An LLC (Limited Liability Company) is a business entity that offers great liability protection for its owners and members, meaning that the company’s debts and legal issues are not the personal responsibility of the members. This makes it an attractive option with significant advantages for non-resident foreigners who want to open a company in the United States.
In the following sections, we will not only analyze the advantages or benefits but also the disadvantages of forming an LLC in the USA…
Quick and simple registration
The registration process for an LLC in the United States is considered fast and straightforward because the registration process itself is very simple and can be completed online (in some cases). Compared to other business structures like a corporation, the LLC registration process does not require as many procedures or documents, nor does it need to comply with the same financial disclosure requirements.
Safeguards the entrepreneurs’ assets
As the name suggests, an LLC has limited liability, which means that the owners of the company are not legally obligated to assume the debts and responsibilities of the company beyond their investment in it.
Simplifies tax filing
As a separate entity from its owners, the LLC can file its own federal and state tax returns instead of the owners having to do it personally, reducing administrative burden and simplifying accounting processes for the owners.
Allows for an investor visa application
Another advantage of opening a company in the United States is that the owners or members of the LLC can apply for an E-2 investor visa, provided they meet the requirements set by the U.S. Citizenship and Immigration Service.
Enhances the ability to enter new markets
LLCs provide certain benefits to businesses, allowing them to be more competitive, expand, and seek new market opportunities.
Limited economic liability
Having limited economic liability means that the owners or members of an LLC are not personally liable for the debts or financial obligations of the company to the extent of the capital they have invested in the LLC. This means that in the event the LLC has debts or is sued, the personal assets of the owners cannot be used to satisfy the LLC’s financial obligations.
Minimal maintenance costs
LLCs have fewer maintenance requirements in terms of documentation and legal procedures. For example, in some states in the United States, LLCs may not be required to hold annual meetings, draft minutes, or file mandatory annual reports.
Potential disadvantages of forming an LLC in the United States
Regulation is determined by each state
Although there are federal laws that govern all businesses, each state has its own legislation and specific regulations regarding the formation and operation of limited liability companies. Maintenance requirements, legal procedures, and fees vary among states, and the laws can also change over time.
Inflexibility in the event of a partner’s departure
This can depend to some extent on the regulations of each state. In some states, the withdrawal of a partner may require the dissolution of the LLC and the creation of a new business entity, while in other states, it may be possible for other partners to buy out the departing partner’s share and continue operating the LLC without the need to dissolve it.