There are various documents associated with entity formation, depending on the type of entity you are forming. We will address the three main types of entities: Corporation, Limited Liability Company, and Partnership, the differences between them, what formation documents are, and which document are associated with which type of entity.
Source: Corpnet Article
A corporation is an independent legal entity owned by shareholders. Corporations are formed under the specific laws of the state they are registered in. Some advantages of forming a corporation are a.) the ability to raise capital by selling stock, b.) taxes are paid separately from the owners, and c.) shareholder’s personal assets are protected from the responsibility of the business debts and actions. According to U.S. tax law, a nonresident alien may own shares in a C corporation, but may not own any shares in an S corporation, so most foreign companies choose to register their U.S. business as a C Corporation.
When filing for a corporation, a Certificate of Incorporation which contains the Articles of Incorporation will be issued. The Articles of Incorporation share important information such as the company’s name, shares of stock, contact information and establishes the corporation as a separate business entity.
LLC (Limited Liability Company)
An LLC is a legal structure which contains the limited liability of a corporation with certain tax flexibility. Owners of an LLC are referred to as the ‘members’ and all profits and losses are passed through the LLC to the members. Some advantages of an LLC are a.) fewer restrictions on profit sharing within the company, b.) limited liability protection for the members from business decisions, c.) more flexibility and less paperwork and costs associated.
When filing for an LLC, you will receive a Certificate of Formation containing the Articles of Incorporation. The Certificate of Formation will list the name of the company, address, and the registered agent.
A Partnership has two or more partners sharing ownership of a single business. The partners will contribute to the entirety of the business operations and also share in the profit and loss of the business. There are General Partnerships and Limited Partnerships. In Limited Partnerships, the limited partners have limited liability and limited management decision input depending on the percentage of their investment and negotiation of the Operating Agreement.
The company formation document for a Partnership is the Certificate of Partnership which contains the Articles of Partnership. The Certificate of Partnership proves which state the business was registered in. The Articles of Partnership lists the name of the business, names and addresses of the partners, and the Registered Agent address.
Other company documentation such as your businesses’ Federal Tax ID letter, Certificate of Good Standing, and the Certificate of Authority may be asked for when opening a bank account in the U.S. For more information about opening a bank account in the U.S. as a foreign company, check our upcoming blog on 'Opening a Bank Account in the U.S.'
Here at HPC, we know what it takes to form and incorporate your business in the U.S. HPC has helped many clients open their U.S. corporate bank accounts, assisted in where and what type of entity to form, U.S. company formation, and registered an EIN number for their company. If you are looking to expand your business to the U.S., let HPC know by using the link to Schedule a Consultation below.