How To Register a Company in The US

The US business landscape is known for its large consumer base, innovation-friendly environment, and diverse business opportunities. 

The GDP of the US is estimated to be $27.97 trillion in 2024. According to the latest World Bank annual ratings, among 190 countries, the United States is ranked 6 in the ease of doing business. Further, the country is home to millions of businesses across diverse sectors, reflecting a high business density.

Whether you’re an established business looking to expand its operations or a budding entrepreneur who wants to set up a company in the US, one of the most fundamental steps is to register a company in the US. 

Here, we will help you navigate the basics of USA company registration, from the types of businesses to the necessary paperwork you need to get done for opening a company in the USA. 

Determining Your Business Type

One of the initial decisions you must make when starting a business in the USA is to decide on a business type. This forms the foundation for future aspects like how much your personal assets are at risk, your day-to-day operations, how you file taxes, etc.  

You can decide the type of business based on a few key factors like business goals, liability, ownership, taxation, legal formalities, future growth, and exit strategy.

Broadly, the types of businesses are divided into the following: 

1. Sole Proprietorship 

In a sole proprietorship, a single person owns and operates a business. This becomes a default business structure if you don’t pick any other. Here, the individual’s personal assets and liabilities are not separate from the business. 

2. Partnership Firm 

When two or more people partake in business operations, it can be called a partnership firm. The partnership contract that’s in place determines how they manage and operate the business, including day-to-day operations. The involved partners carry the weight of the company’s actions, including taxes, settling debt, fulfilling legal obligations, and more.    

3. Limited Liability Company (LLC)

LLC is a form of business where the owners are protected from personal responsibility for their liabilities or debts. This form of business offers the advantage of limited liability and the simplicity and flexibility of a partnership. Typically, state laws govern LLCs so regulations may vary from state to state. However, core characteristics remain the same. 

4. C Corporation 

This is a form of entity where the owners, or shareholders, are taxed separately from the entity. A C corp is a separate legal entity with shareholders, directors, and officers. Meaning it can make money, pay taxes, and be sued on its own. Unlike the LLC or the S corp, the C corp pays its own income taxes that are separate from the owners. 

In other words, the shareholders or owners might face ‘double taxation’ because they pay taxes on any dividends they receive from the company's profits. This business structure is better suited for larger businesses that intend to go public in the future. 

5. S Corporation 

S Corporation is one where, under the tax code, this structure can pass its losses, deductions, credits, and taxable income directly to its shareholders. It’s very similar to the C corp, the only difference is the S corp comes with a special tax status. The S corp does not pay its own income taxes. The profits and losses "pass through" to the owners (shareholders), who report them on their personal tax returns. This way, the double taxation like in C corp can be avoided. This makes this structure better for smaller businesses.

Steps to Register a Business in the US

To register a company in the US, you need to know both state and federal employment laws. Depending on your location and business type, the exact steps may differ. However, there’s a general outline of the steps you would undergo when opening a company in the USA with federal agencies.

Steps to Register with Federal Agencies

Follow the steps below for company registration in the USA for non-residents.

1. Determine Your Business Structure

Before opening a company in the USA, determine the type of business you want to start. Only specific types of businesses need federal registration, like corporations that issue securities, banks, and businesses involved in interstate commerce. You don't necessarily need a federal registration if you have a business that runs in a single state. 

2. Obtain an Employer Identification Number (EIN)

Issued by the Internal Revenue Service (IRS), also known as the Federal Tax Identification Number, the EIN is a unique identifier. It is necessary for federal tax purposes and other business transactions. You can apply for this online, by mail, or via fax. 

3. Register with the IRS

Depending on the nature of your business, you may be required to complete the necessary forms for the IRS that your business falls under.   

Additionally, some businesses might have to pay additional taxes such as payroll, income, or excise taxes. You need to register with the IRS for this. 

4. Apply for Necessary Permits and Licenses

Depending on which industry you choose to operate in, you may require certain federal permits and licenses. For instance, those in the food business need a Food Establishment Permit from the Food and Drug Administration (FDA). It’s best to check with specific federal agencies to determine your needs. 

Also Read: US Work Permits

5. Comply with Industry Regulations

Like the necessary permits and licenses, your business also needs to comply with industry-specific regulations. For instance, healthcare providers must adhere to the Department of Health and Human Services (HHS) regulations.

6. Register Intellectual Property (Optional)

Don’t forget to register any unique intellectual property like copyrights, patents, trademarks, etc. 

7. File Required Reports and Documentation

Keep all important documents safe and ensure you file all the required reports that federal agencies require. If you employ staff, you must report employee wages to the IRS. 

It’s a good thing to keep in mind that the above steps are just general guidelines. What’s specific to you and your business will vary. 

Also Read: How to Avoid Misclassification as an Independent Contractor in the USA

Steps to Register with State Agencies

To register a company in the US at the state level, you need to follow certain steps. While it varies from state to state, he’s a basic outline to give you a glimpse of the steps involved. 

1. Choose a Business Structure 

Before starting a business in the USA, you must determine its structure. Most businesses, including sole proprietorships, partnerships, LLCs, and corporations, are registered at the state level. 

2. Select a Name for the Business

You must choose a unique name for your business. This name must not only be available but also comply with the state regulations for naming businesses. You can check for availability on the state's Secretary of State website.

3. Register Your Business 

Using the necessary paperwork and filing the documents, register your business with the state.  

