Steps to Business Entity Formation in United States

Globalization has provided scope for business houses to expand their business across geographical boundaries and oceans. Irrespective of the type of business, be it manufacturing unit or a service, most forward looking organizations tend to look out for newer markets in the United States. Entering into the U.S. market is a great venture for many foreign businesses.  

Business refers to  continuity and the  initiating point for this incessant procedure is through incorporation. Business entity formation, in the US can incorporated either as

  • Sole Proprietorship,
  • Partnership
  • Limited Liability Company or
  • A Corporation


Sole Proprietorship is a  type of entity formation owned and operated by an individual, with  no legal difference between the business and owner. Set up at a reasonable cost, it is simple to dissolve and usually involves no tax planning as the profits and losses are a part of the individual owner’s income.  Partnership  business on the other hand  involves two or more people or  business entities  sharing the profits and losses  equally. Every partner has a joint responsibilities to the partnerships and further,  any partner might be held responsible to pay off the total debts of partnership regardless of his participation in capital contribution, profit or losses.

The Limited Liability Companies (LLCs) are the  highly flexible kind with the option for the  members involved  to have limited liability. They  can choose to be taxed either as partners or corporations or can also be disregarded for tax aspects like that of a sole proprietorship. The corporations are the complex business entities in comparison to others and needs  a new legal entity distinct from  its owners.

With each type of business entity formation offering a discreet tax and business advantage; it also demands the business entity maintain a corporate compliance. Eminent tax planning service providers besides offering the necessary guidelines regarding business entity formation , also helps the entities with services to meet the inherent requirements of business operations in the United States. From  registration of agencies and business name, application of EIN, maintenance of minute books and drafting of resolutions,  Business Licenses & permits, Bylaws and Operating Agreements, providing certificates of Good standing, Corporate & Compliance kits as well as filing of annual taxes.

However, it is mandatory for every business entities, in the US  to report of all income sources worldwide, irrespective of  them receiving a business tax return statement or its foreign equivalent. In addition to this the individuals and entity with any  financial interest in, or with signature authority, or other authority over one or more accounts in a foreign country must provide a  Foreign Bank Account Report(FBAR).  Non reporting of such financial sources is a crime and IRS examiners in collaboration  and their  international partners focus on aggressive international tax planning by entities and structures established in foreign jurisdictions to evade taxes.

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