Frequently Asked Questions

Common Questions about Establishing a U.S. Operation

Foreign companies looking to do business in the United States ought to consider the following business arrangements and issues:

• Corporation. The corporation is the most common form of business entity in the United States. It has limited liability and a separate legal existence from its shareholders. A corporation is managed by a board of directors and officers. It is suitable for public or private ownership. Key organizational documents are the Articles of Incorporation and the Bylaws.
• Limited Liability Company. The limited liability company has certain attributes of a corporation and certain attributes of a partnership. It is normally structured like a general partnership, but its members have limited liability (in a general partnership the partners have full liability for all of the liabilities of the partnership). It is normally managed by a managing member (similar to a managing partner in a partnership) but can also be managed by officers and directors. The fundamental documents of a limited liability company are the Articles of Organization and Operating Agreement.
• Preferred Type of Entity. Corporations do not have “flow through” tax treatment and hence are required to file tax returns. Limited liability companies, on the other hand, have “flow-through” tax treatment and are not required to file income tax returns; rather, their parent companies must file income tax returns in the United States. Since most foreign companies do not want to file tax returns in the United States, the preferred form of entity for U.S. operations of foreign companies most often is the corporation.
• Jurisdiction of Incorporation. Corporations and limited liability companies can be formed under the laws of all 50 states. Most corporations are formed under Delaware law due to low franchise tax and laws favorable to management. A party can form a corporation under Delaware law but estab¬lish its office and conduct business in other locations.
• Qualification. If a corporation is formed in one jurisdiction (e.g., Delaware) and has offices in another location (e.g., New York) the corporation must file a short registration in the jurisdiction where it conducts business (called "Qualification to Conduct Business").
• More Complex Operations in the United States. Business operations can be expanded in the United States through a variety of means, including affiliated corporations (e.g., a second corporation in the United States owned by the foreign parent company), a second-tier subsidiary (a second U.S. corporation owned by the first-tier U.S. subsidiary) or similar arrangements.

To contact an attorney about this response, click here.