The first step for setting up a company in the U.S. is determining in which State to set up such company, because each of the 50 States has its own forms and rules. Generally, a sole shareholder or member would set up a Limited Liability Company (LLC), which protects the member from personal liability and offers wide flexibility in terms of its management. Depending on the type of business conducted, a sole shareholder could also set up a Corporation. A Corporation offers the strongest protection to its owners from personal liability. However, generally, the cost of setting up a Corporation are slightly higher than those for setting up an LLC. Also, Corporations require more extensive record-keeping and reporting.
Business entities (except for corporations) may elect classification for federal tax purposes. The possible classifications are: (1) as corporations, entities taxable at the entity level and the dividend distributions of which are taxed once again at the recipient level, (2) as partnerships, entities with more than one partner, generally transparent (i.e., non-taxable at the entity level, but at the partners’ level), and (3) as disregarded entities, entities with a single partner and which, as their name suggests, are disregarded for federal tax purposes and are exclusively taxed at the level of such partner. Exemplifying: a Corp. or an Inc. cannot elect to be treated in any other way and shall be taxed as a corporation. An LLC with two or more members may elect to be treated as corporation or as a partnership. An LLC with a single member may elect to be treated as a corporation or as a disregarded entity (i.e. taxed at the member level).
What are the requirements for capital and ownership of quotas or shares by foreign companies in the United States?
Limited Liability Companies are managed by either their members or a manager appointed by the members. Members of the LLC have flexibility in structuring the company, including the ability to divide ownership and voting rights in several ways. An annual meeting of the members or managers is not required, unless established in the Operating Agreement. LIST OF LLC DOCUMENTS: - when an LLC is formed by two or more members, it is advisable to prepare its Operating Agreement, which governs the internal operations of the business, by outlining the business' financial and functional decisions including rules, regulations and provisions.
Corporations are managed by a board of directors responsible for making major business decisions and overseeing the general affairs of the corporation. Directors are elected by the stockholders of the corporation and must meet annually (in the alternative, a written consent in lieu of a meeting can be executed). Officers, appointed by directors, run the daily operations of the corporation. The management has, therefore, the ability to transact the corporate business without stockholder and/or director’s participation in each decision. An annual meeting of shareholders is required to vote on certain items, such as election of directors (in the alternative, a written shareholder resolution can be executed). Certain states may require statutory officers such as President, Chief Financial Officer, Treasurer and Secretary. LIST OF CORP./INC. DOCUMENTS: - corporate bylaws, adopted by the directors, governing the day-to-day operations of the business; - corporate minute books and stock ledgers; - bank accounts that need to be separate from those of the corporation’s stockholders.
A business entity must correctly accrue and pay its correspondent taxes. On the federal level, pay attention to the income tax, the employment taxes (Social Security, Medicare, Additional Medicare, and FUTA taxes), and the self-employment taxes (Social Security, Medicare, and Additional Medicare taxes.) On the state level, check whether your particular activity triggers state and local sales and use taxes, as well as state income taxes. Safe for its corporate income tax, Florida does not tax the income of its resident individuals or businesses. Other states do.
What are the legal requirements a foreign company should comply with when incorporating a subsidiary in the United States?
It is advisable for a foreign company wanting to establish a subsidiary in the United States to set up a brand-new company, based on the information provided above.
A branch is an extension in the U.S. of the foreign company and, therefore, there is no need for registration of a new corporate entity (except for applicable permits that might be required based on the type of business conducted). Even though this option sounds appealing because of the lack of formalities needed, it is not advisable to open a branch for tax and liability issues. A branch of a foreign company may subject that foreign company to direct legal claims and liability for the acts and business of the branch in the U.S.
What is the process for the incorporation of the subsidiary in the United States?