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Incorporation in USA: Corporation or Limited Liability Company “LLC”?

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If you decide to incorporate your business in the U.S., whether in Delaware or in any other state of the country, several legal structures are available, the most popular being the corporation and the Limited Liability Company (LLC).

Incorporated entities

The general corporation (C Corporation):

This is the most widespread legal form adopted by medium and large businesses in the United States. The main characteristics of the C Corporation are:
• Separate legal personality.
• An unlimited number of shareholders.
• Taxation of profits and losses through the corporation (separate from the owners).
• Possibility to raise capital by selling shares in the company.
• Shares may be transferred easily.
• Attractive tax rates.
• Shareholders or directors do not need to be U.S. citizens or residents.

The closed corporation:

The characteristics of a Closed Corporation are relatively similar to the C Corporation except for the following points:
• The number of shareholders is limited to 30.
• The transfer of shares is subject to the prior approval of the directors.
• It is prohibited to sell shares on the stock exchange.

The S Corporation:

The S Corporation is a C Corporation that has been granted a special tax status by the Internal Revenue Service following a request made within a certain time frame after its constitution. This status allows you to avoid double taxation (first at the corporate level, then at the personal level) and does not affect the protection offered by the corporate structure. The number of shareholders in this case is limited to 100 and their American citizenship or residency is required.

The LLC: Limited Liability Company

The LLC or Limited Liability Company is the American counterpart to the French S.A.R.L. (Société à responsabilité limitée).

Introduced in 1977, limited liability companies (LLC’s) are widespread in the United States today, due to the many advantages offered by this statute.

The LLC resembles the S Corporation in that it allows you to avoid double taxation of income (at the corporate and personal levels). In addition, the Limited Liability Company is not subject to certain restrictions imposed on the S Corporation. Below are a few of the benefits offered by the LLC:
•The personal liability of a member is limited to his capital outlay and the property of members is protected.
• No taxation at the corporate level.
• The number of members is unlimited.
• The organization of the LLC is flexible.
• Corporate formalities are largely simplified.
• Shareholders or directors do not need to be U.S. citizens or residents.

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