It’s clear that forming a business in the United States comes with a plethora of opportunities, both as a legal citizen of the country or even as a foreign national. The United States has the most developed consumer market, provides a multitude of legal seals of protection, supplies capital, all which serves as a foundation for creating and expanding a business.
United States possesses many forms of business structures, of which the most common is Limited Liability Company or LLC. There are a multitude of operational, tax related, and legal benefits of forming an LLC which together make it the most suitable option for startups and businesses that are looking for growth.
In this article, we will discuss the concept of an LLC, summarize its 10 benefits of forming an LLC in the US.
What Is an LLC?
In essence, an LLC is a type of legal business organization that marries together the liability shield of a corporation with tax benefits of a sole proprietorship or a partnership, which are easier to manage. This means that, you as an individual, do not lose your personal valuables, but at the same time, running the business remains simple.
Unlike corporations, LLCs do not require extensive record keeping, formal operating agreements, or annual meetings. At the same time, they provide robust personal liability protection for lawsuits, debts, and other legal issues concerning the business.
Want to save money and pay as little tax as possible? LLCs also have a lot of flexibility when it comes to taxation. In its default state, an LLC is a pass-through entity, which means profits and losses are passed to the owners and declared via personal tax returns.
To benefit from certain tax strategies, however, LLCs can also choose to be taxed as an S Corporation or C Corporation.
LLCs are perfect for online entrepreneurs, international founders wishing to do business in the United States, freelancers, and small business owners.
10 Key Benefits of Forming an LLC
1. Limited Personal Liability
One of the top reasons that entrepreneurs decide to have an LLC is the limited liability it has to offer. If your business ever gets sued or goes into debt, legally speaking, your personal assets such as your house, savings, car and investments are usually protected and not at risk.
This is due to the fact that LLCs offer limited liability. A without a doubt claim cannot be made on your personal belongings in accordance to settle business debts. This is very critical for businesses with clients, customers, employees, or sensitive information to protect.
On the other hand, sole proprietorships, along with general partners, bear the financial responsibility for business-related debts, which may completely obliterate their financial stability.
2. Greater Tax Flexibility
LLCs are regarded as one of the most flexible taxation structures available. By default, an LLC with one member is taxed as a sole proprietorship and LLC with more than one member will be taxed as a partnership.
In both situations, the company does not incur any tax liability at the entity level. Rather, the profits and losses flow to the members’ tax returns and not the other way around.
Furthermore, LLCs have the option of being taxed as a C or S Corporations by filing IRS Form 8832 or 2553 respectively. This could decrease self-employment taxes or allow more efficient reinvestment of profits depending on the structure and income of the business.
This versatility is a powerful asset overlooked by corporations and sole proprietorships, giving prime reason why LLC’s are usefully strategized for optimal tax purposes.
3. Easy and Affordable Formation
Forming an LLC is usually easy and inexpensive. The procedure usually requires the following steps:
- Selecting an appropriate business name
- Submitting the Articles of Organization to your state
- Appointing a registered agent
- Paying the state filing fee
- Drafting an Operating Agreement (optional but suggested)
The process in most states allows you to complete the steps online within a few business days. There is less paperwork compared to forming a corporation, and there is less maintenance workload after the LLC is established.
For LLCs, annual state fees are typically lower than those for corporations, and there is no need to issue stock or conduct shareholder meetings.
4. No Citizenship or Residency Requirement
An LLC can be formed by virtually anyone, regardless of their geographical location, which is one of the greatest benefits of an LLC. Forming an LLC in the United States does not require one to be a citizen or resident.
The flexibility provided makes LLCs appealing to international entrepreneurs, freelancers, e-commerce merchants, and service providers seeking to enter new markets, utilize US payment gateways, or establish themselves in the global economy.
A non-resident can set up an LLC, procure an EIN, establish a U.S. business account, and manage everything from overseas with sufficient support.
5.Credibility and Professionalism
A limited liability company enhances your business esteem. Customers, vendor and partners look at you as a contracted person rather than a freelancer or non-formal business because of the registered business “LLC” affixed at the tail of your company name.
This professional image can assist you:
- Earn trust with clients and customers
- Gain vendor accounts or wholesale contracts
- Obtain collaborators, investors or partners
- Open accounts with merchant and payment processors.
Service providing entrepreneurs and online shops reported improved trust and customer inflow after registering themselves as LLC.
6. Flexible Ownership Structure
LLC’s provide the finest flexibility concerning ownership and control. You may have:
- Single owner (single-member LLC)
- Multiple owners (multi-member LLC)
- People, corporations, or other LLCs can be registered as members.
The type of structure chosen, member managed or manager managed governs control; each member is entitled to a vote based on the passed operating agreement.
This flexibility is ideal for family businesses, start-ups, and investment groups who want more complicated division of ownership or profit sharing.
