If you are establishing a business, or expanding to the US, you need to know the paperwork required to complete the formation of your business entity. Learn more about US requirements below. And reach out to us if you’d like help from the experts in setting up your business correctly right from the start.
There are various documents associated with entity formation, depending on the type of entity you are forming. We will address the three main types of entities: Corporation, Limited Liability Company, and Partnership, the differences between them, what formation documents are, and which document are associated with which type of entity.
Corporation
A corporation is an independent legal entity owned by shareholders. Corporations are formed under the specific laws of the state they are registered in.
Some advantages of forming a corporation are:
a.) the ability to raise capital by selling stock,
b.) taxes are paid separately from the owners,
c.) shareholder’s personal assets are protected from the responsibility of the business debts and actions, and
d) sue and be sued.
According to U.S. tax law, a nonresident alien may own shares in a C corporation but may not own any shares in an S corporation, so most foreign companies choose to register their U.S. business as a C Corporation.
When filing for a corporation, a Certificate of Incorporation which contains the Articles of Incorporation will be issued. The Articles of Incorporation share important information such as the company’s name, shares of stock, contact information, and establishes the corporation as a separate business entity.
Partnership
A Partnership has two or more partners sharing ownership of a single business with a view to profit. The partners will contribute to the entirety of the business operations and share in the profit and loss of the business. There are two different types of partnerships: General Partnerships and Limited Partnerships. General Partnership can be formed when two or more individuals intend to work together. General Partners share profits and losses equally. In contrast, a Limited Partnership can only be formed if there is at least one General Partner. In Limited Partnerships, the limited partners have limited liability and limited management decision input depending on the percentage of their investment and negotiation of the Partnership Agreement.
While General Partnership does not require any formalities, the Limited Partnership, in some States requires statutory compliance. For Limited Partnership, the company formation document is the Certificate of Limited Partnership which contains the Articles of Partnership. The Certificate of Partnership proves which State the business was registered in. The Articles of Partnership lists the name of the business, names, and addresses of the partners, and the Registered Agent address. Partnership Agreement executed by the Partners governs the relationship between Partners.
LLC (Limited Liability Company)
A hybrid of Corporations and Partnership, an LLC is a legal structure which contains the limited liability of a corporation with certain tax flexibility of partnership. Owners of an LLC are referred to as the ‘members’ and all profits and losses are passed through the LLC to the members. An Operating Agreement governs the relationship between members.
Some advantages of an LLC are:
a.) fewer restrictions on profit sharing within the company,
b.) limited liability protection for the members from business decisions,
c.) more flexibility and less paperwork and costs associated compared to that of a corporation.
When filing for an LLC, you will receive a Certificate of Formation containing the Articles of Organization. The Article will list the name of the company, address, and the registered agent.
General Requirements
Other company documentation such as your businesses’ Federal Tax ID letter, Certificate of Good Standing, and the Certificate of Authority may be asked for when opening a bank account in the U.S. For more information about opening a bank account in the U.S. as a foreign company, check our upcoming blog on ‘Opening a Bank Account in the U.S.’
States require that all the above referenced entities except General Partnership needs to be published within 120 days of its filing with State.
Here at the Law Offices of Evelyn V. Sylvester, PLLC we know what it takes to form and incorporate your business in the U.S. We have helped many clients open their U.S. corporate bank accounts, assisted in where and what type of entity to form, U.S. company formation, and registered an EIN number for their company. If you are looking to expand your business to the U.S., let us know by using the link to Schedule a Consultation with us.
Hi,