LLC Company Registration in USA: Everything You Need to Know
Completing LLC registration in the USA is a fairly straightforward process. 3 min read
2. What Is a Sole Proprietorship?
3. What Is a Limited Liability Company (LLC)?
4. How to Form a Limited Liability Company in the USA
Updated July 1, 2020:
Completing LLC registration in the USA is a fairly straightforward process. However, with so many business structures to choose from, how do you determine which one is right for you? If you are wondering what to do next in terms of registering your business in the United States, here is what you should know.
Business Entity Options
When forming a business, there are several options available. The structure you choose will depend on numerous factors.
These possible entities include:
- Nonprofit organizations
- Sole proprietorships
- Partnerships (general or limited)
- Corporations (C-corps or S-corps)
- Limited liability companies (LLCs)
It is important to note that when selecting your business structure, your choice is not permanent. For example, you may first register as a sole proprietorship and as your company expands, you can form an LLC. If you are a foreign national, you can choose from either C-corporation or an LLC.
What Is a Sole Proprietorship?
Commonly selected by startups, this structure is simply an entity that a person opens on their own with any agreement with others. In this case, there are no additional forms and in terms of taxation, the owner is personally responsible. This means all profits and losses will be filed under the owner's individual tax return.
In most states, if you are using a name other than your own name, i.e. John Smith, you will need to register your business name. This is what's known as your "doing business as" name or your trade name. With no requirement to register at the state level, any debt or liability is the responsibility of the sole owner.
What Is a Limited Liability Company (LLC)?
Combining components of a corporation and partnership, an LLC protects owners against lawsuits and bankruptcy — similar to a corporation. All profits and losses are divided among owners, which is like a partnership.
- Each owner is known as a member and in most states, you can operate a single-member LLC. When there are multiple members, nonresidents can be included — known as offshore LLCs.
- In terms of taxation, LLCs do not pay taxes. Instead, LLC members are tax liable and must report their portion of profits on individual tax returns.
- To register your company, you need to submit articles of organization with the secretary of state.
Overall, the main benefits associated with LLC formation include:
- Pass-through taxation, helping companies avoid what's known as double taxation.
- Reduced formalities and regulations in comparison to a corporation.
- Availability of corporate income splitting.
Once an LLC is making a significant amount of money, the company can be treated as a corporation for tax purposes. The LLC must file form 8832 with the IRS.
How to Form a Limited Liability Company in the USA
If you are considering LLC registration in the USA, please be mindful of the following steps:
- First, determine which state your LLC will operate out of. If you live outside of the United States, then you can form an LLC in one of the following international-friendly states — Delaware, Nevada, or Wyoming.
- Select a unique and memorable name. Choose a name your customers will remember. Your desired name will need to end in LLC or limited liability company. Conduct a name search and also search all filed trademarks.
- Next, decide on a management structure. Will your company be manager-managed or member-managed? You must also select a registered agent.
- File your articles of organization before drafting your operating agreement.
- Obtain your employer identification number (EIN) — this is imperative when you plan to hire employees and is generally required when opening a business bank account.
- Depending on where your business is located, you may also require additional permits and licenses. Contact your nearest Small Business Development Center to inquire.
- Open a business bank account, keeping your personal and business banking separate. Mixing funds could lead to significant complications in terms of a potential lawsuit.
- If you do hire an employee, you must report them to the state's new hiring office within 20 days.
- Consider hiring a professional business lawyer, accountant, and bookkeeper.
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