1. Choosing the Right Legal Structure -
1.1 Introduction -
Establishing a business entity in the United States can be an important strategic step for any international company that wants to avail itself of the world’s economy. There are, however, many considerations to weigh carefully in consultation with an experienced attorney. Perhaps first and foremost, a company should choose the legal structure that is most advantageous and best suited to their needs. Section 1 examines the basic principles of five of the most common types of business entities in the United States: the corporation, the limited liability company, the general partnership, the limited partnership, and the limited liability partnership. In particular, this Section will highlight governance, capitalization, personal liability, and tax treatment for each entity type. While the tax discussion will focus on federal income tax, most state laws follow federal income tax principles. Finally, some consideration will be given to less-common business structures and other regulatory issues.
1.2 A Preliminary Note: Choosing a State for Organizing the Entity -
In the U.S. federal system, each state promulgates its own statutes and regulations that govern the business entities which may be established in that jurisdiction. It is important to remember that in most cases there is no general “U.S. corporation,” and that choosing the state in which to organize is a preliminary decision that will affect a company’s formation requirements and operations. A natural choice for local companies is often the state where the company maintains its primary place of business or U.S. headquarters...
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