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Incorporating a Business in US
Benefits of Incorporating in US
Regardless of the size of your US business, all US businesses can benefit from incorporating. Advantages of forming a corporation or Limited Liability Company (LLC) in US include:
- Personal asset protection. Both corporations and LLCs in US allow owners to separate and protect their personal assets. In a properly structured and managed company, owners should have limited liability for business debts and obligations.
- Additional credibility. Adding Inc. or LLC after your US business name can add instant authority. Consumers, vendors, and partners may prefer to do business with an incorporated company.
- Name protection. In most states, other businesses may not file your exact corporate or LLC name in the same state.
- Perpetual existence. Corporations and LLCs in continue to exist, even if ownership or management changes. Sole proprietorships and partnerships just end if an owner dies or leaves the business.
- Tax flexibility. Though profit and loss typically pass through an LLC and get reported on the personal income tax returns of owners, an LLC can also elect to be taxed as a corporation. Likewise, a corporation can avoid double taxation of corporate profits and dividends by electing Subchapter S tax status.
- Deductible expenses. Both corporations and LLCs may deduct normal business expenses, like salaries, before they allocate income to owners.
In the United States, the individual states incorporate most businesses, and some special types are incorporated by the federal government including national banks, federal savings banks, and federal credit unions. Federally chartered organizations are either issued a charter by Congress or are licensed for a specific operation (such as a bank) by a federal agency. (Many governmental units are specially formed public corporations and some private organizations have received a charter from Congress.) Corporations are required to file articles of incorporation with a state agency for each state they operate in. Corporations operating in the nation's capital file with the District of Columbia, but this does not make them federally chartered.
In the articles of incorporation, the corporation's name must be stated. Usually, at least one word of its name must indicate that the entity is a corporation (indicating it has limited liability) as opposed to an individual (with unlimited liability). There are also restrictions that may not be used, for example, a corporation may, in some cases, not be allowed to use a word or phrase that implies it is a government agency, and may in some cases be restricted from using certain terms referring to special businesses, e.g. most states prohibit a corporation from having the word "bank" in its name unless it is chartered as a bank or has special permission. Each state has varying requirements for forming a company and also determining what designations can and can not be used.
The only terms that are universally acceptable in all 51 U.S. jurisdictions that register corporations are either the word "Corporation" or "Incorporated" or the abbreviations "Corp." and "Inc." Many allow "Limited" or "Ltd." and some states allow "Company" (or "Co.") but a number that allow use of "Company" prohibit use of "and Company", "and Co.", "& Company" or "& Co."
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