Every year thousands of foreign entrepreneurs interested in registering a company in America, face the same question: which form of business is better - a Limited Liability Company (LLC) or a C-corporation (C-Corp)?
Despite the fact, that the number of C-Corporation, opened in the United States, is significantly higher, than the number of LLC, this does not mean, that the first legal form is better than the second. Each of these legal forms has its own advantages and disadvantages, after a detailed examination of which, everything falls into place.
We will talk in detail about the circumstances, under which it is profitable to open an American LLC or establish a U.S. C-Corporation.
Features of LLC and C-Corp
The aforementioned forms of companies are registered commercial institutions, in which owners are not personally liable for debts. The difference between them is in terms of management and taxation, as well as the responsibility of the parties. Having decided to open an LLC in California or Alabama, you will be provided with simpler management conditions and a variability in a tax regime (by a type of C-Corp).
When choosing a suitable legal form, remember, that your decision will directly affect 2 things - your time and money. Tax conditions, the ability to attract foreign investment will largely depend on the chosen form of your entrepreneurial activity.
Therefore, if you are interested in registering an LLC in Florida remotely or in opening a C-Corp in New York, first, study carefully how these business structures are similar and how they differ.
Similarities between LLC and C-Corp
Both legal forms of enterprise are registered as legal units. In this regard, you need to open a business through a specialized registration agency in your chosen state. LLC and C-corp also offer owners benefits with a limited liability.
It is worth noting, that at the initial stages of registration, your company does not belong either to the LLC or to a C-Corporation. To register a C-Corp in Vermont or to establish an LLC in Hawaii, first, you need to obtain a business license in the United States. To do this, contact the state registration agency.
Registering an LLC or C-Corp requires from 1 or more shareholders/founders, has no restrictions on the minimum size of the authorized capital, requires the presence of a secretary - a resident of the USA.
Planning to register an LLC in New Mexico or open a C-Corp in Connecticut remotely, first of all, you should know, that such a legal form as a Limited Liability Company is more suitable for setting up a small enterprise with few shareholders, a C-Corp is more suitable for opening medium/large firms, as well as launching startups to attract investment.
Also, key differences between these entities are the following:
- A company registration: in order to register an LLC in the USA, you need to submit a Charter to the state registration agency and draw up a contract for operation. To open an American C-Corp, in addition, to filing constituent documents with a registration agency, it is also necessary to prepare a Charter, to elect a Board of Directors and hold the first meeting, to organize a meeting of shareholders, to issue shares.
- The ownership and fundraising: C-Corp has a more complex system for attracting investor money, than an LLC organization.
- C-Corporation is managed by private individuals and the board of directors, and LLC by founders;
- Features of taxation: registering a C-corp in Nevada or Maryland implies a double taxation. The federal rate is 21%, then taxed shareholders, who receive dividends. Those, who decide to open an LLC in New Hampshire and other states, have the right to choose a tax regime.
- A company reporting: C-Corporation owners file financial and tax reporting, issue shares, maintain a register and are regulated by US federal authorities. LLC owners can submit annual reports online or by mail.
Advantages and disadvantages
Those, who decide to register an LLC in Colorado and other states of America, expect the following pros and cons:
- The ability to choose a taxation method;
- A lower cost of annual fees;
- Minimum management requirements;
- More complicated fundraising process from interested investors.
Entrepreneurs, planning to register C-Corporations in Texas, Illinois, other states, will expect these advantages and disadvantages of the selected legal form:
- A simple way to attract funds from investors;
- Offers stock options to lure talented professionals;
- C-corporations are subject to double taxation.
Registering an American LLC or C-Corp company may take a little time and you will incur minimal costs, if you contact YB Caseexperts. Our specialists will provide personaladvice on the features of doing business in the USA, assistance in obtaining an American business visa and opening an account with an American bank.
On average, the process of registering a business requires from 1 week to 10 days.