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Compare an LLC vs Corporation (C-Corp & S-Corp)

For US non-residents, the requirements for setting up a company are the same as the residents, with some additional requirements. Furthermore, several problems of non-residents are also presented such as laws of the state where the clients incorporate their companies at; open US corporate bank accounts, and international laws. Lastly, it is essential for clients to understand the difference between US business entity types.

With many types of the business structure in the USA, One IBC will explain clearly about 2 of the most popular company types for registering business in the U.S.

Limited Liability Company (LLC)

Limited Liability Company, also known as LLC or L.L.C, is one of many common chosen types of business structure among domestic and foreign business owners. LLCs are popular since they offer liability protection like corporations but are easier to set up and manage.

Limited Liability Company (LLC)

Benefits offered by registered LLC in the US

  • No ownership restrictions: In LLC’s corporate structure, there is no limitation on the number of members as many states don’t restrict ownership, thus anyone can be a member, ranging from individuals, foreigners, corporations, other LLCs, and foreign entities.
  • Limited liability protection: Owners of the LLCs are protected from companies’ debts and liabilities
  • Pass-through taxation: The tax rate applied for the LLC is not paid by the business but rather the taxes due are paid at the individual level and the income or losses are reported on the owners’ tax return.
  • Credibility: An LLC offers added credibility to the business as LLC is recognised as a formal business structure. In addition, by adding the suffix of either LLC/L.L.C at the end of the company name, partners and customers are more likely to do business with that particular company.
  • Flexible management: The flexibility of structuring company management is another advantage offered by LLCs to the business owners

LLC Requirements (Manager/Member)

For Manager

For Manager

  • Minimum one manager or more.
  • Can be any nationality.
  • At least 18 years of age.
For Member

For Member

  • Minimum one member or more
  • One person can be the president, treasurer, and secretary.
  • Can be any nationality.

Corporation (C- Corp and S-Corp)

The term “Corporation” refers to a legal and separate entity from its owner, in addition to limited liability which means the company’s shareholders are not individually liable for the company’s debts, and the profits they receive come in the form of dividends and stock appreciation. Any individuals and/or other entities can own a corporation and the ownership process is easily transferable via the trading of stock.

Corporation is categorized into either C-Corp or S-Corp which each has its own advantages for the business owners. Between these two, C-Corp is the more common corporation choice for business owners.

Corporation (C- Corp and S-Corp)

Benefits offered by registered Corporations in the US:

  • Limited liability protection: Owners of Corporations are protected from companies’ debts and liabilities.
  • Tax-deductible expenses: Owners of the LLCs are protected from companies’ debts and liabilities
  • Pass-through taxation: The expenses of Corporations may be deductible from tax.
  • Ease of ownership transfer: Through the sale of stock, the ownership of a Corporation is easily transferred from the current owner to the new owner.
  • Access to capital: Corporations have the ability to raise capital through the selling of shares. This greatly boosts the growth of the business, and also for dire situations in the time of need.

Corporation Requirements (Director/Shareholder)

For Director

For Director

  • Minimum one manager or more.
  • Can be any nationality.
  • At least 18 years of age.
For Shareholders

For Shareholders

  • Minimum one member or more
  • One person can be the president, treasurer, and secretary.
  • Can be any nationality.

Although they have some differences and advantages of types of business structure for company formation in the U.S, the ongoing requirements of both are the same. Almost all states require the annual report, franchise tax and Employee Tax Identification (EIN) for completing the responsibility of business to the state government.

  • Annual report and franchise tax: the due date for annual report and franchise tax filing are different between different states. Some states set specific dates for annual reports and franchise tax filing while submission dates for annual reports and franchise tax filing set on the same date for other states.
  • Federal tax identification number (EIN): An EIN is required for LLCs that have employees working in the USA. Furthermore, most banks will require an EIN if the business owner wants to open a business bank account.

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