Corporation simply explained – Forming a corporation (C-Corp or S-Corp) is a common choice for entrepreneurs in the US who want to legally protect their business and benefit from tax advantages. An insight into the differences between C-Corp and S-Corp, the formation of a corporation and its advantages, disadvantages and taxes. Setting up a US company? Learn more about US legal forms here.
Does it make sense to set up a corporation in the USA?
Corporation gründen – sinnvoll oder nicht?
Forming a corporation is a popular form of business in the US that offers legal and tax advantages. There are certain steps to follow when forming a corporation, including:
Articles of association: Formation of the corporation
The formation of a corporation requires the drafting of Articles of Incorporation, which set out the basic rules and structure of the company. These documents must be submitted to the relevant state office.
Minimum capital: Variable
In most states, there is no fixed minimum capital for the formation of a corporation, but some states may require a minimum capital contribution. Find out about the specific requirements of each state.
Entry and registration
The corporation must be registered with the appropriate state office, which includes filing incorporation documents and paying fees. The exact requirements may vary from state to state.
Foundation costs in detail
The cost of forming a corporation can vary from state to state. Typical costs are:
Foundation fees: between 50 and 500 USD
Notary fees: if required
Annual reporting costs: between 50 and 800 USD, depending on the state
My recommendation for the first 10 properties
For the first two to ten properties, an LLC (see GmbH in Germany) is best suited to minimize liability risks and at the same time take advantage of tax benefits. The LLC limits the personal liability of the owners, while profits and losses are attributed directly to the shareholders, which avoids double taxation. In comparison, a Limited Partnership (see KG) offers more flexibility in terms of passive participation, but the general partner bears full liability. A general partnership (see OHG) involves higher risks due to unlimited liability.
US-Firmengründung speziell für Tax-Lien-Investoren
US-Firmengründung speziell für Tax-Lien-Investoren. Dieses exklusive Paket wurde speziell für deutschsprachige Tax-Lien-Investoren entwickelt und enthält alles Wichtige, was ein Investor benötigt, um seine Tax-Lien-Investments erfolgreich umzusetzen:
The choice between a C-Corp and an S-Corp has significant tax and operational implications. More on the topic here: Taxes USA and here are the main differences:
C-Corp
C-corporations are the standard form of corporation, which levies taxes on corporate profits. Owners also pay taxes on dividends, which can lead to double taxation. Advantages of the C-Corp include:
Unlimited number of shareholders
Attractive for venture capitalists
S-Corp
S-Corporations allow pass-through taxation, where profits and losses are passed on to the owners. This can reduce the tax burden. Prerequisites are:
Here are the most important advantages and disadvantages of a corporation at a glance:
3 advantages at a glance
Limited liability
Facilitated capital procurement
Unlimited service life
The main advantages of a corporation are limited liability, which allows owners to protect their personal assets. In addition, a corporation makes it easier to raise capital through the issuance of shares and has an unlimited life, regardless of changes in ownership.
3 “Disadvantages” at a glance
Double taxation (C-Corp)
Complexity of foundation and administration
Higher start-up costs
A C corporation is subject to double taxation, which means that both the company and the shareholders must pay taxes on the profits. The formation and administration of a corporation can be complex and costly as more formalities are required.
Taxes for a corporation in the USA
Corporations are subject to corporation tax at federal and state level. The current corporate income tax rate is 21% at federal level, although tax rates may vary at state level.
Important tax aspects
Federal income tax
Dividend taxation
Deductions and tax benefits
Corporations can claim various deductions to reduce their tax burden, including business expenses, depreciation and certain benefits.
Save taxes with a corporation
Using a corporation can help you save tax, especially if you reinvest profits instead of distributing them as dividends. It is important to undertake careful tax planning to make the most of the tax advantages.
FAQ about the Corporation
What is the difference between C-Corp and S-Corp?
C-Corps are subject to double taxation, while S-Corps have pass-through taxation where profits are passed directly to the owners.
How much does it cost to set up a corporation?
The start-up costs vary depending on the state, but are generally between USD 50 and USD 500.
Corporation foundation for entrepreneurs
Forming a corporation can be a smart decision, especially when you consider the benefits of limited liability and the ability to raise capital.
Corporations offer protection for your personal assets and allow you to benefit from tax advantages. This makes them an attractive choice for many entrepreneurs.
Conclusion
The corporation is a versatile business form that can offer significant benefits to many entrepreneurs in the US. If you are thinking about forming a corporation, it is advisable to learn about the specific requirements of your state and possibly consult a professional to make the best decisions for your business.
Legal forms USA: Foundation & real estate
What types of company are there? If you want to set up your first US company, choosing the legal form is one of the first steps in the company formation process. Whether you want to set up a special real estate company or a start-up, we have summarized all types of companies in the USA for you here – with extra tips for real estate investments, of course.
For the first two to ten properties, an LLC (see GmbH in Germany) is best suited to minimize liability risks and at the same time take advantage of tax benefits. The LLC limits the personal liability of the owners, while profits and losses are attributed directly to the shareholders, which avoids double taxation. In comparison, a Limited Partnership (see KG) offers more flexibility in terms of passive participation, but the general partner bears full liability. A 
