How to choose a company type for registering a US company? Why not recommend LLC companies?

The common types of companies in the United States include: C-type Corporation  (Standard Limited Liability Company), S-type Corporation (Small Liability Company),  LLC (Limited Liability Company). For non US citizens, the most commonly chosen  are LLC and C-Corporation. But compared to LLC, Corporation is still more friendly  to foreign traders!

Why are foreign trade professionals not necessarily suitable for LLC company  types

01. The tax process is complex and diverse in types

Among the people expanding their business in the United States, there are  still a large number of non US tax residents. If your company is an LLC, you  will face complex tax filing issues.

LLC type companies' tax reporting is often considered a "transparent  entity/penetrating entity", meaning that the company itself does not have  to pay income tax, but rather "penetrates" tax responsibility to  its members, who report income and losses on their personal tax forms for tax  reporting. This is called a 'transparent tax system' or a 'single-layer tax  system'.

If there is only one non-U.S. member of the company, reporting personal income  in the United States through a personal income tax form conflicts with immigration  laws.

According to the regulations of the Immigration Administration, non resident  foreigners must not have the permission to work legally in the United States  and cannot have employee income or self-employed income in the United States  before obtaining the work permit issued by the USCIS (United States Immigration  Administration). Therefore, if a single member of an LLC company is a non-U.S.  natural person, it is usually more recommended to apply for C-status with the  tax bureau and file taxes according to the C-company type. It's better to register  the Corporation company directly in one step!

02. There are many restrictions on fund operation and company operation

LLC companies are not conducive to non US residents adjusting their equity  structure, and share transfers are relatively complex, subject to many legal  and regulatory requirements. According to the company's articles of association  and relevant laws and regulations, members (i.e. shareholders) of LLC must  follow specific procedures and requirements when transferring their shares.  These procedures and requirements may include obtaining the consent of other  members, signing equity transfer agreements, updating company articles of association,  etc. Therefore, the transfer of LLC shares is usually difficult and requires  a significant amount of time and effort to complete. If you want to open a  bank account, you will also face strict identity and background checks.

03. High legal risk

The regulations for LLC vary from state to state in the United States, and  non US tax residents are prone to neglect and violate the regulations, thereby  facing risks such as legal action and fines. If you are the only foreign member  of the company holding an LLC without multiple member companies sharing the  burden, any legal issues or company debts may be primarily borne by you.

Advantages of Corporation

Corporation is a type of company that registers more for customers, and tax  reporting is done as the main entity of the company. Compared to LLC, it provides  sellers with a relatively stable tax environment. In terms of tax treatment,  it is simpler and easier to understand. If a US company maintains its business  normally every year, it can declare corporate income tax (i.e. federal tax+state  tax), providing sellers with a relatively stable tax environment.

In summary, when setting up a company in the United States, bosses should  carefully choose the form of the company! After fully understanding the characteristics  and risks of the company's form, plan according to your own business needs  and development!