Some Features of Business (Company) Registration in the USA

Companies in the USA are registered by states, not the federal government. Each state has its own business laws, registration systems, rules, and forms for registering companies. Therefore, when talking about company registration in America, it is essential to note that the registration procedure differs significantly in each state. By the way, lawyers also go through a certification process and take the relevant exam on the laws of that state in each state where they operate.

That’s why it makes no sense to consider the registration procedure itself. Let’s focus instead on the challenges and “pitfalls” that most businesspeople face, especially those who intend to register a company on their own. Moreover, the main problems manifest after registration. In this case, correcting the situation is much more challenging. For this reason, it is better to foresee everything in advance.

The registration procedure for companies is carried out by the administration of the state in which you decide to register the company.  

How does it usually happen in practice? A client contacts us, for example, in the state of Nevada, seeking our lawyers' assistance in registering a company. After receiving a complete package of documents from us, they ask for additional documents that are not required in the state of Nevada. This is because they were holding a package of documents from New York state, which is fundamentally different from that of Nevada. 

Even in Kazakhstan's cities, the company's registration documents can vary. What can we say about the legislation of the states when every state in America strives to conduct business “economically justified” and where there is a complete absence of the concept of “vertical power”? Each state is a purely autonomous entity. 

For all these reasons, the package of registration documents for a company can vary significantly from state to state. This includes those issued to the owner-founder of the company. For example, regarding Nevada, without a list of the company's officers and directors (List of Officers), you will not be issued a registration package when registering a corporation. In other words, you will need to provide this list before registration of the company itself. In California, for example, you submit this document after registering the enterprise or organization. Wyoming, on the other hand, does not require this document at all. Although you can also order and receive the List of Officers, and have it notarized, it will be purely your document, and there will be no need to present it officially anywhere. 

The federal government from Washington does not interfere in the affairs of individual states and has no right to do so. In the USA, there is a clear distinction between what falls under the jurisdiction of the federal government and what is decided by the states. For example, all issues related to defense, foreign policy, federal taxes, immigration, and visa regulations fall under the federal government. States do not have the right to create an army or issue visas in the USA. However, all matters related to police, business, local government, and licenses are the responsibility of the states. 

Which States Do We Work With?

That’s why, based on our practice, our lawyers recommend registering companies only in those states where:

a) there is minimal taxation;

b) the registration of a company requires collecting and providing a minimal package of documents.

There are only five such states: Nevada, Wyoming, Texas, Florida, and Washington. The last should not be confused with the capital of the United States of America — Washington D.C. 

There is also, of course, the state of Delaware, but due to high taxes and complex case law that primarily protects the rights of minority investors, company registration in this state is rapidly losing popularity. 

By the way, the capital of the USA, Washington D.C., is not at all attractive for business; it is home exclusively to Congress and the ministries, mostly operating using lobbying practices. The situation with business in Washington D.C. is quite dire.

The state of California is quite good for business. It is home to the maximum number of technology companies (Silicon Valley). This accounts for 95% of all technology companies in the USA. 

           For many years, the state of Nevada has ranked first in terms of ease of doing business. Its maximum tax benefits, minimal licensing requirements, and some of the most attractive laws in the USA attract more and more businessmen from the USA and other countries to Nevada. 

           However, the state of Wyoming is actively following Nevada, offering even more favorable conditions for business and special conditions for business anonymity. 

What, apart from company registration, can we offer you?

The main activity of our company is business management. Therefore, we will be happy to help you register a company if you plan to entrust us with its maintenance in the USA. We assist with managing and developing business in the case of purchasing a profitable, functioning business. 

Unfortunately, we cannot provide you with the service of company registration separately from the business management process. 

The company registration process is just the first step. If, after receiving the founding documents, you think, “That’s it, it’s done,” you will be fundamentally mistaken. The main goal of any business, even the smallest (although we sincerely believe that such businesses do not exist and treat the process of registration and further business development as a child that needs to be “raised and put on its feet”) is to generate profit. This is the issue we will work on with you in the process of providing business management services for your company. 

In addition, there is a need to prepare and submit reports to the tax authority, in the annual re-registration process of the company, when purchasing an established business from its American owner, and obtaining various permits, such as licenses for certain activities, etc.

