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Types of companies in America

When establishing a company in the United States, there are several legal types to choose from, depending on the nature of the business, the number of shareholders, legal and tax responsibilities.
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Types of companies in America

Sole Proprietorship
  • They are the simplest types of companies, where the owner is one person who is responsible for all profits and losses. There is no legal separation between the owner and the company, which means that the owner is personally liable for debts and obligations.
Partnership
  • A general partnership in which two or more persons participate in the management of the business, with unlimited liability for debts.
  • A limited partnership consists of at least one general partner who is responsible for management and obligations) and a limited partner who only invests money without taking on management responsibility or debts.
S Corporation
  • It has tax advantages, since it does not pay taxes at the corporate level, profits are taxed directly to shareholders according to the individual taxation system. The number of shareholders is required to be 100 or less, and all of them are citizens or permanent residents of the United States.
Limited Liability Company - LLC
  • It combines the advantages of companies and partnerships, providing legal protection of their owners from debts, with tax flexibility.
C-Corporation
  • Treated as a separate legal entity from its owners, which gives legal protection from financial liabilities.
  • It can raise funds from investors by issuing shares, but it is subject to taxation at the company and shareholder level when distributing dividends (double taxation).
Nonprofit Organization
  • It is established for charitable, religious, educational or scientific purposes, enjoys tax exemptions. Profits should be used to support non-profit goals rather than distributed to shareholders.

How to choose the right type of company

The choice of a legal type depends on several factors such as:

  • The scale and nature of business activity.
  • The required level of legal responsibility.
  • The appropriate tax structure.
  • The number of potential shareholders and investors.

Choosing the right type contributes to the protection of personal assets, minimizes taxes, facilitates the future growth of the company. Therefore, it is better to consult a lawyer or financial adviser before making a decision.

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