If you have already chosen the USA for your business registration, the next step is to determine the ownership structure, state of registration, company type, and tax regime. The structure depends on your business objectives and can change over time, but such changes are often complex and costly. The choice of state is determined by the market, corporate law, tax rates, infrastructure, and logistics.
- Want a fast start with minimal formalities? Choose LLC registration
- Planning for investors, stock options, or scaling? Choose C-Corporation registration
- Have managing partner(s) and passive investors? Choose Partnership registration (GP/LP)
Technical details and tax forms are covered in the FAQ below. For company type, U.S. non-residents can choose between LLC and C-corporation. These differ in management structure, taxation, and reporting format. Choosing the company type is important at the initial stage because changing it later can be complex and costly. Next, the essence of each option is explained in simple terms.
LLC Registration: who it’s for and taxation
In the USA, an LLC (Limited Liability Company) is the most popular business structure for small and medium-sized enterprises. It combines the advantages of a corporation (asset protection for owners) and a partnership (flexible taxation).
However, within the term “LLC,” there are different types that vary by structure, number of members, and management rules. The most common LLC types are Single-Member and Multi-Member. LLCs can also be structured as Member-Managed, where all owners participate in daily operations and decisions are made jointly or by majority vote; or Manager-Managed, Manager-Managed, where one or more appointed managers handle operations, and investors do not participate in day-to-day management.
Next, we’ll look at the key differences between Single-Member LLC and Multi-Member LLC.
Single-Member LLC
A legal entity with a single owner (individual or corporate) that is by default “pass-through” taxed, meaning profits are not taxed at the company level but only at the owner level, reported on the individual’s tax return. This type of company is very similar to a sole proprietorship. A Single-Member LLC allows simplified administration with no fees, meetings, or minutes. The IRS (U.S. tax authority) treats this company as a “disregarded entity” (not separate from the owner). It is suitable for freelancers or consultants operating independently.
Important! The owner of a Single-Member LLC can change the company’s tax classification by submitting a special form to the IRS. The following taxation options are available for this type of LLC:
- Disregarded Entity
This is the default taxation type for a Single-Member LLC. The owner pays the tax, not the company. All LLC income and expenses are reported on the owner’s personal tax return.
Advantages of this taxation type include straightforward reporting. The company does not pay CIT (federal 21% + state); only the owner’s income is taxed.
However, it is important to note that the company does not distribute dividends, and the IRS does not issue certificates confirming PIT. As a result, when declaring income in your country, it is not possible to apply the Double Taxation Avoidance Convention between the countries to credit U.S. taxes paid.
This taxation model is also not ideal for reinvesting profits or attracting investors.
- C-Corporation Taxation (C-Corp Election)
A Single-Member LLC can also elect C-Corporation taxation. In this case, the company becomes a separate taxpayer, paying 21% federal corporate tax plus state tax. If the owner later withdraws profits as dividends, additional dividend tax applies.
This taxation option is chosen by Single-Member LLCs that prioritize profitable reinvestment over distribution. The company benefits from C-Corporation advantages without requiring a complex management structure or a board of directors. When dividends are paid, the Double Taxation Avoidance Convention between your country and the USA can be applied.
The main disadvantage compared to a Disregarded Entity is more complex reporting.
Entrepreneurs typically opt for the C-Corp taxation scheme if the LLC plans to scale, seek investors, or retain profits within the company. Unlike a direct C-Corporation, an LLC can later switch back to Disregarded Entity taxation.
Multi-Member LLC
A legal entity with two or more members, which is taxed as a partnership by default (pass-through). Members’ liability is limited to their contributions to the company’s capital. The company requires an Operating Agreement that defines ownership shares, management, and profit distribution.
The IRS allows a Multi-Member LLC “to choose”, its taxation method by submitting a special form, known as a “check-the-box election.” The taxation options for Multi-Member LLCs are as follows:
- Partnership Taxation
This is the default taxation type for Multi-Member LLCs. The company itself does not pay CIT. Profits and losses pass through to each member, who reports their share of income on their personal tax return. Profits are distributed proportionally to members’ shares or as specified in the Operating Agreement.
