Starting a business in the United States requires choosing the right business structure and completing the necessary legal steps. This guide covers the different types of business entities, their benefits, registration requirements for residents and non-residents, and the best companies for business registration along with their fees.
Types of Business Entities in the U.S.
1. Sole Proprietorship
- Definition: A business owned and operated by one person with no legal separation between the owner and the business.
- Benefits:
- Simple and inexpensive to set up
- Full control over business decisions
- Less paperwork and lower taxes
- Requirements:
- Register a business name (DBA) if different from the owner’s name
- Obtain necessary local/state business licenses
- No formal registration with the state is required
- Best for: Freelancers, consultants, and small businesses with low risk
2. Partnership
- Definition: A business structure where two or more individuals share ownership.
- Types:
- General Partnership (GP): Equal responsibility among partners
- Limited Partnership (LP): At least one general partner with full liability and one limited partner with restricted liability
- Limited Liability Partnership (LLP): Protects all partners from personal liability
- Benefits:
- Simple structure and shared responsibilities
- Pass-through taxation (profits are taxed at individual levels)
- Requirements:
- Register a partnership agreement
- Obtain necessary permits and business licenses
- Best for: Small businesses with multiple owners sharing management duties
3. Limited Liability Company (LLC)
- Definition: A hybrid structure that provides the liability protection of a corporation with the tax benefits of a partnership.
- Benefits:
- Limited liability for owners (personal assets protected)
- Flexible management structure
- Pass-through taxation (unless opted for corporate taxation)
- Requirements:
- File Articles of Organization with the state
- Create an Operating Agreement (not always required but recommended)
- Obtain an Employer Identification Number (EIN) from the IRS
- Comply with state-specific annual reporting requirements
- Best for: Small to medium-sized businesses seeking liability protection
4. Corporation (C-Corp)
- Definition: A legal entity separate from its owners, offering strong liability protection and the ability to raise capital through stock issuance.
- Benefits:
- Limited liability for shareholders
- Easier to raise investment funds
- Perpetual existence beyond owner changes
- Requirements:
- File Articles of Incorporation with the state
- Elect a Board of Directors and issue stock
- Hold annual meetings and maintain corporate records
- Best for: Larger businesses and those seeking outside investment
5. S Corporation (S-Corp)
- Definition: A special tax designation that allows corporations to avoid double taxation while retaining liability protection.
- Benefits:
- Avoids corporate income tax (profits pass through to shareholders)
- Limited liability for owners
- Requirements:
- Must be a U.S. entity with no more than 100 shareholders
- Shareholders must be U.S. citizens or residents
- File IRS Form 2553 for S-Corp election
- Best for: Small businesses looking to reduce tax burdens
Business Registration Requirements for Residents & Non-Residents
For U.S. Residents:
- Choose a business structure (LLC, Corporation, etc.)
- Register with the Secretary of State
- Obtain an EIN from the IRS
- Get necessary business licenses and permits
- Open a business bank account
For Non-Residents:
- Choose a business-friendly state (Delaware, Wyoming, Florida, etc.)
- Register an LLC or Corporation (S-Corp is not available to non-residents)
- Obtain an EIN (can apply without SSN via Form SS-4)
- Appoint a U.S. registered agent
- Open a U.S. business bank account (may require a physical visit)
- Comply with tax and reporting requirements
Best Companies for Business Registration & Fees
| Company Name | Services Offered | Pricing |
|---|---|---|
| ZenBusiness | LLC and Corporation formation, registered agent, EIN assistance, compliance reminders | Starting at $49 + state fees |
| Incfile | Free LLC formation (excluding state fees), EIN acquisition, compliance tools | Free + state fees |
| Northwest Registered Agent | LLC and Corp formation, registered agent service, privacy protection | $39 + state fees |
| LegalZoom | Business formation, tax services, legal consulting | Starting at $79 + state fees |
| MyCompanyWorks | LLC setup, operating agreements, compliance reminders | Starting at $59 + state fees |
Choosing the Right Business Structure
When selecting the right entity for your business, consider:
- Liability Protection: LLCs and corporations provide personal asset protection.
- Tax Implications: Sole proprietorships and partnerships avoid corporate taxes but may have higher self-employment taxes.
- Complexity & Compliance: Sole proprietorships are easy to manage, while corporations require more administrative work.
- Investment Needs: If seeking venture capital, a C-Corp may be the best option.
Conclusion
Registering a business in the U.S. is a strategic decision that requires careful planning. Whether you’re a resident or non-resident, choosing the right business structure is essential for legal protection, tax efficiency, and operational success. With various online services simplifying the process, entrepreneurs can efficiently register their businesses and start operating in compliance with U.S. laws.