Whether creating a new business, or modifying the legal structure of an existing one, an entrepreneur faces a wide variety of options.
When making this important decision, a large proportion of businesses tend to consider a type of entity that is increasingly popular thanks to the numerous advantages it offers: the Limited Liability Company of the United States (LLC).
If you are thinking about open your LLC in the United States, whether you are an American resident or a foreigner, these are The 10 advantages that this type of business structure can offer you.
Limited Liability
As its name indicates, a Limited Liability Company limits the liability of the members, as the company is considered to be an independent legal entity.
This means that the individual assets of the LLC members cannot be used to satisfy the debts and obligations of the LLC. A member's risk of loss is limited to the capital he or she has invested in the business.
This is one of the most important advantages of LLCs.
Tax Advantages
When opening an LLC in the United States, it is possible to benefit from very advantageous tax conditions. This will depend on the nationality and country of residence of the members, whether or not there are physical establishments in the USA and whether or not there are agents dependent on the USA.
This is because LLCs benefit from what is known as "pass-through taxation". This means that the company does not pay taxes as a company. Instead, the owners of the LLC must report on their personal tax returns the profits they have received from the LLC, and pay them in their country of residence.
In summary, the tax burden of an LLC with one or more members is carried out at the personal level, and not at the business level.
An important thing to know is that even if the profits of an LLC stay in their own bank accounts, members would still have to pay personal taxes on those funds.
Fiscal flexibility
By default, LLCs with one member are taxed as "Sole Proprietorships", and those with multiple members as Partnerships, that is, they work with "pass-through taxation". However, an LLC can also choose to be taxed as:
- An S-Corporation: There is pass-through taxation, but there are no federal taxes on profits. To be taxed as an S-Corporation, the LLC must file IRS Form 2553.
- A C-Corporation: The LLC is taxed directly as an independent entity. There is no direct taxation. To be taxed as a C-Corporation, the LLC must file IRS Form 8832.
To make this type of decision, it is essential to consult a professional.
Operational flexibility
The way an LLC operates is very flexible, since the members determine the operation of the LLC through an operating agreement, which must be signed by the members.
The operating agreement is basically a contract between the members that establishes how the company will be organized and managed internally. This includes who the members are, how new members can join, how dividends will be distributed, non-compete agreements, how the LLC can be dissolved, and much more. In this way, members can adapt the operation of the business according to their needs, within the legal framework.
Unregulated profit distribution
By default, LLC profits are divided based on the ownership percentage of LLC members. However, the LLC's state-determined profit sharing requirements can be overridden by specifying them in the Operating Agreement.
In this way, members can freely choose the arrangement that best suits them to distribute benefits.
Ease of opening
Opening an LLC in the United States is very easy. Anyone over 18 years of age and with a passport can do so, whether an American resident or a foreigner.
The cost of opening an LLC is relatively low (the registration fee costs between $50 and $500), and the process usually takes between 2 to 3 weeks, but it can be expedited for an additional fee.
In addition, the process of opening an LLC can be done completely online, and there are several companies that can do this for you. Also, if you don't have partners, you can open a unipersonal LLC.
To open an LLC in the United States, you do not need capital contributions, have an SSN, ITIN or a Green Card.
Simple maintenance
Maintaining an LLC is quite simple. The annual requirements and obligations of your LLC will depend on the state in which you register it, but once you have registered your LLC, you will have to:
- File an annual report (except in New Mexico, Arizona, Missouri, Ohio and South Carolina), the cost of which varies between $0 and $100 for most states.
- File an annual report to the IRS
- Renew the registered agent, that is, a person who resides in the state of your LLC and who is responsible for receiving and transferring documents to it.
Privacy
When registering an LLC, some states offer that the names of the members of the LLC be anonymized. In these states, the names of the members are not required to register the LLC nor are they published in any public document or the state database. The only place their names appear is in the Operating Agreement, which is an internal document.
The states that offer anonymity are: Delaware, Nevada, New Mexico, and Wyoming.
In some cases, only the name of the "organizer" is published, that is, the person who files the LLC with the state (this could be the registered agent, an attorney, an accountant, a company). The organizer must be authorized by the LLC.
It is important to clarify that having an anonymous LLC does not guarantee the anonymity of your bank account, the IRS, nor does it allow you to avoid taxes. Certain establishments can access that information.
Get a bank account in the USA
By registering an LLC in the United States, and obtaining your "Employee Identification Number" (EIN), it is possible to open a business bank account in the United States, or use online payment systems such as Stripe, for example. This way, you can collect, send or save in dollars very easily.
While many people think that it is necessary to go to the United States to open a bank account, this is not the case. Many banks such as Mercury, Relay, Revolut, Airwallex, etc... allow you to open your business bank account 100% online.
In addition, using a business bank account is necessary for the LLC to maintain its corporate veil. If you mix your personal account with your business operations, you can put your personal assets at risk.
Credibility of your business
Establishing an LLC to own and run your company will allow your business to have a certain credibility with clients. By seeing the legal mentions of your website, receiving contracts or invoices, your client will be sure that your company is a real company. Additionally, your business will have an official business name.
Written by
Ignacio Navarro
Ignacio Navarro is a Certified Public Accountant, graduated in 2020 from the National University of Tucumán. Founder of Start Companies since 2023, he advises clients worldwide on forming LLCs in the United States and on proper tax filing. His expertise combines legal, tax, and practical knowledge, offering a comprehensive service that spans from company formation to bank account setup and sales platform integration.
