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VisaPro.com: Types of Business Entities
Jul 22nd
The United States has no federal business law and, therefore, corporations are exclusively regulated by state laws. There are four main types of business entities in the U.S. i.e. Sole Proprietorship, Partnership, Limited Liability Company (LLC), and Corporation. For establishing a new office in the U.S. usually the LLC or the corporate structure is recommended.
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| II. | Incorporations | ||||||||||||||||||||||||||||||||||||||||||||
| Incorporations (also called corporations) are more complex than partnerships or sole proprietorships, in that a new legal entity is created. A corporation is an entity that is separate from its owners, so that regardless of what happens to shareholders, the corporation continues until it is legally dissolved. Depending on state law, a corporation can be owned by just one person and have just one director and officer. The owner(s) of a corporation are known as shareholders. The shareholders elect directors to set the policies of the corporation and represent their interests. The directors appoint the officers of the corporation to manage day to day operations. Corporations are legally required to follow more formalities than any of the other entities, including annual meetings of the shareholders and directors, as well as board approval of most significant acts by the corporation. Because a corporation is separate from its shareholders, for example, even if one person is the sole shareholder/director/officer, that person cannot just take company funds for him/herself without documenting the reason and entering a board resolution into the corporate records.
Taxation of corporations is much more complex than sole proprietorships or partnerships: depending on the number of, residency of and type of shareholders, a corporation can elect to be treated for tax purposes as a if it were a partnership (an S corporation) and therefore not pay taxes itself, or it can be treated as a taxable entity (a C corporation). |
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Incorporation FAQs
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| III. | Strategic considerations in selecting appropriate structure |
| Selecting the most suitable legal business structure is the first and foremost step in starting a business entity. The decision depends upon various factors such as the capital involved, the nature of business, the nature of ownership, legal formalities involved, tax issues, management and control etc. The following points highlight the distinction between the major types of business structures: | |
| Formation Sole Proprietorship and Partnerships may not require filing in some States; however for establishing a LLC or a Corporation, State filing is required.
Management In Sole Proprietorship full control of management and operations rests with the proprietor, whereas in Partnership generally each partner has equal control, unless there is an agreement to the contrary. The management and control of an LLC is outlined by the operating agreement between the members. A Corporation is managed by directors, who are elected by the owners i.e. the shareholders of the corporation. Raising Capital Raising of capital from external sources is often difficult for a sole proprietor and he has to depend on his own contributions. In a Partnership, contributions can be invited from the partners or a new partner may be added who may bring his share of the contribution. LLC members can raise capital by selling interests, however it is subject to the operating agreement. A Corporation has the option of raising external capital through issue of shares. Liability Sole proprietor and partners have unlimited liability, whereas members of an LLC may not be liable for the debts of the LLC. In a Corporation, the liability of shareholders is generally limited to the extent of value of shares purchased. They may not be held personally liable for the debts of the corporation. A Sole Proprietorship dissolves if the sole proprietor dies or discontinues with his business. A partnership dissolves with the death or withdrawal of a partner, unless partnership agreement contains contrary provisions. The duration of an LLC depends upon the requirements imposed by the state where it has been formed. The major advantage of a Corporation lies in its perpetual existence. Tax Issues There are different tax rules that apply to each different type of entity. Generally sole proprietorships, partnerships, and LLCs are taxed at the individual level, while the corporation is taxed at the corporate level with dividends being taxed a second time at the individual level. There are several taxes you have to account for when establishing a business in the U.S. The taxes could be at the city, county, state and federal levels. |
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Conclusion
Launching a new business can be quite exciting. But there are also many challenges. In-depth market research and planning can minimize the risks. You must weigh all your options, analyze all the possible situations and select a reliable service-provider who will guide you through the entire process.
VisaPro handles the formation requirements of your new business in the U.S., and also helps you obtain new office space and file your visa petition to enable you to enter the U.S. to take care of your newly established business. Our team of professionals, strong service culture, quality service and timely response ensure that everything related to your new office is handled professionally, completely and in a timely fashion. Any Questions? Contact VisaPro to learn more about how we can help you.
Source: http://www.visapro.com/Immigration-Articles/?a=304&z=48
