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In recent years, more and more individuals and companies come to the United States to engage in business activities and seek development. However, doing business in the United States usually requires setting up a company and operating in the name of the company. The operation of a company is subject to many U.S. laws, including corporate law and labor law. Foreigners operating in the United States must also be subject to U.S. immigration laws in many ways. Knowledge of these laws from the start of business operations will avoid some unnecessary troubles and reduce unnecessary costs. Below make a brief introduction to the form of certain different company first, offer everybody reference.
What are C corporation and S corporation?
The Corporation is the most common Corporation in the United States. The names of these companies all end with ‘Corp.,’ ‘Inc.,’ ‘Co.,’ etc. For example, Apple inc. is’ Apple, Inc. ‘
A corporation is a legal organization that is completely independent of an individual. This form limits investment risk to the company’s assets, and individual shareholders are not liable for the company’s debts. If the company goes bankrupt, the creditors can not ask the shareholders to repay the debts owed by the company. The personal assets of the shareholders and the assets of the company are completely independent.
The two types of corporation include C corporation and S corporation.
C company is the most common form of joint stock limited company, whose biggest characteristic is double taxation. The income received by the company is subject to corporation tax, and the shareholder himself is subject to individual income tax after dividends are paid to the shareholder.
For example, if the company makes a profit of 1 million yuan, the remaining 700,000 yuan will be distributed to shareholders in proportion to shares after deducting 30% of the company tax. If each of the two shareholders gets $350,000, they also need to deduct personal income tax on that $350,000. At a 33% rate, each shareholder would end up with only $234,500.
The shareholders of both S company and C company are protected by limited liability. The biggest advantage of S company is that it has no corporate tax burden. The profit of the company is reported as individual income tax by the shareholder according to the proportion of shares, avoiding double taxation.
However, the establishment of S company has many restrictions, the number of shareholders does not exceed 100, and the shareholders must be American citizens or permanent residents.
What is a limited liability company, LLC
Another popular form of companies is Limited Liability companies. A limited liability company usually ends with LLC.
Unlike joint stock companies, the owners or investors of LLC are not legally called shareholders but members. They don’t own stocks, but they have legal interest in proportion to their investment.
LLC is an innovative American “hybrid” that combines the strengths of several types of companies. LLC can choose to pay taxes as a company or as an individual in the U.S. tax law, and the company does not need to pay taxes, thus avoiding double taxation. The debts and obligations of the company are entirely those of the company and its owners and members are not liable for the debts. Most importantly, there is no limit to the number and nationality of LLC’s investors.
benefits of establishing LLC as a limited liability company
Whether buying real estate or allocating assets, LLC is popular among some investors in the United States as a simple and economical type of entity. From the perspective of investment, the following four major advantages can be summarized:
Benefit 1: limited liability
One of the most important benefits of establishing LLC is that it can separate personal property from company property and protect personal assets. For example, if the investors in the name of the LLC, a set of real estate, investment and lease to the tenant, tenant demand compensation if there is a dispute, the property of all people are LLC, the LLC company to a company’s assets to compensate for tenants, rather than as members personal assets, effectively reduce the investment risk of personal assets. This type of company is suitable for investors with large and complex personal assets. It sets up a layer of protection in the form of a company, and the assets will not involve and influence each other.
Second benefit: tax flexibility
Another feature of LLC is its tax system. If LLC chooses to pay taxes on personal income, there is no corporate tax at the corporate level if the company generates income. Members pay only personal income tax to avoid the double taxation of C company. If the company produces a loss, it can also be credited to personal income for deduction. In addition, the establishment of a company can also be recorded in expenses, offset by income to reduce corporate tax.
Benefit 3: easy setup
Unlike S company, LLC is not limited by the number and nationality of its investors. Members need only enter into an operating agreement and do not have to follow the laws as strictly as a corporation.
Benefit four: privacy protection
If an investment is made in the name of a company, the owner of the investment is the company, not the individual. Especially for investors who buy houses, because real estate information in the United States is published on municipal websites, investment in the name of the company can play a role in protecting privacy.