1. USA >
2. Starting a Business >
3. Company Formation

Company Formation

The process of registration in the USA is a 6-step procedure, which is as follows:

• Register the business name and file the articles of association with the New York State Department of State, Division of Corporations. The forms can be purchased at a legal supply store or downloaded from department's website. This takes 1 day and costs $275.
• Submit an SS-4 form to apply for a federal identification number (EIN) for tax and employer purposes. This takes 1 day to submit but usually 4-5 weeks to process.
• Businesses selling goods must register online for sales tax, within 20 days of starting operations. This takes 1 day.
• Register as an employer by submitting a registration form to the Unemployment Insurance Division of the State Department of Labor. This takes 1 day.
• Arrange for workers compensation insurance with a private fund by presenting the unemployment insurance registration number, which is issued to the company in procedure 4. This is a one-day process.
• Publish two notices within 120 days of the company's formation. Two affidavits and a certificate of publication must also be submitted to the New York State Department of State, Corporations Division. This costs $50 and takes 1 day.

The three most popular options for formulating a company are:

• Limited Liability Company
• Partnership
• Corporation

Limited Liability Company

This type of organisation combines the corporate advantages of limited liability with the partnership advantage of pass-through taxation. The members of the organisation can be managers of the company, but not risks their personal assets. Limited Liability Companies are taxed on the level of its members like Partnerships.

Partnership

The easiest kind of Partnership is a Sole Partnership. A Sole Partnership is a business entity connected with the sole owner; the owner operates the company on his own terms.

A General Partnership is a form of business entered by two or more individuals who do not want to set up a Corporation or any other type of company. Therefore, the members are responsible for any debts and liabilities in proportion to their stake in share capital of the Partnership. The distribution of profits is conducted in the same way.

Corporation

The most popular types of corporations used in the United States are the C-Corporation, the S-Corporation and the Non-profit Corporation. C-Corporation is the most commonly used, and is suitable for businesses of any size. C-Corporations can have any number of shareholders. The liability of the shareholders is only limited to the amount of capital contributed by them.

If a company assumes S-Corporation status, for tax purposes it is regarded as a Partnership or a Limited Liability Company. S-corporations are not separately taxable entities, so the income is supplanted to the shareholders.

Initial Setting-up Costs

Below are some typical costs you could expect when starting up your business in the United States:

• Filing Fees for Incorporation - Expect these fees to range from approximately $80 to over $1,000, depending on the state
• Lawyer Fees - Expect these to range from $1,000 to $5,000, depending on the location and type of corporate entity
• Minimum Franchise Taxes - Some states impose minimum franchise state taxes of up to $800 or more
• Office Space - Expect even office shared arrangements to cost as much as $1,000-$5,000 per month, depending on the location
• Insurance - A business insurance package might cost as much as $4,000 per year or more
• Employees Salaries - Expect to pay a basic salary plus employment payroll taxes of at least $50,000 a year for a fulltime competent employee who is put in charge of running your US company. In high-cost-of-living states, this could be as large as $80,000 per year. Obviously, these salaries can be lowered in accordance with level of employee responsibilities
• Immigration Visas - Expect to pay between $1,500-$3,000 per visa fees depending upon the location and choice of visa

Are there any regulations I should know about?

The US is a highly regulated society, and is business culture is no exception. As such, businesspeople should be made aware of the many regulations, standards and guidelines that may affect the sale of their product or service. What follows is a list of predominant regulatory bodies.

• US Customs and Border Protection for regulations affecting the importation of all articles into the US
• Food and Drug Administration (FDA) for regulations relating to US bioterrorism laws and the labelling of food, dietary supplements, cosmetics, drugs (both prescription and over-the-counter), medical devices, items that emit radiation and animal foods
• Environmental Protection Agency (EPA) for regulations affecting any product that may be considered toxic or hazardous to the environment such as pesticide, fungicide, rat poison or anti-microbial agents
• US Department of Agriculture (USDA) through its Food Safety and Inspection Service (FSIS) is responsible for ensuring that the US commercial food supply is safe, wholesome and correctly packaged and labeled
• Consumer Products Safety Commission (CPSC) for regulations and voluntary standards affecting consumer products that may pose a risk of injury or death, such as flammable products, toys, items containing lead and defective electronics. The CPSC comes under the umbrella of the Federal Trade Commission (FTC)

?

Offshore Companies

By choosing to incorporate an offshore company, business owners and? investors can set-up a business outside the jurisdiction of its operations. Offshore companies are traditionally, but not exclusively, incorporated for lower fees and taxes. Business owners must abide the regulations of the offshore jurisdiction, and must not trade within the jurisdiction.

The benefits are vast. As aforesaid, reduced tax and fees are often big factors when considering offshore incorporation. A company may also choose and offshore location to:

• Simplify set-up and maintenance - entrepreneurs may find bureaucracy and red tape less of an obstacle in offshore jurisdictions
• Assume anonymity - the names of owners and directors are not for public record, and references to the company may only be made in its registered agent
• Ensure legal protection - for instance, some jurisdictions favour corporate governance, meaning a company is only liable to offshore laws as opposed to those in its areas of operation
• Protect assets - business owners may opt to arrange their assets and transactions in such a way that protects them from liability
• Characteristics of an offshore company:
• Memorandum and Articles of Association
• Certificate of Incorporation
• Registered Office/Agent
• Shareholders / Members
• Directors / Managers
• Company secretary
• Statutory Register
• Bookkeeping

Traditional locations for offshore incorporation are tax havens, such as the British Virgin Islands, Panama and Monaco. Other favoured areas include India, the Bahamas, Dubai, the Cayman Islands, Cyprus, Seychelles, Marshall islands, Delaware, Turks & Caicos Islands, Hong Kong, Jersey, Guernsey and the Isle of Man.

Franchise Opportunities

If you want to get into franchising, the United States is arguably the best place to do so. Not to sink into sycophancy again, but these guys are the godfather of franchising. Their home-grown franchises are easily the most recognisable and successful on the planet. We needn't name them; they're already permanently engrained our consumer psyche. Heck,franchising is so big it symbolically marked the end of the Cold War by putting a McDonald's in Moscow.

Buying a franchise in the States can, indeed, give you an essential head start in business.

The United States also hosts the world's largest franchise shows, where companies such as MFV Expositions bring together potential franchisees along with the industry's hottest prospects, seminars and workshops.

Click here to Ask an Expert about Company Formation in USA