In the United States, one of the most popular structures for setting up a business is the LLC (Limited Liability Company), known for its flexibility and liability protection. If you’re wondering what an LLC is, how to create an LLC, or how to register an LLC in the United States, especially if you’re a foreigner or non-resident, this article will provide you with a detailed guide and answer your questions.
What is an LLC in the USA
An LLC is a legal entity that combines aspects of corporations and partnerships, offering liability protection to its owners, called members, and allowing for a great deal of flexibility in management and taxation. The company’s profits and losses can be passed directly to members without being taxed at the corporate level.
Who can open an LLC in the United States
The appeal of the LLC lies in its accessibility. Anyone, regardless of whether they are a U.S. citizen or a foreigner, can open an LLC in the United States. The regulations allow the formation of LLCs for non-residents and foreigners, thus facilitating entry into U.S. markets and the utilization of advanced financial systems.
Types of LLCs
There are several types of LLCs in the United States that can be formed depending on the number of members and the nature of the business:
Single-member LLCs
Single-member LLCs are made up of a single member. This type of LLC is ideal for sole proprietors who want to enjoy limited liability protection without the need to partner with others.
A single-member LLC is simpler to operate compared to multi-member LLCs, as business decisions can be made quickly without having to seek consensus. However, it is important to note that although the entity is independent for liability purposes, in tax terms, it is treated as a sole proprietorship, unless it chooses to be treated otherwise.
Multi-member LLCs
Multi-member LLCs are made up of two or more members. They function similarly to a partnership in terms of management structure, but with the added protection of limited liability. This type of LLC is suitable for businesses that involve multiple investors or operating partners.
Members can decide how profits will be distributed, which should be stipulated in the LLC’s operating agreement to avoid future conflicts. In addition, Multi-member LLCs must consider how they will be managed, either democratically, with decisions made by the majority or by a designated manager who has the authority to make day-to-day operational decisions.
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How to Open an LLC in the United States: Step-by-Step Guide
To open an LLC company in the United States effectively, it is crucial to follow a series of detailed steps that ensure compliance with all relevant legal and operational regulations .
Here we explain each step in more depth, including the regulatory entities and the specific documents to be submitted:
1. Choice of State
Choosing the state where you will register your LLC is critical, as each state has its own laws and benefits. For example, states like Delaware, Nevada, and Wyoming are popular for their business-friendly policies, offering perks like lower tax rates and enhanced privacy requirements. You’ll need to research which state offers the best conditions for your type of business. We’ll help you do it. Contact us now.
2. LLC Name
Selecting an appropriate name for your LLC is the next step. Itmust be unique and comply with the regulations of the selected state, including, in most cases, the ending “LLC” or variants such as “L.L.C.” to denote the structure of the company. It is crucial to check the availability of the name through the Secretary of State or the appropriate division to ensure that it is not already in use.
3. Registered Agent
Designating a registered agent who has a physical address in the state of registration is a legal requirement. This agent is responsible for receiving all official correspondence, including legal documents and compliance notices. Companies that specialize in offering registered agent services can provide representation in any state, making this process easier for owners who do not reside in the state where the LLC is registered.
4. Training documents
You must file the “Articles of Organization” with the state’s regulatory entity, usually the Secretary of State. This document is crucial and should include information such as the name of the LLC, the primary address, the details of the registered agent, and, in some cases, the names of the founding members.
5. Operating agreement
Although it is not mandatory in all states, it is highly recommended to draft an operating agreement. This internal document sets forth the ownership structure, the responsibilities of the members, the rules of operation and distribution of profits, and other important aspects for the day-to-day and strategic management of the LLC. It helps prevent conflicts between members and clarifies operations in the event of audits or legal proceedings.
6. Obtaining EIN
Finally, you will need to apply for an Employer Identification Number (EIN) from the IRS (Internal Revenue Service). This number is essential for tax, banking and employment purposes. The EIN is free and can be easily applied for through the IRS website. This number is required to open bank accounts in the name of the business and for payroll management if the LLC has employees.
Non-Resident LLC Registration
Opening LLCs for non-residents and foreigners is particularly attractive. U.S. residency, investor visa, or Social Security Number is not required to form an LLC.
In addition, this type of LLC can open corporate bank accounts and operate businesses internationally, offering an efficient vehicle for global expansion and tax optimization.
How much does it cost to maintain an LLC in the United States?
The cost of maintaining an LLC in the United States varies depending on the state where it is registered due to different state fees and annual maintenance requirements. Here’s a general idea of the costs involved:
Annual Registration and Maintenance Fees: These fees depend on the state and may include the cost of filing annual reports and paying franchises or state taxes. For example, in California, the annual maintenance fee is $800, while in Texas there is no annual state maintenance fee if benefits are less than $1,180,000.
Registered agent: The costs to hire a registered agent service typically range from $50 to $300 per year.
Specific licenses and permits: Depending on the type of business and location, you may need to obtain specific licenses and permits, the costs of which can vary widely.
Additional costs: Some states require you to publish your LLC formation in a local newspaper, which can add additional costs that vary by county and newspaper.
Taxation: In addition to state fees, LLCs are subject to federal income taxes if they generate income, although the “pass-through entity” structure allows income and losses to be reported on members’ personal tax returns.
It is important to note that these are only examples from a few states and that costs may change. I recommend reviewing the specific details of the state where you plan to register your LLC or consulting with a U.S. business attorney or accountant for accurate and up-to-date information. At Interlink we know the most honest and efficient professionals. Contact us so that we can put you in touch with one of them.
*Data as of the date of publication of this article
*Values expressed in US dollars
How an LLC works to manage franchise in the United States
Although it is not mandatory to open an LLC to operate a franchise in the United States, it is highly recommended. Opting for a structure like the LLC offers several advantages, especially in terms of legal protection and tax flexibility:
The LLC protects the owner’s personal assets from business-related debts and lawsuits. This means that in the event of financial or legal problems for the business, the members (owners) of the LLC are not at risk of losing their personal assets, such as their home or vehicle.
In addition, LLCs are considered “pass-through entities” in tax terms, meaning that the company’s income is reported on members’ personal tax returns, avoiding the double taxation that occurs in structures such as corporations.
Operationally, setting up an LLC for a franchise can also make management easier and establish a clear separation between personal and business finances, which is crucial for any investment.
Finally, incorporating an LLC gives you additional credibility with banks, investors, and business partners, which is especially valuable when you’re looking to expand your franchise or secure financing.
Open your LLC in the United States
Now that you know the benefits and process of establishing an LLC in the United States, it’s the ideal time to take the next step towards expanding your investments safely and efficiently.
At Interlink FBC, we are prepared to guide you through every stage of your LLC registration process, ensuring that everything is handled professionally and hassle-free.
It doesn’t matter if you are a U.S. citizen or a foreign investor, our expert team will provide you with all the necessary assistance so that you can focus on what really matters: growing your business. Contact us today for more information
