rate of litigation because:
      • Annually, 15 million civil lawsuits are filed in the United States at a cost of US $251 billion, which is the highest in the world. Italy, the country with the 2nd highest litigation rate, incurs a cost of only US $2.7 billion;
      • Even if our Clients succesfully defend a lawsuit, the legal bills are likely to be high and unrecoverable, as the US legal system does not attribute the costs of litigation to the losing party;
      • Consequently, we encourage our Clients to plan for the cost of liability insurance, potential lawsuits as well as precautionary measures.

    5. There is a high cost of inefficient Congressional laws including:
      • Calculating tariffs and import duties is complicated because almost every product has its own rate, which varies by country of origin. In addition, clearing US customs is also cumbersome given the modern fear of drug trafficking, hazardous materials and terrorism;
      • The federal-state system leads to extremely complex and irregular regulations. There are basically 50 unique jurisdictions within the US, being the states themselves, that can require extremely odd regulations like: blog licensing, raw milk licensing, interior design licensing, license to close business, babysitting, and vending machine licensing.

    6. The US market is highly competitive market for young firms, with new businesses failing at a rate of 50% in the first 5 years. Furthermore, there are several American industries that are impossible to enter as a young startup due to high costs of entry and regulatory barriers. For example, agriculture and large manufacturing industries are dominated by large corporations, as the initial capital required is in billions of dollars.
  • Best uses for a USA company

    1. United States is the world’s 2nd largest manufacturing and distribution hub because:
      • While only 19% of the US GDP is derived from the manufacturing sector, it is still the 2nd largest in the world (valued at US $3 trillion) after China;
      • Energy costs in the United States are low and will continue to get lower. Electricity is 10.3 cents per Kilowatt hour in the US, compared to 30-40 cents in Europe;
      • The US labor is the world’s 3rd most productive in terms of output per hour (US $67). In addition, the workforce has 92% English fluency;
      • The country’s enormous network of roads, railways, airports and ports enable easy and cheap distribution of goods;
      • Hypermarkets littered throughout the US are excellent places to sell and promote our Clients’ goods. Walmart, Best Buy, Target, and K-Mart stores assist our Clients with marketing, logistics, and distribution – acting like a nation-wide trade show;
      • While the US has largely eliminated low-cost manufacturing, it excels in manufacturing sectors such as planes, turbines, computers and robotics. High emphasis on cutting edge technology and economies of scale have made manufacturing more competitive;
      • The US government has signed major free trade agreements with over 20 countries. As an instance – NAFTA allows for tariff free imports and commerce with Canada and Mexico. This provides American firms access to the entire North American market, similar to the EU;
      • The government is also currently negotiating two massive free trade agreements with the EU and Pacific nations. The Trans-Pacific Partnership is being negotiated between the US, Australia, Brunei, Chile, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. These countries would eliminate tariffs, quotas and lower customs regulations for 11% of the world’s population and nearly 40% of global GDP. Meanwhile, talks continue with the EU on the Transatlantic Trade and Investment Partnership.

    2. US is the entrepreneurial hub of the world because:
      • It is a cauldron of startup companies, financial backers and innovative entrepreneurs, which fosters and funds creativity and exchange of skills across industries and cultures. As an instance – there is no better place in the world to set up a tech firm than the Silicon Valley, surrounded by the likes of Google, Facebook, Apple, Intel, and Yahoo and the colleges of Stanford and UC Berkeley. To learn more about what makes Silicon Valley special, read this comparison of Silicon Valley and Singapore for launching a startup;
      • Several major American cities with developed industries cause spillovers in technology, thinking, employees and culture and this will assist a young business. For instance, the following cities are industrial hubs that offer advantages to the businesses clustered within them: Technology – Silicon Valley; Energy – Houston; Automobiles – Detroit; Finance – New York City; Aerospace – Seattle; Entertainment – Los Angeles; Agriculture – Chicago and Midwest.

  • Similar low tax jurisdictions

Contact us

For additional information on our company registration services in USA, please email us at email@healyconsultants.com. Alternatively please contact our in-house country expert, Mr. Paavan Chhabra, directly:
client relationship officer - Paavan
US sec us chamber US dhs US commerce department US irs US sba US aicpa acaus