This structure is convenient for combining multiple partners into a joint business. It differs from a C-Corporation in its simpler administration and no CIT.
Disadvantages include the fact that each member pays individual taxes, which cannot be credited in your country. Reporting is also more complex than for a Single-Member LLC. Initially, a partnership tax return is filed showing the company’s financial results. Special schedules are attached, detailing profits, credits, deductions, and each partner’s share of income or loss.
- C-Corporation Taxation
Like Single-Member LLCs, Multi-Member LLCs can elect C-Corporation taxation. The company then becomes a separate taxpayer, paying 21% federal corporate tax plus state tax. If profits are distributed as dividends, members pay dividend tax.
This taxation method is chosen by Multi-Member LLCs that prioritize profit reinvestment, attracting investors, or issuing stock options. Reporting is slightly more complex than under default partnership taxation.
Companies in the USA may also pay a franchise tax. Each state uses its own calculation formula. For example, in Delaware, it is a fixed $300 per year for an LLC, regardless of profit or capital.
We’ve gathered everything that matters in one guide: jurisdictions, taxes, payment systems, and the most common mistakes entrepreneurs face when entering new markets.
C-Corp Registration: who it’s for and taxation
A C-Corporation is a legal entity with with one or more owners. Both individuals and legal entities may be founders of the company. The number of shareholders is unlimited, and shareholders may have any residency status, which significantly expands opportunities for attracting investors.
The corporate governance structure includes a board of directors and officers who manage operations. The rules governing the corporation are determined by state law and the company’s governing documents.
Registration features
When registering a C-Corp, the company may specify in the Articles of Incorporation the maximum number of shares it is authorized to issue: Authorized shares. The document also specifies the share classes, their quantities, and (par value). Shares may be Common stock (standard ownership rights) or Preferred stock. The rights of preferred shares can be defined after registration.
The company then determines the number of Issued shares actually granted to shareholders (founders, investors, and others). Issued shares may be much lower than the number of authorized shares. This allows the company to attract investors later by allocating shares without changing registration documents.
The number and value of authorized and issued shares affect the state franchise tax. For this reason, issuing the maximum possible number of shares immediately is not advisable. An example of this can be found on the government website.
C-Corp Taxation
All C-Corporations pay a federal CIT at the rate of 21 percent. State CIT also applies, ranging from 0 percent to 12 percent depending on the state (for example, 8.7 percent in Delaware). When profits are distributed, shareholders pay dividend tax, and for nonresidents, this is regulated by the bilateral tax convention.
C-Corporation is suitable for attracting investment, allows issuing an unlimited number of different share classes and stock options, and has a clear governance structure that supports large-scale operations. Formal dividend payments allow application of the tax convention between your country and the United States when dividends are taxed.
This company type involves significantly more bureaucracy, formal requirements, and expenses. A board of directors is mandatory. Franchise taxes are calculated under rules that differ from those applied to LLCs.
Partnership registration: who it’s for and taxation
In the USA, nonresidents can register various types of partnerships. The most common are General Partnership (GP) and Limited Partnership (LP).
The advantages of partnerships include flexibility in profit distribution and management, taxation at the partner level, and the ability to attract investors without losing control. However, a partnership is not suitable if the goal is to attract venture capital, as investors generally prefer a C-Corporation structure.
Basic comparison of Partnership types
Type | Who manages | Liability | Best for |
GP | All or designated general partners | General partners - unlimited | Small joint businesses with active management |
LP | General partner | GP - unlimited, LP - limited to contribution | When there are passive investors and one managing partner |
- General Partnership (GP)
The simplest form of partnership, used when two or more individuals join together to conduct business for profit. Each partner has unlimited liability for the partnership's debts.
Taxation is a pass-through system, meaning that profits and losses flow through to the partners, who pay taxes as individuals.