4. Obtain an Employer Identification Number (EIN)

Issued by the Internal Revenue Service (IRS), EIN is a unique identifier. It is necessary for tax purposes and other business transactions. You can apply for this online, by mail, or via fax. 

5. Apply for Necessary Permits and Licenses

Depending on which industry you choose to operate in, you may require certain state-level permits and licenses. 

6. Register for State Tax 

Register for state-level taxes like use tax, sales tax, etc., if it’s applicable to your business. 

7. File Required Reports and Documentation

Keep all important documents safe and ensure you file all the required reports that state agencies require. 

It’s a good thing to keep in mind that the above steps are just general guidelines. What’s specific to you and your business will vary. 

Understanding Tax Obligations

A registered corporation must file tax returns and pay taxes to the federal government, the state where it's registered, and any other states or cities where it does business. At times, businesses also collect tax from customers and send it to the government. Not following through with these tasks on time will result in fines, losing the right to operate, and even shutting down.   

Here’s a look at the different tax and reporting requirements businesses have to deal with. 

1. Income tax

• Sole proprietorship and partnerships - Individuals pay income tax based on their share of the business's profits. At the federal level, the rate is 10% to 37% based on your income bracket. 
• C corporations - These corporations must pay both state and federal income taxes. It’s different from the individual tax shareholders pay. At times, shareholders may also pay individual income tax on dividends they receive from the corporation, leading to potential "double taxation." The federal rate is 21%, and the state level varies from 0% to 12%.  
• S Corporations - Here, income passes through to shareholders, who report it on their individual tax returns. S Corporations do not pay federal income tax at the entity level. The percentages are similar to sole proprietorships and partnerships at the federal level. 
• Limited Liability Companies (LLCs) - Most LLCs are pass-through entities, similar to S Corporations. Income is reported on members' individual tax returns. The percentages are similar to sole proprietorships and partnerships at the federal level. At the state level, income tax is based on their respective company income shares.

2. Self-Employment Tax

All self-employed individuals, including active partners and sole proprietors, must pay self-employment tax. It helps them qualify for FICA benefits, including medicare contributions and social security. 

3. Employment Tax 

Any business with employees must hold federal and state income tax, social security, and medicare taxes from the employee’s salary. 

4. Sales Tax 

The local and state governments impose these taxes on the sale of tangible goods and, in some cases, on certain services. Sales tax and its rules differ based on location. 

5. Property Tax 

Businesses that own property such as equipment, buildings, or land must pay this tax on the assessed value of real property. 

6. Excise Tax 

This form of tax is levied on certain goods with the aim of regulating them. Typically, firearms, gasoline, tobacco, and alcohol fall under this category. 

7. Local and State Taxes

Local and state governments may levy additional taxes, like business license fees, gross receipt fees, franchise taxes, etc.  

8. Capital Gains Tax 

When individuals and businesses sell assets that have appreciated in value, such as business property, real estate, or stocks, they must pay capital gain tax. 

Setting up a Company vs. partnering with an Employer of Record in the US

Opening a company in the USA and partnering with an Employer of Record (EOR) are two different approaches to conducting business. Each has its own advantages. Take a look at them and decide what works best for you. 

Hire Talent in the United States Compliantly 

Registering a company in the USA involves several processes and intricacies. 

There's a much easier and quicker way for businesses who want to enter the US market without the complexities –  choosing Skuad as their EOR platform. Skuad is an Employer of Record platform that helps companies build globally distributed teams, compliantly. 

With Skuad, you can easily hire, onboard, and pay employees in over 160 countries, so you can grow your business across borders. Book a demo today! 

FAQs

Q1. How much does it cost to register a company in the USA?

The cost to register a company in the US varies vastly by state, but it’s approximately $600 to $1500. Characteristics such as type of entity, location, industry, and more determine the price. Apart from the ongoing costs, the initial setup fee ranges from several hundred dollars to a few thousand.

Q2. How do I register an LLC in the USA?

Typically, to register an LLC, you have to follow these steps:

• Pick a name for your LLC that complies with state regulations. 
• Select a registered agent with a physical address in the state where you're forming the LLC.
• With the Secretary of State or equivalent agency, you must file the Articles of Organization. 
• Draft a document that outlines the procedures of how the LLC will operate. 
• For tax purposes, get an Employer Identification Number (EIN). 
• Meet any tax requirements and local and state licenses. 
• Submit any feed and reports annually to keep the status of your LLC active.

Q3. How long does registering a company in the USA take?

It’s difficult to give an exact timeline to register a company in the US as it varies based on factors such as the state where the company is being formed, the structure of the business, and the efficiency of the process. As an estimate, completing the process takes anywhere from a few days to weeks or several months. Sometimes, paying an additional fee might help expedite things. 

Q4. Where is the best place to register a company in the USA?

Each state has its advantages. There’s no such thing as the best place. It really depends on your specific business needs and goals. You can pick and choose a place based on a business-friendly environment, regulations, taxation, etc. The top choice is Delaware, home to over 66% of the Fortune 500 companies. Wyoming does not charge corporate or personal income tax, and sales tax is low, too. The same goes for Nevada.

Q5. Can anyone open an LLC in the USA?

Typically, setting up a company in the USA by a foreigner is also possible. While most states don’t have any restrictions, when you undergo company registration in the USA for non-residents, you need to work with a registered agent and comply with tax regulations for foreign-owned LLCs.