In the case of registering a company outside of the five states mentioned above, you will need to involve outsourced consultants even for filing a tax return, as the format and specifics of document submission, for example, in Arizona, do not match those in Nevada. Additionally, our specialists do not have the necessary licenses to engage in this activity, the required reporting forms, and the corresponding software. Plus, you will need to find a CPA (who must also be located in Arizona) to bring all documentation into compliance with Arizona state format. Furthermore, to prepare and submit federal reports to the IRS regarding your company’s activities, you need to find and hire a “local” lawyer, which is also a significant expense. This is also relevant when attempting to minimize taxes for your company, which needs to be done at both the state and federal levels. 

Which states are considered the most problematic? 

New York is considered the most challenging state both for company registration and for imposing various fines for the slightest oversight. The city of New York is no different; it requires all tax reporting to be submitted directly to the city of New York, in addition to state and federal reporting. 

Another very “challenging” state is Delaware. It was once a favorite among Russian businessmen. Today, unfortunately, it has become one of the most problematic. This is the case when it comes to doing business there. Plus, the tax and fee situation is far from favorable, unlike in Nevada and Wyoming. In Delaware, the tax rate is 8.7%, while in Nevada or Wyoming, it is zero. 

From this, it follows that the cost of registering a company is relatively insignificant compared to its subsequent support. Ignoring this fact leads to further misunderstandings. Therefore, we advise you to initially budget not only for the company's registration but also for its ongoing support, including tax expenses. And that’s why it’s advisable to clarify all the nuances before choosing a state for doing business. To do this, it’s sufficient to get a consultation from the specialists of our company. Only after weighing all the “pros” and “cons” should you make a final decision and choose a state for conducting business. Here, it is completely inappropriate to conclude based on the principle: “This state is so large and has so many national parks.” We exaggerate, of course, but sometimes situations can be frankly anecdotal. For example, a client chooses a particular state solely because they have already purchased property there or simply because of a relative living there. Family ties in a foreign country are certainly important, but sometimes business taxes and other expenses can lead to significant losses. This is especially acute when your business is just starting and is still very “small and weak.” Believe me, it’s not far from bankruptcy.

Now let's touch on another important practical point that is crucial to consider when registering a company. 

Why do we register a company only together with opening a bank account (turnkey)

Opening a corporate account necessarily precedes the registration of a company. This is primarily because it is one of the requirements of tax structures, immigration services, and the government of the state you have chosen. After all, opening a bank account implies prior registration of the company with the tax service (IRS). Without its registration, we cannot obtain the EIN tax number required to open a bank account. 

To open an account in an American bank, the director opening the account must necessarily have a personal Social Security Number – SSN (personal tax number). This number exists for both U.S. citizens and those with a residence permit, that is, a green card. The bank account is opened in the name of the company director, who can, by the way, be a nominee. 

In case of any illegal actions, tax evasion, or using “gray” or even “black” business schemes, the first person after the company president to whom claims will be made is the employee who presented their identification number to the bank and the tax office. 

Therefore, without registration with the U.S. tax service and without opening a corporate bank account in our execution, registration and further support are impossible, as we do not allow even the slightest reason to suspect us of illegal actions. 

U.S. tax legislation implies mandatory payment of taxes on all transactions you conduct, even if they were not made on U.S. territory. Excluding this “not always pleasant procedure” will definitely not work, as “forgetfulness” leads to problems much greater than, for example, in Kazakhstan. Thus, discovering unpaid taxes for even one transaction can result in accusations not only of tax evasion but also of “money laundering” and even “aiding” terrorist organizations. 

Every year, authorities in many states create all conditions for foreign citizens to conduct business, but they do not allow even the slightest violations of the laws of these states. In addition to timely tax payments, the United States is also extremely interested in creating new jobs for native residents of the States. In this case, you are guaranteed a warm, loyal attitude from absolutely all structures. Over 18 years of working in the American market, we have built a high level of trust, and our reputation is now beyond doubt among all government structures. That is why we completely exclude the possibility of being “talked into” violating the law at any level.  That is why registration with the state tax service and opening an account in an American bank is mandatory.

Now we have approached one of the extremely important questions that we are asked most often.

Which state is best for opening your business

Initially, it is important to determine how closely your business is “tied” to a particular state. If it implies remote operations (for example, trading worldwide), it is quite possible to choose a state with low or even zero taxation. The minimum taxation exists in Nevada, Wyoming, and Florida. Here, you can legally avoid paying taxes entirely. This will not be possible if your business operates exclusively locally, for example, if it is a beauty salon, a store, or a sewing workshop.

