Some may ask for yearly reports, require you to issue shares and hold yearly meetings as well as keep accurate and complete records, written communications, financial statements and meeting minutes. Check with your state or consult with a lawyer for more information regarding the specific requirements to remain compliant. Read more about USA company formation here. A corporation is required to obtain an EIN, and you’ll need it to open a bank account, set up payroll withholding and set up state tax accounts. Some states require corporate bylaws to be recognized legally as a corporation. Corporate bylaws are rules and regulations of a corporation outlining how it operates. You can draft bylaws either before or after you’ve submitted your corporate formation documents. There can be some distinct advantages to incorporating as an LLC.
And of course – consult a CPA and an attorney if you are not confident enough with your choice. We have the entire section of this article dedicated to taxation, as well as an entire article dedicated to taxation of foreign-owned U.S. companies, so we recommend you to study those. Also, it is always a good idea to consult with a CPA (accountant) before making your final decision on what type of entity to register. Remember, LLCs are flexible, so chances are you won’t go too wrong by choosing an LLC as your entity type.
There are no prerequisites to registering as either, it’s all down to which option is better for your ecommerce business. But most LLCs are formed in 3-5 business days and can take a few weeks, depending on the state, the time of year, and other factors outside your control. LLC registration services can typically offer same-day or next-day service. The disadvantages of operating a business as a sole proprietorship are that there is no limit to the number of people who can become shareholders. First, it allows owners to pass ownership of the business down through generations. Second, it protects members from being personally liable for debts and obligations incurred by the company.
Step 6: Choose the Business Structure
When incorporating your business, you may choose to form either a C or S corporation. One of the main reasons that people choose to form an S corporation is to save money on taxes. To incorporate in Washington, you must file the Washington Initial Report within 120 days of your incorporation date.
Introduction to the USA economy and business culture
Moreover, when determining the cost of an LLC, it is vital to consider factors beyond the basic paperwork to form the business. That includes annual obligations such as registered agent fees and annual reports. First, it is an important means of separating your business entity and assets from your own finances. Additionally, banks often require an EIN when opening a business account for your LLC.
An EIN allows you to submit your business’s tax forms to the federal and state governments alongside other necessary paperwork. The IRS makes it easy to get an EIN quickly and easily through its online EIN form. The site will also let you know if your business does not require this number.
Regardless of where you form your LLC, you’ll have to pay applicable taxes in the state where you conduct business. However, LLCs also have the option to elect S corporation or C corporation taxation, which can provide additional tax benefits and flexibility. S corporations are exempt from federal income taxes, with shareholders subject to individual taxation. Conversely, C corporations are subject to corporate income tax, but they may offer more tax planning opportunities and benefits for certain businesses. You’re self-employed if your LLC is classified as a sole proprietorship or partnership.