UNITED STATES OF AMERICA

 

GENERAL

 

Law

In the USA the internal structure and governance of the corporation is left to State law.  US Courts look to the laws of the State of incorporation rather than the laws of the principal place of business.  Therefore the selection of the jurisdiction in which to incorporate  is usually made independently of the place of the corporation’s operations.

 

Corporation

A corporation has three main layers- the stockholders, the directors and the officers.  The stockholders ( or shareholders) are in general the owners of the enterprise, the directors set the policy for the organisation and the officers manage and operate the organisation on a day-to-day basis. Most organisations have officers , selected by the board of directors, who are titled the President, Vice President, Treasurer and Secretary.

 

Types of Corporation

 

Limited Liability Company (LLC)

·         is not the same as the UK Limited Liability Company

·         is a hybrid of a partnership and a corporation

·         formed by filing articles of organisation/incorporation (similar to UK Memorandum and Articles of Association) with State filing officers

·         internal affairs of the LLC are contained in its operating agreement

·         owners are called members. Most states require there to be at least two members

·         members are similar to shareholders or limited partners and are not liable for the company’s debts

·         members can manage the business

·         can be taxed as a partnership so has the  benefit of “flow through” taxation whereby all profits and losses belong to the owner and become part of his/her income tax return. The business is not itself taxed.

·         Will have to apply for authority to do business in other States

 

Business Corporations

·         Most are like the UK Limited company

·         Formation and internal operation governed by State law.

·         Main advantages are:

o        Investors not liable for corporation’s obligations

o        Has a perpetual existence

o        Capital can be raised by selling stocks and securities

o        Has centralised management so investors not involved in day to day operations

·         The main disadvantages are:

o        expensive to form

o        complex to operate

o        double taxation- corporation tax to be paid and dividends also taxed

 

When a corporation conducts business in a State other than its own State of incorporation, the corporation is considered to be a Foreign Corporation in that State.

 

All States prescribe terms and conditions that a foreign corporation must adhere to before being allowed to conduct business in that State.  There are typically two main requirements:

·         it must obtain a certificate of authority

·         it must appoint and maintain a registered agent and a registered office.

 

 

 

Incorporation

Incorporation can generally be effected electronically and will be within 48 hours.   A more rapid service is normally available.

 

A readymade/off the shelf corporation is available from registered agents.  A limited liability company is not available.

 

Company Name

A limited liability company name will include the abbreviation “L.L.C.” or the designation “LLC”

A corporation will normally have “Incorporated” or “Inc” at the end of its name

 

There are restrictions on the use of certain words or business descriptions such as “bank” , “trust” and “insurance”.

 

If a name is available then it can be reserved for periods up to 120 days.

 

Documents to be filed on Incorporation

Certificate of Formation/Incorporation ( Articles of Organisation).  This will include the company name, registered office and registered agent, share capital and the name and address of the incorporator.

 

Bylaws.  These are the regulations of the corporation and contain the basic rules for the conduct of the corporation’s business and regulating the corporation’s affairs

For a limited liability company an agreement also has to be submitted. This provides for various classes of members and managers and their respective rights, powers and duties.

 

Directors

Requirements differ across the States.

 

Delaware:

Corporation. The minimum number of directors is one.  There is no maximum.

There should be one officer to be the President etc and one officer to be the Treasurer/Secretary.

 

Limited Liability Company.  No specific requirements for director and officer.

 

California:

Minimum of the directors

Minimum of three officers

 

 

Share Capital

There is no minimum share capital

No par shares are permitted

Bearer shares are not permitted

 

Meetings

No requirement to hold Annual General Meetings .

Meetings can be held anywhere

There is normally an initial meeting on formation to approve the appointment of officers and the company terms and conditions.

 

Seal

A company seal is not mandatory but is usually obtained

 

Accounts/Financial Statements

Accounts do not have to be filed

 

Records to be kept

There is no requirement for records to be held in the jurisdiction

 

Registered Office/Registered Agent

A registered office and a registered agent must be provided in the State of formation

 

Annual return

An annual return is required but the data to be provided is minimal

 

Tax

A corporation is generally subject to United States federal income tax on its income.

Dividends are taxed at the individual holder level or are included in the net income of the corporation.

 

 

Quick Reference Guide

 

Delaware

 

Type of Entity	Filing Required	Separate Entity from Owners	Personal Liability	Centralised or Decentralised Management	Taxed as Separate Entity	Minimum of Investors
Corporation	Yes	Yes	No	Centralised	Yes	1
Limited Liability Company	Yes	Yes	No	Either	As corporation or partnership	1

 

 

Price

 

Delaware  Incorporation   £450, Renewal  £125

 

Other States               Price on application