Business entities in USA in 2023

Healy Consultants will assist our Clients determine the optimum type of company to use in the USA. Although several corporate entities exist, the most common ones are the LLC and the corporation, which can be structured either as an S-Corp or a C-Corp.

Table of comparison between United States entities

	LLC	S-Corp	C-Corp
US company incorporation costs	US$9,000	US$8,860	US$8,860
Subsequent annual costs	US$3,900	US$3,900	US$3,900
Primary purpose of the entity	Small and medium business	Small and medium business	Small and medium business
Example of a real life company	Healy Consultants	Family deli	Twitter
Foreign ownership allowed	Yes	No	Yes
Limited Liability enjoyed	Yes	Yes	Yes
Formal Rules/Regulations	No	Yes	Yes
Corporate tax payable on profits	Electable	No	Yes
Allowed to issue sales invoices	Yes	Yes	Yes
US corporate tax payable		No
Allowed to import goods	Yes	Yes	Yes
Allowed to export goods	Yes	Yes	Yes
Type of business permitted	All	All	All
US bank account allowed	Yes	Yes	Yes
How long to open company bank account	3 weeks	3 weeks	3 weeks
Can rent an office locally?	Yes	Yes	Yes
Tenancy agreement required?	No	No	No
Can conduct business within the US?	Yes	Yes	Yes
Can apply for immigration visas?	Yes	Yes	Yes
The US employment visa fees	US$4,950	US$3,950	US$3,950
Can hire staff in the US?	Yes	Yes	Yes
Incorporation period	1 week	2 weeks	1 week
Shelf companies allowed	Yes	No	Yes
Minimum shareholders allowed	1	1	1
Maximum shareholders allowed	Unlimited	100	Unlimited
Minimum directors allowed	1	1	1
Bearer shares allowed	No	No	No
Annual accounting required	Yes	Yes	Yes
US resident company secretary required	Yes	Yes	Yes
Can buy property in the US?	Yes	Yes	Yes
The Client needs to travel?	No	No	No
Annual tax return	Yes	No	Yes
Annual audited financial statements	No	No	No
Access to US double tax treaties	Yes	Yes	Yes
US resident director or shareholder required	No	No	No
Can own shares in other US companies?	Yes	Yes	No
Annual government fees	$310	$310	$310
Healy Consultants fees	$1,590	$1,750	$1,750
Draft invoice (PDF)	View invoice PDF	View invoice PDF	View invoice PDF

Limited Liability Company (LLC)

The LLC is the most flexible business structure under US corporate law. A US LLC has only one shareholder, who is typically the company’s “manager”. LLCs are treated from many perspectives like partnerships in other jurisdictions, being managed by the members. However, the members can appoint managers who act in a capacity similar to that of a director. In addition, there is no minimum paid up share capital requirements for incorporation;
An LLC, due to its simple and flexible structure, is highly recommended for conducting business within the USA. Furthermore, there are no restrictions on the type of business activity that a US LLC can pursue;
The main document governing LLC administration is the operating agreement, which is somewhat analogous to articles of association. LLCs also use a document called the “articles of organization”, which are more akin to the modern memorandum of association;
Prior to incorporation, an LLC is required to i) appoint one director and one shareholder (member) ii) open a US corporate bank account with a balance of US $1 iii) appoint a registered agent in their state of incorporation and finally, iv) have a legal registered office in the country.

S-Corporation

This type of company is more similar in structure to companies seen elsewhere, typically the Plc or SA;
The unique feature of the S-Corp is that the owners make an election so that the company does not suffer federal corporation tax. Instead, profits and losses pass directly through to shareholders, who pay tax on their total income at the normal rate;
An S-Corp is ideal for small businesses as it eliminates the double taxation on profits and dividends. Furthermore, an S-Corp is not required to file corporate taxes;
By law, an S-Corp cannot have more than 100 shareholders. Also, all shareholders must be US citizens or residents in order to be eligible to make the S-Corp election;
An S-Corp must have a board of directors, file annual reports, keep meeting minutes, and has generally more regulations than the LLC, which that normally is just run on the basis a shareholder agreement.

C-Corporation

This is the main kind of corporation used by US companies with medium to large operations, involving a large investment or raising of capital;
C-Corporations pay tax at the corporate level, and shareholders are taxed again on their dividend income. However, the shareholders are not mandated to be American residents;
A C-Corp is ideal for those looking to sell shares to the public or get outside venture funding, as there is no limit to share transfer or share ownership.

Free Zone Companies

The United States free zones are ideal for trading firms because these zones in each state i) limit customs clearance time ii) lower or eliminate state and local taxes, and iii) offer great transportation infrastructure;
In total, there are 293 free zones in the United States. Healy Consultants will help our Client to determine the optimum zone to suit their business needs;
A free zone company can be any corporate entity, including LLC, S-Corporation or C-Corporation.

Foreign Branch Office

In the United States, a branch office is allowed to invoice local customers and sign local sales contracts in any business sector in the United States;
A foreign branch office will work within the scope set by the parent company. In case of a lawsuit, the parent company will be held legally liable;
US companies commencing operations in another state often register themselves as a “foreign company”, which is the term used for branches. Foreign and domestic treatment for companies is often dealt with at the state level, so “foreign” in this context just means foreign from that state.

Representative office

While a United States representative office is 100% foreign-owned and controlled, it is not permitted to make direct sales within The United States;
Such an office will only engage in activities such as i) promoting the business of the parent company and ii) market research.

Doing business in The US without a local company

To minimize USA company setup costs in America, entrepreneurs implement the following strategies:

Through a local agent or distributor, a foreign company is allowed to sell its goods/services directly to US customers;
Business owners can also sell their franchise to a United States commercial agent or distributor, eliminating the need to hire local staff and incorporate a local company.