Incorporation is a process where a business owner decides to separate a business as a legal entity. This post will explore the definition of incorporation, safest state to incorporate in, company types and steps to incorporate in United States.
Incorporating your business as a separate legal entity in United States is one of the most important steps you will be taking. At first, forming a company overseas may sound challenging.
Yet, incorporating in the state of Delaware as a non-resident, will grant you a more time-saving and simple incorporation process comparing to the other US states, thanks to the start-up friendly legal system of Delaware.
Some sources are skeptical about Delaware as a starting point for your new incorporation. However, more than half of U.S. publicly-traded companies and fully 64 percent of the Fortune 500 were among that number, according to the state’s Division of Corporations.1 Facebook and Yelp are just some of these Fortune 500 companies that finalized their IPO from Delaware.
Considering you have decided on forming a company in Delaware, there are still a few important steps to consider.
You should decide on the type of company that will fit your business needs. Despite the numerous company types in US legal system, as a non-resident, you have to choose whether to form an LLC or C-Corporation.
A limited liability company (LLC) is a business structure in the United States whereby the owners are not personally liable for the company's debts or liabilities. Limited liability companies are hybrid entities that combine the characteristics of a corporation with those of a partnership or sole proprietorship.
LLC will offer you simple process in terms of formation, costs and taxation during the whole business cycle.
A C corporation (or C-corp) is a legal structure for a corporation in which the owners, or shareholders, are taxed separately from the entity. C corporations, the most prevalent of corporations, are also subject to corporate income taxation. The taxing of profits from the business is at both corporate and personal levels, creating a double taxation situation.
C-Corporation, however, will offer you a more complex but non-rigid structure, including taxation, investment, distribution of shares and venture capital procedures.