As an entrepreneur, growing your business in the United States is an essential goal for your company. At Rooney Nimmo, we can help you seamlessly navigate the complexities of establishing your company name in the U.S., including incorporating your business.
Foreign-owned businesses may find the most protections under incorporation instead of simple registration. Here are the basics you need to know about registration vs. incorporation before establishing your business in the U.S.
Understanding Business Registration vs. Incorporation in the U.S.
U.S. entities used by both domestic and foreign companies to conduct business in the U.S. include corporations, limited liability companies (LLCs), partnerships, limited partnerships, and branch offices.
To choose the most appropriate business structure for your situation, consider the structure of your existing business, tax issues, facts regarding ownership, venture capital or other fundraising ambitions, as well as the specific activities your company intends to undertake in the U.S. It’s important to note that each entity type requires distinct documentation and information for formation.
Incorporating a business creates a separate legal entity, protecting your personal assets and limiting your liability if something goes wrong with a product or service. Foreign companies can conduct business in the U.S. without forming a new stateside entity, though they must be aware of the legal and tax implications associated with doing so. Under most tax treaties, U.S. tax liabilities for a company arise if it is deemed to be engaged in a trade or business (“permanent establishment”) in the States.
As an LLC, Inc., Corp., or Ltd., you may apply for an Employer Identification Number (EIN) with the IRS. This nine-digit number is a federal tax ID used to identify a business entity. An EIN has numerous uses beyond government identification and tax purposes—it also allows you to open a company bank account and pay your employees directly, establish business credit, and hire employees (as an LLC, for example).
Considerations for Registering Your Foreign-Owned Business
Registering your business in a specific state allows you to obtain a business license for that jurisdiction, which some areas require. It typically only takes a few minutes to register at the government office in the local area where you’ll operate, and the process is relatively affordable. However, if you register your business, you will not receive the same personal asset protection as you would have if you incorporated. Your business’ name and brand will remain unprotected unless you obtain a trademark or copyright.
While there are some benefits to registering your business, such as making it simple for customers to research your company, you must renew the registration each year. If you do not have a physical location in the state you’re registered in, you will also need to file for a foreign qualification in that state.
If you wish to ensure your assets are protected from liability and plan to conduct business from within the U.S. and abroad, incorporation may be your best option.
Why Foreign-Owned Businesses Should Incorporate
If you plan to have a physical presence in the United States, incorporation may offer the most protection. For example, you’ll need to undergo company formation and name approval during incorporation—this helps to protect your business’ name.
Incorporation requires the expertise of a corporate lawyer with international experience in helping entrepreneurs bring their business stateside, so be sure to partner with a firm you trust.
This process also varies from state to state, so it’s essential to have someone on your legal team who understands the process and who you can trust to advise you on all matters concerning your business. Note that you can incorporate in any state regardless of where you conduct business. For instance, few businesses have a physical office in Delaware, but “The First State” remains a popular choice for those looking to raise venture-capital funding in the near-term. Many companies incorporate in Delaware due to its lower costs—including franchise tax—and the Delaware Court of Chancery’s extensive expertise in corporate law.
Another benefit of incorporation is that your personal debts or bankruptcies are kept separate from your corporation’s finances. Your business is also taxed separately, shielding you from higher personal tax liabilities.
Finally, with an incorporated business, you can offer stock shares, sell the corporation, transfer it, and add a partner. Our transatlantic boutique law firm can help you design the right incorporation plan for your personal and company goals.
The Final Word
Rooney Nimmo helps fellow entrepreneurs achieve their goals with flexible, efficient legal solutions to help you meet your business objectives. Contact us today and let us help you choose between registration vs. incorporation for your US-inbound business.