7. Privacy Protection in Some States
Particular states in the U.S like Wyoming, Delaware and New Mexico permit the creation of LLCs without disclosing the owners’ identities.
Such anonymity is beneficial if;
- You want to separate work and personal life
- You currently live in a country where entrepreneurship is discouraged
- You prefer to keep your business activity to yourself
- You want to protect one’s intellectual property or digital assets
At Bizstartz, our clients are privacy-oriented owners which prefer having their details concealed while legally protecting them under U.S. jurisdiction. Therefore, we helped them form LLCs in privacy-friendly states.
8. Access to the U.S. Financial System
Having an LLC formed allows you to tap into the entire financial ecosystem of the U.S which includes, but is not limited to:
- U.S. business bank accounts
- Credit cards and loans
- Payment processors (Stripe, PayPal, Square)
- Accounting software and merchant tools
This is particularly crucial for international entrepreneurs and online businesses that actively need to receive payments in U.S. dollars, pay for services from subcontractors, and build a business credit profile.
Possessing an EIN along with a U.S. LLC allows you to easily obtain a bank account in the US, improving the accessibility to ‘scalable’ tools for your growing business.
9. Reduced Compliance Burdens
LLCs Have Many Advantages Over Other Types of Business Organizations Compared To Corporations, They Have Lighter Formalities And Compliance Requirements That Include:
- Conducting annual meetings is optional
- Issuance of stocks is not mandatory
- Complex corporate by laws are not required
- Minimal reporting every year in most states
These factors reduce the administrative workload for small business owners and entrepreneurs. These individuals tend to prefer an LLC as it enables them to focus on actually running their business with minimal red tape.
Though some states impose an annual fee or franchise tax, the compliance burden is light, especially with the help of professional services like Bizstartz.
10. Drawbacks to Investors and Business Associates
Many angel investors and strategic partners are more than willing to invest in or partner with LLCs, particularly at an early stage, despite the fact that venture capital firms prefer to work with incorporated companies due to their equity structuring.
An LLC offers you a legal framework which you can scale into, and later switch to a C Corporation when the need arises. It also allows you to establish custom agreements amongst the partners, thereby facilitating the inclusion of other co-founders or advisors.
An LLC can, if correctly structured, serve as an effective platform for scaling in the long term and raising capital.
Final Considerations
Final Thoughts
An entrepreneur or a freelance worker will greatly benefit from a US based LLC, as it provides ease of taxation, legal protection, added credibility, and access to some of the largest financial systems in the world.
No matter if you are an American freelancer or a global entrepreneur, this structure can drastically change how you launch, grow, and protect your business.
At Bizstartz, we simplify U.S. LLC formation for residents and non-residents, ensuring it is done accurately and within the legal framework. Our packages come complete with:
- LLC Formation
- EIN Application
- Registered Agent Services
- ITIN Assistance
- Beneficial Ownership Information (BOI) Filing
- U.S. Business Bank Account Setup
- Bookkeeping & Compliance Support
- Trademark Registration
Want to kick start your U.S. business today?
👉Go ahead and book a free consultation or simply get started now with Bizstartz.
Frequently Asked Questions (FAQs)
1. Is it possible for a non-U.S. resident to set up an LLC?
Absolutely. You don’t have to be a citizen or resident of the U.S. to set up an LLC. With proper documentation, you can set up an LLC from almost any part of the world, provided you have a registered agent in the U.S. At Bizstartz, we help international entrepreneurs set up compliant US LLCs, so you can focus on other important tasks.
2. Am I required to live in the U.S. to operate an LLC?
No. An LLC can be operated from anywhere around the world. Numerous overseas owners if an LLC manage their businesses remotely through emails, video conferences, and cloud software. They can market their products and services globally, employ remote staff, and manage everything from their home country.
3. Who is a registered agent and do I need one?
Yes, a registered agent is required for the formation of an LLC in the U.S. This is an individual or a business that can accept service of process and other communications from the government on behalf of your LLC. Bizstartz offers registered agent services in all states which makes them great partners for LLC that operate in multiple states.
4. Am I required to pay U.S. taxes if I am a foreign LLC owner?
It depends whether each of your LLC’s activities gives rise to income sourced from the United States or has a fixed place of business in America. If your LLC has no customers, employees, or even a physical presence in the U.S., you might not pay taxes. That said, there are some forms that need to be submitted to the IRS. Personally, I can assess your situation and provide the right advice with the help of our tax advisors.
5. Is it true that having an LLC qualifies me to open a bank account in the US?
That is correct. Opening a business bank account with a U.S. bank requires an EIN and some form of legal business entity, such as an LLC. Having an LLC allows you to open bank accounts with U.S. banks and fintechs that work with non-US founders, which allows access to ACH transfers, cards, and credit lines.
