Learn about US business models
28 jul 2018
As in Brazil, there are different types of companies that you can open in the US, and to choose one you need to know their particularities because this choice will influence everything from daily workflow to taxes. That is why it is important to work with a specialized consulting firm that knows the laws and will always show you the best path to take with your business.
Similar to the Individual Entrepreneur model in Brazil, there are no members, only an owner who can opt to get a commercial name if he/she wishes. The owner is the one who is fully responsible for the administration of the business and may have his/her assets confiscated to pay any debts contracted by the company. Banks do not usually make loans for this type of company. This business model may be a good choice for low-risk companies and homeowners who wish to test their business idea before forming a more formal business.
It is the simplest structure for two or more people wanting to form a business together. There are two common types: Limited Partnership (LP) and Limited Liability Partnership (LLP).
Partnerships can be a good choice for multi-owner companies, professional groups (such as lawyers), and groups that want to test their business idea before forming a more formal business.
Limited Liability Company (LLC)
An LLC allows you to take advantage of both the “partnership” as well as the “corporation” business models.
LLCs protect the partner from personal liability in most cases. Its members are considered independent and must contribute to their own to Medicare and Social Security.
LLCs may be a good choice for middle or high-risk companies, homeowners with significant personal assets they wish to protect, and homeowners who wish to pay a lower tax rate than they would have to with a corporation.
A corporation is a legal entity completely separated from its owners and it provides greater protection against personal liability. They also require more comprehensive records, operational processes and reports.
Unlike sole proprietorships, partnerships and LLCs, corporations pay income tax on their profits. In some cases, corporate profits are taxed twice – first when the company makes a profit and again when dividends are paid to the shareholders on their personal tax returns.
Corporations have an advantage when it comes to raising capital because they can raise funds through the sale of shares, which can also be a boon to attracting employees.
Corporations can be a good choice for medium to high-risk companies, companies that need to raise capital, and companies that plan to “open up capital” or that will eventually be sold.