People pursuing dreams of starting a business in the United States: Choosing a business entity

Pursuing dreams of starting a business in the United States: Choosing a business entity For many entrepreneurs who plan to do business in the United States, choosing the form of a business entity is the first thing to consider. …

For many entrepreneurs planning to start a business in the United States, choosing a business entity form is the first consideration. The most important thing is that business operators should separate personal assets from company business. The following are the most common major business entity forms in the United States:

1. Corporation. This is the most common form of business entity in the United States. There are two categories: C corporations and S corporations. The company will issue shares to shareholders to determine their rights and interests. It can also issue stock options (Stock Option) to employees and consultants, such as Google and Facebook, in order to allow them to work hard and share in the success of the business. Almost all publicly traded companies on NASDAQ and the New York Stock Exchange are C corporations. Its disadvantage is that taxation is divided into two levels: the company must pay corporate income tax on profits. At the same time, when it distributes profits to shareholders, they must also pay personal income tax. S corporations solve this problem, except that the shareholders pay personal income tax, and the company itself does not pay any taxes. An S corporation's income, deductions, and tax credits are borne by shareholders based on their shareholdings. The catch is that an S corporation should have less than 100 shareholders, and each shareholder must be a U.S. citizen or permanent resident. In addition, S corporations can only issue one class of stock. Therefore, it is not suitable for high-tech start-ups, which need to issue common stock to founders and employees instead of stock to investors.

2. Limited Liability Company – LLC. LLCs are more flexible than regular corporations: anyone, including other LLCs, corporations or foreign citizens, can be the owner. An LLC is a transformation of a corporate entity and does not require corporate-level tax filing. All income and expenses are reflected through the owner's personal income tax return. Unlike a company, the members of a limited liability company may, upon negotiation, share profits on a regular basis rather than in accordance with ownership.

3. General partnership. All partners are jointly responsible for the debt. It is usually created based on a protocol or behavior. If two people create a business together, such as a partnership to operate a restaurant, they are considered to have a partnership, even if there is no agreement or government filing. If one partner commits a wrongful act, his or her partner may bear equal liability for the consequences. Therefore, it is recommended not to use this form as much as possible.

4. Limited Partnership – LP. It consists of at least one unlimited partner and one limited partner. The principal partners are responsible for the management of the business and usually have unlimited responsibilities. A limited partner is usually an investor whose liability in the business is limited to his investment.

5． Sole proprietorship. This is the simplest form of entity with a single owner, usually with a different business name (Doing Business As – DBA) than the owner’s real name. A sole proprietorship does not have the protection of limited liability, so this form of entity is generally not recommended.

6． Limited Liability Partnership (Limited Liability Partnership?LLP). Limited liability partnerships are generally aimed at some professionals, such as lawyers, doctors, accountants, architects, etc., and their business is a business form authorized by the government. Partners' liability is limited except in cases of professional negligence or malpractice.