USA Corporations Inc.

A corporation is very different from a single or multi-member LLC because it is considered its own person for us tax purposes.

A corporation pays tax to the US government on its worldwide income just like US citizens would. The federal corporate tax rate is 21% and most states have a tax rate between 5 and 10% on income earned in their state.

Corporations are best for International individuals and businesses that have a physical presence in the United States. A corporation is the safest way to avoid double taxation with International operations in two countries. Most multinational businesses and large companies operate with corporations instead of LLCs for a number of reasons.

A corporation offers a bit more flexibility and how you do business in a Marketplace.

US corporations can take advantage of the U.S. tax treaties, while LLC’s and not because they are not US tax residents.

One of the most common reasons my clients decide to open a corporation is to seek investment from US-based investors and or potentially go public in the future.

US investors generally prefer to invest in corporations especially when the owners are not US tax residents.

Also is important to note that LLCs do not have stock or shares only a corporation can go public with a stock offering and actually sell shares. Even though an LLC can elect to be taxed as a corporation it cannot ever have shares or be involved in an initial public offering.

With a flat tax rate often a US Corporation will pay fewer taxes and then a Non-US Corporation.

Additionally, corporations draw hard lines between the operations of international business and aid to avoid double taxation.

In referencing double taxation here, I’m talking about the taxation of the US government and other countries. A US Corporation is still subject to a form of double taxation in the United States as it relates to dividends. The profits of a corporation are taxed at 21%, as we know.

After this tax is paid, these funds remaining would be considered dividends when paid to the shareholders. A US person receiving dividends from US Corporation would pay about 15% tax on dividends received from a US Corporation.

Having a 21% corporate tax and then about 15% tax on dividends does not make a US Corporation the best option for many US individuals.

For non-residents the rules are a bit different. US corporations still pay a 21% tax on profits. The US corporation is required to withhold 30% of all dividends paid to US non-residents.

There are tax treaties that lower your withholding rate based upon the residency of the shareholder with Canada and Mexico generally being the lowest at about 5%.

Now it’s not all taxes and withholding. There are certainly ways to operate a US Corporation without paying excessive taxes. Since many of my clients are small businesses oftentimes those that prefer a US corporation instead of an LLC will pay out most of their profits as a salary to themselves. This way there are no corporate profits, no income taxes to pay and there will be no dividends or associated taxes, but it is very important to arrange everything correctly so that this holds up should the IRS ever ask.

Very often we will recommend a combination of US Corp and USOC for our clients, but every situation is different.

If you are interested in finding out if a US Corporation is right for your business, contact us today.

Contact Form USA Corporations Inc

Contact os on Phone +45 70231422, or email, or the Contact Form below, and get answers to your questions about USA Corporations Inc in the United States. We always offer free advice on choice of USA Company, together with our free Quote.

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