Company registration in the USA

There are no offshore, tax-free states in the United States, meaning that you have registered companies and do not pay taxes. Since there is a three-level taxation system in the USA, taxes may differ at the state level, but at the federal level, both LLC and C-corp pay taxes.

Example 1.

At the federal level, everyone pays the Federal Corporate Income Tax. 

Then going down to the state level

Personal Income Tax

Delaware’s income tax rate ranges from 2.2% to 6.6%:

Florida and Wyoming do not have a personal income tax

Corporate Income Tax

Delaware’s flat rate – 8.7%

Florida’s taxable income is over $50,000, rate: 01/01/19 – 12/31/21 -4.458%

Wyoming – none.

Franchise Tax

Delaware flat fee – $300 LLC, C-Corp – $250

Wyoming flat fee – $50 (license tax)

Florida – none.

Sales tax rate

Florida – 6%

Delaware – 0%

Wyoming – 4%

Example 2.

Also in the U.S., you can submit a form to pay company taxes at the place of the owner’s residence. Many people see this as an opportunity not to pay any tax at all. But the next question arises: “How do Ukrainians find out if they have a company in the USA?”

1. From 2022, all owners of foreign companies must submit CFC (Controlled Foreign Companies) notifications.

2. In the case of IRS request for proof of residency tax payment, you will not be able to provide a proof. The company will be audited (and this is a very long and often frustrating process for clients, as you have to provide all statements, invoices, etc. for all time of company existence), a fine will be applied, and you can probably no longer conduct business in the USA, as well as obtain a visa.

In contrast to European countries, the USA does not require an authorized fund when opening a company.

All you have to do is register the company with the Companies Registry and then in the Tax Registry.

You may have heard that LLC is hard to sell or attract investments.
But we incline to think the company is a tool that should be effective for your business. If, in the early stages, you have a small turnover or are just entering the USA market, you are better off operating as an LLC. If it comes to selling the business or attracting investments, you can always change the form of ownership.

Let us take Delaware as an example of a company’s change of legal form.

You must submit a request to change the company status and pay the Franchise Tax of $300, regardless of whether the reporting period has come up.

In terms of time, it will take about one month. The procedure will take one week if you pay a state fee of $150.

For Florida, the situation will look as follows.

The status of a company from LLC to C-Corp is changed by filing the 8832 Form with the IRS. You do not need to do this separately for the state; they will find out about it when filing their tax declarations.

After the notice is reviewed, a confirmation letter will come from the IRS.

Registry in Delaware and Wyoming is closed at the state level. The registry in Florida is open.

• Company members pay taxes at the individual level;
• LLC can be managed either by members of the company (Member-Managed) or appointed managers (Manager-Managed); a manager does not have to be a member of the company (LLC);
• The liability of LLC members is limited to the amount of their personal investment in the company;
• There are no quantitative restrictions on LLC membership;
• All company members have limited liability;
• No double taxation (use of the simplified tax system); 

The possibility of disproportionate distribution of profits among the company’s participants.

• Different states have different systems of taxation and liability for LLCs;
• Any changes in the company membership or the proportions of their shares in the authorized capital involve mandatory changes to the package of constituent documents of the company.

• All shareholders have only limited liability within the invested capital (i.e., within the amount paid for the shares purchased);

• Owners (shareholders) can elect directors who will run the business instead of them or do it independently, being a member of the corporate board;

• Ownership in a corporation can be easily transferred to new shareholders by selling shares;

• C-Corporation may issue various types of shares, and some states allow the issuance of bearer shares.

• Corporation’s income is subject to double taxation. It happens when C-corp income is first taxed at the corporate level, and then dividends paid to shareholders are taxed again, but at the individual level of each shareholder;

• There are more formalities and government oversight as double taxation is formed, and a higher level of protection is granted to the owners of such corporations.