- Limited Partnership (LP)
A partnership structure that separates the rights and responsibilities of the active manager and the passive investor. It must have at least one general partner (manages the business and bears full liability) and one limited partner (an investor with limited liability). The limited partner’s liability is restricted to the amount of their contribution.
This structure also uses pass-through taxation: the partners, not the partnership itself, pay the tax. If a partner is a non-U.S. resident, the partnership is required to withhold 37% (for individuals) or 21% (for legal entities) from that partner’s share of U.S.-sourced income.
All partnerships file a main company tax return and submit schedules attached to it (one general schedule and separate ones for each partner)
Basic comparison of U.S. company structures: LLC vs C-Corp vs Partnership
Criterion | LLC | C-Corporation (C-Corp) | Partnership (GP/LP) |
Who is this payment system for? | Freelancers, small/medium businesses, quick start | Venture capital, scaling, stock options, multiple investors | Joint projects with active managers and passive investors |
Taxation | Default pass-through; may elect to be taxed as a C-Corp | CIT 21% + state; dividends taxed at shareholder level | Pass-through taxation at the partner level |
Owner payouts | Usually profit distributions (no dividends); dividends only if taxed as C-Corp | Dividends with treaty withholding; reinvestment possible | Each partner’s profit share per the agreement |
Bureaucracy & management | Simple administration; Operating Agreement | More formal: board of directors, officers, corporate procedures | Partnership agreement; simpler than C-Corp |
Investors & stock options | Limited; suitable for smaller investments | Most investor-friendly: multiple stock classes, options, and cap table | LP structure allows passive investors, but venture prefers C-Corp |
Liability | Limited liability for members | Limited liability for shareholders | GP – unlimited for general partner; LP – limited for limited partner |
Franchise tax | Yes, varies by state; in Delaware, fixed at $300/year | Yes, the formula depends on shares and state | Present in some states; depends on form and state |
Flexibility | High: can change tax classification | Lower: strict corporate rules | High contractual flexibility |
Cons | Nuances with tax forms and dividend treatment; not ideal for venture capital | Double taxation (profits + dividends); more formality and cost | GP bears full liability; less suitable for venture capital |
Choose when | You need a quick start and a simple profit withdrawal | You need funding, options, and a scalable structure from day one | You have managing partners and passive investors; flexibility matters |
The choice between an LLC, C-Corporation, and Partnership depends on goals, tax model, and capital plans.
- Registering an LLC offers the fastest start with pass-through taxation and the option to switch to C-Corp status later.
- Registering a C-Corp is the standard for venture growth and a large shareholder base. Still, it requires more formal management and results in double taxation—corporate income tax plus shareholder dividend tax.
- Registering a Partnership (GP/LP) provides contractual flexibility and tax transparency at the partner level: GP is suitable when managers take active control and full liability, while LP suits structures with passive investors who enjoy limited liability.
If simplicity and fast profit distribution to the owner are the priority, registering an LLC is the best choice. If you already plan to attract investors and issue stock options, choose a C-Corporation from day one.
Need to verify the numbers? Our team will gladly provide consultation on opening a company in the U.S., taxation, accounting and Payoneer account. Submit your request via the website form or through messengers.
Frequently asked questions about U.S. business structures
Register an LLC. Minimal formalities, default pass-through taxation, with the option to change tax classification later.
Need investors and stock options? Choose a C-Corporation. Ideal for venture rounds, cap table management, multiple stock classes, and options.
Yes. An LLC can make a C-Corp election and switch back to pass-through. The company must submit Form 8832 to select the desired tax classification.
For example, in Ukraine, pass-through income from an LLC does not provide a U.S. PIT certificate, so crediting it in Ukraine is generally not possible. Dividends from a C-Corp may be credited under the tax treaty. In Ukraine, foreign-sourced income is taxed at 18%, while foreign dividends are taxed at 9%.
Franchise tax is a state tax. Rules vary by state. In Delaware, LLCs pay a fixed annual fee of $300. For C-Corps, the amount depends on the number of shares and the state’s formula.
