Are there as much legal status in the USA than in France? Is it necessary to pay for the advice of an attorney to create its structure ? Excerpt from "Launch start-up in the United States", by Patricia Carreras, editions Eyrolles.
You have decided to start a company in the United States ? Therefore, it is necessary to choose between the different legal statuses existing in us law. (...)
in The United States, an entity is generally governed by the law of the State where it is incorporated. This applies to many aspects of the activity. The level of taxation, if the federal tax Code is applicable to all states, each State and sometimes even some cities have their tax own. Many States like Florida, Nevada or Texas do not levy tax on individual income, while others, such as New York, have the highest taxes.
Be assisted by a lawyer is therefore indispensable . The specialized professionals are not lacking. It is better to choose a practicing lawyer preferably in the State where you wish to install. The advice of an accountant or tax specialist can also be valuable. Try to ask friends or start-up local who has already solved this type of issue.Your support is essential. Subscribe for $ 1 support Us
You can start a company without having a visa, because the creation of a company is governed by the law applicable in each State, while the immigration issues are handled by the federal regulations. However, without a visa, you can neither hire an employee nor touch money .
The formation of a company in the United States is inexpensive and can be done quickly. The mere incorporation should not cost more than $ 1,500 and is carried out in less than an hour online.
You have the choice between several types of legal structures.We will focus on three options, considered as the most classic :Sole proprietorship ;Limited Liability Company (LLC) ;C Corporation.
The first does not entail the creation of a legal person, unlike the other two.
1. Sole proprietorship
The sole proprietorship refers to the exercise of an individual's activity without creation of legal person american . It is the legal form most widespread in the United States, even if this choice may seem illogical in the light of the risk incurred by the contractor. In fact, the latter becomes personally liable for the obligations of the company.
the liability is unlimited, and it agrees on its own property.
in addition, the danger in terms of dispute is non-negligible. In the United States, a country with a very litigious, clients, insurers, suppliers, etc, do not hesitate to resort to the courts to resolve disputes. It is therefore a significant risk, particularly given the costs involved and the ability of the parties to obtain detailed information on the opponent through the procedures of instruction.
advantages. Nevertheless, insurance and caution helping, this risk may be acceptable, especially if one considers the advantages offered by this structure. The attraction of the sole proprietorship, understood as the conduct of a commercial activity by the contractor - who may be a natural or legal person foreign - held to its simplicity as well as the tax advantage that arises possibly from the lack of legal personality and american.
• Simplicity , because the sole proprietorship is distinguished by the lack of formality is necessary to its constitution. It is enough to register a name ("assumed name certificate", sometimes called "d. b. a" for "doing business as"). In addition, the accounting was limited to a statement of expenditure and revenue primarily intended for the calculation of the taxable profit. Finally, if the contractor cannot be an employee of his company, he can put in place a social security cover for himself and his staff.
This structure is particularly suited when the planned activity is by nature individual. Indeed, if the project fails, the administrative issues related to the cessation of activity are strongly reduced.
• A business tax advantage , because the absence of legal personality leads to the taxation of profits only at the level of the entrepreneur ; moreover, the losses inherent in any first phase of activity is by nature integrated into the results from the contractor to the overseas, they are deducted from his taxable income.
• local , the mandatory procedures relate mainly to occupancy licenses (buildings, activity areas, etc) and the obtaining of certain authorizations for the regulated professions. If the company registration is not necessary, some of the formalities of starting the are. If the company does not bear the name of the officer, the form d. b. a must be completed. This document is required to open a bank account. In addition, the sole proprietorship needs to be collected where applicable on the sales of certain products and services sales tax (sales tax) in the State where it is located and in those where it is brought to exercise. The contractor shall obtain a registration number from the competent authority.
Limited Liability Company and C Corporation
The other two legal statuses as a priority recommended in the United States, the Limited Liability Company (LLC) and C Corporation (C Corp), this causes the creation of a legal personality . The choice between the two is made depending on the criteria defined by the contractor.
The LLC and C Corp both have the advantage of limiting the owners ' liability to their capital contributions . The essential difference between the two types of structures is that the LLC, unlike a C Corp, can be fiscally transparent. The structure then pays no taxes on its profits on which are directly imposed on the members of the LLC, according to a predetermined percentage between them. This mechanism eliminates the double taxation borne by the owner of a C Corp. The benefits of the latter are in effect taxed for the first time within the company. The shareholders are then taxed on the dividends received, to the image of what exists in France, in corporations.
2. Limited Liability Company (LL C)
Features. The LLC is a legal form relatively new which combines the benefits of partnerships and those of corporations. The image of corporations, the LLC allows for limited liability of partners the liability of its partners, also referred to as "members", the number of which is not limited to the input of the latter. "Members" are not personally liable for the debts and obligations of the company.
The rules regulating the functioning and the constitution of the LLC are primarily set at the State level. They give to the "members" of the LLC for a great range of action. The LLC is subject to accounting obligations to be important, but is not liable for the tax on the companies ; only "members" are taxed, thus avoiding double taxation.