Moreover, the annual amount of taxes on net profit that a company must pay can vary from state to state. It can be nearly 10% in Pennsylvania or zero in Nevada, Wyoming, South Dakota, and Florida.

More details about taxes can be found at the link below: http://taxfoundation.org/sites/taxfoundation.org/files/docs/Corporate%20Income%20Tax%20Rates.png

The third separate point of payment is sales tax. It exists practically everywhere and ranges from 5% to 9%. You can find the exact amount for each state here: http://en.wikipedia.org/wiki/Sales_taxes_in_the_United_States

An interesting feature of this tax is that it is only charged for the sale of goods to the final customer. For you, it is virtually unnoticed. If you sell goods for $100, your card processor will charge the customer an additional state tax for where you are sending the goods. After that, your processor will send the deducted tax directly to the state. You will receive your $100 as you sold your goods for $100. 

For example, if you register a company in New York and take goods for sale in that same state, sending them worldwide, you will have to pay both corporate tax and sales tax in that state. To avoid at least the sales tax and save sometimes up to 18% of the cost of the goods or services, your company needs to be registered in another state, such as Nevada. Often these “unfortunate 18%” make up a significant portion of the profits, so they should not be ignored. 

The only state where we categorically believe (in our opinion) that you should not register a company is Delaware. The reason is that 30 years ago, Delaware canceled state taxes, but in 2004, the state government decided to reinstate corporate profits taxes. The current tax rate is 8.7%. This information is little known, and unfortunately, not everyone is used to consulting specialists before starting a business. Our compatriots often learn that this state is no longer “offshore” only after registering a company. This often becomes quite an unpleasant surprise for them. In the early 2000s, it was popular to register a company in Delaware, not register with the U.S. tax authority, and open an account in one of the Baltic banks. This did not go unnoticed by the IRS, FBI, and Secret Service, and the punishment was most severe for the owners of those companies. Accounts and companies were closed, and funds were seized for the benefit of the U.S. So, do not do this, it “does not work.” 

Regarding doing business in Nevada, you can read more at the following link: https://usbusserv.com/reg/states/kompanii-v-nevade

Let's discuss how the registration of a company takes place.

Stages of company registration 

Let's briefly consider all stages of registration. 

Initially, you provide us with a completed application for company registration (registration form). You can indicate your comments, wishes, etc. It is available on our website.

After reviewing, one of our employees will contact you. During the conversation or correspondence, you will discuss all possible options and settle on the one that suits you. Our employee will answer all your questions.

Our employee will generate an invoice for you, listing the proposed services and their costs.

You just need to pay the amount agreed upon in the invoice. After that, we will begin the process of registering your company.

What Founding Documents Will You Receive?

This is a frequently asked question, so we decided to explain it in more detail.

As mentioned before, the set of founding documents varies greatly by state. Not only the content but also the format of the documents differ. This often leads to misunderstandings when, for example, a friend has registered a business in California, and you plan to register in Nevada. Knowing what documents they received after registration in California, you may expect the same. However, your document package will undoubtedly differ from that of your friend.

Another significant difference, which is often surprising to people from other countries, is that in the U.S., all documents exist exclusively in electronic form. There is no concept of a "first copy with a blue stamp" or "second copy with a blue stamp." All copies are digital, and each is considered an "original." For you, the critical thing is not how many printed scans you have but that your company's information is recorded in all relevant government databases of your state and the IRS. For instance, it’s important to obtain your Employer Identification Number (EIN), business license number (in states where it’s required), and other corporate identifiers.

Copies of all founding documents will be sent to you via email or made available online directly from the registration state's databases.

The concept of a "seal" does not carry the same weight in the U.S. It exists in practice, but a seal does not validate a signature as it does in Kazakhstan or Ukraine. For this reason, a "company document with an official seal" is rarely seen in the U.S. However, if desired, we can create a seal of any form for you, although it’s legally optional.

The U.S. also recognizes "notarized copies." All documents are stored in electronic databases, but we can provide notarized copies of all your company documents.

Registering your company in your chosen state simply means that it is entered into the company database of your state’s Secretary of State office.