US BUSINESS ENTITES

Dear Connections,

Hope you all are must be fine and doing well. I want to share some key types of USA Business Entities they included: -

1)     Sole Proprietorship: -

·      As the name goes it the sole proprietor is like one man show where by the single person is the owner of the business.

·      He takes up all the risks.

·      He takes away all the profits that has been earned by him.

·      Owner makes all the decision and have control over business.

·        The profits are taxed once as the Personal Income tax in the hands of the Sole Proprietor itself.

2)     Disregarded Entity: -

·      The entity which is made by one person but have a separate legal status.

·       We can say that it is just like a One Person Company in India.

·      The Income are taxed as in Owner Return only.

3)     Partnerships: - When two or more person joint together to carry out the business and have a well-defined agreement on the terms between them. Such person can form a Partnership. Broadly the partnership can be of four types they are

a.      General Partnership: -

·      The Liability of all the partners is unlimited and there are personally liable for all the liabilities of the partnership and have rights over all the assets of the partnership.

·      All the Partners are engaged in partnership day-to-day business.

b.      Limited Partnership: -

·      The Partners who are engaged in day-to-day business of the Partnership can be termed as General Partners and   there are personally liable for the Partnership Debts.

·      They are second type of partners which are only brought in the Partnership to bring in capital and are give their share in profit which are terms as limited partner.

·      When such partnership is formed between limited and general partner it is known as limited partnership.

c.      Limited  Liability Partnership (LLP):-

·      Where the liability of all the partners in the partnership are limited to the capital contributed by them then such partnership is known as limited liability partnership.

d.     Limited Liability Corporation (LLC): -

·      A Hybrid form of corporation which has a ability to limit the personal liability and as the assess to profit and losses to individuals.

·       It is most flexible form of Business entity commonly used in US.

4)     Business Corporations: - A Business Corporation  is a separate legal entity form in the eyes of law. It is distinct from its members. It is complex structure as compared with sole proprietorship and partnership.

The Business Corporation can be broadly divided into two types they are as follows: -

a.      C-Corp: -  

·      A Corporation that conducts business realised income or loss pays taxed and distribute the income to its shareholders.

·      The Income in such corporation are double taxed as the C-Corp pays the tax on income earned by them then when the income is distributed to their shareholder then shareholder need to pay tax on such dividend.

·      There is no restriction on the number of shareholders in a C-Corp it can range from one to Infinity.

·      The Shareholder are not restricted to be US Citizen it means that the person from any corner of the world can be the shareholder of the C-Corp and even the Corporation can be the shareholder of a C-Corp.

·      The C-Corp can issue any number of classes of stock.

b.      S-Corp: - It is same as C-Corp in its working but the major difference are

·      There is no double taxation the shareholder only pay the tax on the income received from an S-Corp. The S-Corp need not pay any tax on its income.

·      The number of maximum shareholders is restricted to 100 Members

·      The  Shareholders of an S-Corp need to be an US Citizen.

·      The shareholders need to be Individual and no corporation can be shareholder of a S-Corp.

·      The S-Corp need to Issue only one class of Stock.

From the above all most commonly used are LLC and C-Corp.

This was based on my Study the difference types of US Entity

Ramanuj Mukherjee Abhyuday Agarwal Yash V. Priyanka Sinnarkar Chidimma Nwosu-Okoli Gayathri Sivaraj CA, FCCA, Bachelor of Accounting Ritisha Gupta

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