Terms and conditions of the constitution. To form an LLC, you must register with the State you chose, and fill out a governing document that may have different names depending on the State. Thus, one speaks of"articles of organization". The governance and relations between shareholders are defined by an operating agreement, which can be a complex document because of the intricacies of tax and the greater contractual freedom accorded to "members".
The most notable difference between the american rules and French is the existence of a minimum capital in French companies, while u.s. companies have escaped this obligation. The creation of a company requires the designation of an external input.
However, the two coasts of the Atlantic, the use of a law firm is essential, particularly for the drafting of the articles of association. "It is better to prevent than to cure !, repeat F. Chateau, a partner in the large law firm Denton.
3. C Corporation (C Corp)
The use of this type of structure is more rare since the creation of the LLC.
The creation of a C Corp is subject to a formalism important and the use of a legal counsel is also essential. Thus, the holding of a comprehensive accounting is mandatory and general meetings must be met periodically. profit after tax can be used for the financing of the company or be distributed as dividends. In the absence of distribution, the profits are taxed as capital gain.
In case of accumulation of "excessive" profits, a tax of 28% is applied. A C Corp may escape this tax, if it proves that the amounts held in reserve are necessary to meet a debt or to a significant investment. dividends are regarded as income and taxed as such. As for the shares making up the capital, they are generally freely tradable, unless restricted by a shareholders ' pact. in the liability of The partners is limited to their respective contributions.
The executive committee determines the major orientations of the organization and recruiting officers, who ensure the daily management of the company. The number of shareholders is limited to seventy-five, all of which must be tax resident in the us. They can benefit of retirement plans established by the company.
A corporation may adopt the status as a small corporation (S-Corp) to become transparent for tax purposes. Its constitution is similar to those of a C Corp (form, deductibles, etc). To opt for this special regime, the board (board of directors) must, however, complete an additional form to the Internal Revenue Service (IRS), the federal government agency that collects taxes.
Terms and conditions of the constitution
the constitution of The C Corp requires, first, the' registration of a certificate of incorporation , including the basic characteristics of the entity : the name and address of the company, the characteristics of the securities of the company, the details of the person to receive the official letter, the objectives and the duration of life of the enterprise, the rules governing its relations with its shareholders, and finally the name of the incorporator.
The incoporator means the person responsible for the creation of the company , without being a shareholder (lawyer, counselor, etc). It leaves the entity once it has appointed the executive committee (board).
The certificate of incorporation is registered with the Secretary of State of the State chosen, a service which offers no advice and no portion of any disputes. This document defines the characteristics of the securities of the company. It may include shares with or without voting rights, preferential, etc, Their number and their prices must be defined. A number of actions may be placed in reserve and sold when a new partner joined the company. No minimum capital is taxed , but the tax Code (federal level) limit the ratio of loan to shareholders.
regarding the choose the name of the company , the entrepreneur can choose any name as long as it is not already used in the State where it wishes to operate. If the activity of the new company exceeds the boundaries of the State, the designer must ensure that the name is not used by other companies at the national level, fifty States ! The verification can be done in the Yellow Pages (Yellow Pages), with the trademarks offices, the equivalent of the INPI (National Institute of Industrial Property), etc., In the event of a dispute over a name, the recourse to the courts is the only solution. Finally, the name may differ from brand name .
The certificate of incorporation must specify the name of a registered agent, that is to say, the individual as the State contact for all administrative formalities. This agent might be the lawyer who is responsible for the creation of the administrative company or a services company.
The corporation has no lifetime maximum . The incorporator can choose the one he wants. When the duration of activity is unknown, the reference to "perpetual existence" must be added in the document of incorporation. The corporations Code of the State allows to include "special provisions" in the certificate of incorporation providing for example the special voting rules, specifying the dates of general assemblies, etc, These special provisions can also be included in the articles.
The incorporator will then appoint a board, which in turn appoints the officers and receives the capital contributions. The board will then make a number of initial decisions. The board or the incorporator approves the "by-laws", that is to say the internal regulations.
If there are several shareholders , it is necessary to put in place a shareholders . In comparison, in an LLC, the operating agreement or the operating agreement fulfils the dual function of defining the principles of governance (by-laws a C Corp) and the relationship between owners (shareholders agreement for a C Corp).
4. The S Corp
To be able to create it, it must first be a tax-resident in the United States. The partners can be physical persons, this therefore cannot be a subsidiary of a French company for example. In addition, the number of partners is limited to one hundred, which, in terms of development, may prove to be limiting.
The benefits in terms of taxation go beyond that to the LLC, because you can save the amount of tax expenses employee and employer, or 15.3%, of which each independent ("self-employed") perform in the United States and a shareholder of the LLC must pay. The shareholders of an S Corp will save you taxes.
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However, I do not advise to choose the S-Corp , but rather the LLC or C Corp, more suited to an ipo. Once the legal status of your company is chosen, it is necessary to establish the modalities of incorporation, tax obligations and social constraints.
again, it is essential to seek the assistance of a lawyer . Not even imagine to create your company in resolving the legal issues yourself. From the outset, the support of an expert is required to help you choose the best legal status, while taking into account your future tax obligations. The legal structure work ? It remains only to hire.