At Asena Advisors, we establish business entities for clients using a holistic approach. As such, we custom build structures around your goals whether that be building long term cash flow from passive investments or an active business interest or structuring a business to facilitate a capital raising, a future listing on a U.S. stock exchange or a sale. In doing so, we provide in-depth analyses on which U.S. entity best suits your needs, from both a tax perspective and a legal one.
The main U.S. entity types are partnerships, limited liability companies, and corporations. Entity’s themselves can be customized, but each type has some defining characteristics, as explained below.
Partnerships are formed when two or more persons enter into a trade or business together. Each partner is liable for the acts or omissions of the partnership, including the acts of another partner done within the scope of the partnership’s business activities. With regards to taxation, partnerships are treated as “pass-through” entities. As such, each partner must pay tax on their pro rata share of the partnership gains, while remaining liable for any losses. Moreover, each partner must report and file their own tax return.
Limited Liability Companies (LLC) are formed when Articles of Organization are filed with the state of which the LLC will be governed by. Like partnerships, LLCs are flow through entities for tax purposes. However, unlike partnerships, the LLC members are not exposed to personal liability.
Similar to LLCs, corporations can only be formed through the filing of incorporation documents with a chosen U.S. state. Corporations are also legal entities and are liable for actions taken on its behalf; accordingly, owners are shielded from personal liability. Corporations differ the most from the other entities when looking at the tax implications. Specifically speaking, corporations are not pass-through entities. Thus, corporations must pay taxes on their profits and are liable for losses. Owners must pay taxes on distributions made from the corporation, subjecting these profits to double taxation (i.e. taxation at an entity level and on the subsequent dividends).
In addition to choosing an entity, businesses need to choose a state in which to organize under. The most commonly utilized states are Delaware and Nevada. However, it is important to careful consider each state’s taxes, economic incentives, wage requirements, and industry market when determining which to organize under.
Lastly, foreign businesses and business owners must be sure to acquire the required licenses and visas to operate legally within the U.S.
Asena Advisors, can help you identify and satisfy these requirements.
We care. Asena’s guiding philosophy is to understand and have empathy with our clients while providing specialist professional tax advice and services. If you need integrated cross border tax advice and compliance our renowned team is able to help you.