Can a Foreign Company own a US LLC ? (Editor’s Pick)

Establishing Your Business in the USA: A Guide for Foreign Nationals

A lot of effort goes into establishing a business and making it stand firm through the years. The United States of America is famous for providing different business structures and a platform to evolve and expand. If you are a foreign national looking to set up a business entity in the USA, you might be aware of the Limited Liability Company (LLC) structure that is lucrative because of the privacy and protection it offers to non-US residents.

A Limited Liability Company protects your personal assets in the company, saves your time and effort from being taxed more than once, and also keeps your company safe from lawsuits. It is the ideal choice for foreign nationals looking to flourish their business in the USA since it is easy to incorporate and offers more benefits than risks.

What Kind of Business Structures Can Be Adopted by a Foreign Company?

Usually, two primary business structures can be owned in the United States of America by foreign companies:

1. Limited Liability Company (LLC): LLCs are advantageous because you will not incur any personal losses due to the company’s misfortunes. Under an LLC, the members and their assets are safeguarded. There are no restrictions on the sharing of profits between two or more members of an LLC. The limited liability feature is ideal for high-risk businesses as it offers the benefits of both partnership and corporation structures. To form or own an LLC in the USA, you will require the following documents:
   • Certificate of Formation
   • LLC Agreement
   • An Agreement of Confidentiality Between the Members
2. C-Corp: The C-Corp business structure is most suitable for non-residents willing to establish a startup in the USA. The IRS does not interfere with the workings of the company in a C-Corp structure. Further, there is immense opportunity to expand and invest in capital. C-Corps are double-taxed, which can be managed with the right business tactics. The owners/members of a C-Corp do not incur any personal liability, and the legal entity of the company lies separate from them. You will require the following documents to form a C-Corp as a non-resident in the USA:
   • Articles of Incorporation
   • Bylaws Stating the Names and Addresses of All the Shareholders and Officers
   • An Agreement of All the Shareholders of the Company

LLC vs. C-Corp: Which is a Better Choice?

Although both LLCs and C-Corps are ideal options for your foreign company to incorporate in the US, most entities proceed with the Limited Liability Company due to its flexible regulations compared to the C-Corp business structure.

LLCs are preferred over C-Corps for the following reasons:

• Taxation: One benefit that LLCs have over C-Corps is that they are not double-taxed unless that method is chosen. LLCs have a flexible option where they can choose to be taxed as a C-Corp or a pass-through entity. While choosing to be taxed as a C-Corp will result in double taxation, opting to be taxed as a pass-through entity will tax every member of the LLC on a personal level instead of the corporate one.
• Ownership: LLCs offer membership based on a single owner or more than one individual. In a multi-member LLC, the members can run the business without any hassles. If a manager runs the LLC, he or she can appoint a member outside the company as well to operate the business entity.

Some business professionals might choose C-Corps over LLCs due to the ease of managing stocks compared to an LLC. However, it depends on your business needs and how smoothly you can operate it in the USA as a non-resident. Water and Shark can guide you in choosing the business structure that suits you best to make a promising choice.

Are You Making an LLC a Joint Venture or a Fully-Owned Subsidiary?

Once you decide to establish an LLC of your foreign company in the USA, you need to determine whether you want it to be a joint venture or a fully-owned subsidiary of the parent company. Each has its pros and cons, which can be weighed according to your requirements.

A joint venture is established and operated by two or more companies. The partnership might be equally divided between the companies, or one of them might have a larger share. If the venture undergoes turbulence that results in more losses than profits, it is divided between all the companies involved. However, a joint venture has the following cons:

• A joint venture requires better access to skills and other resources, which introduces a major risk factor.
• The profits incurred by a joint venture must be divided among the companies in the partnership, leading to lesser financial benefits compared to a fully-owned subsidiary.

A fully-owned subsidiary is controlled by one company alone and thus, has access to all skills, knowledge, and resources within the firm itself. Although loss management might be a bit problematic on a personal and corporate level, every profit made is dedicated to the company. Opening a subsidiary of your foreign parent company in the US might be an ideal option for most business professionals. Irrespective of which business structure you choose, Water and Shark can help you select the correct path.

Owning a US-based LLC by a foreign company does not take much time and follows a similar process even for residents. If you wish to receive a consultation about the same, contact Water and Shark today to give your business the necessary boost in the United States of America.