In this article we will not be talking about specific company registration procedures. They are different in different states anyway. We want to explain to you some nuances, that arise after registration of a US company, and those issues that you have to consider before company registration and after it.

Registration of companies and businesses in the USA is done by the administration of states. Each state has its laws related to registration and doing business.

These laws are so different from one state to another that even lawyers dealing with corporate law have to pass exams in corporate state legislation in the state where they practice.

In many states the laws are similar, but in many others they differ greatly.

E.g. a lot of people who saw registration documents in the state of New York start demanding from use the same documents for the state of Nevada, saying “We saw them, we know what they look like, and you try to give us something not even close to documents that we saw!”

Even in Russia, documents prepared in different regions could differ. In the USA there has never been any uniformity in this issue.

The concept of the “vertical line of power” is not very familiar. The administration of each state tries to ensure economic development reflected by honest statistics. Welfare of a state does not depend much on the trust of the “national leader” or the number of new recruits called (or caught) to the Army.

That is why all the documents issued by state administrations including those received by business owners differ greatly from state to state. E.g. a List of Officers (a list of company managers and directors) is a compulsory document that has to be presented for registration of a corporation (and LLC) in Nevada. No company will be registered without this list. In California, this list is registered only after company registration. I.e. the company is registered, and the List of Officers is processed later. It is more convenient for the state administration and it does not care much about the opinion of Washington in this respect. By the way, Washington does not have any right to interfere with issues that fall within competence of the state. The only condition says that state laws should not contradict federal American laws and US Constitution.

In the state of Wyoming (there is such a state) such List of Officers is not required at all, neither during, nor after company registration. Of course, it can be done and even certified at the closest notary public, but in fact it will be your (your company’s) documents not having anything to do with the registration of your company.

That is why we do not register companies in all states.

We recommend to register companies only in the states that have minimal taxation and minimal number of the documents necessary for operating the company.

These are the states of Nevada, Wyoming, Texas and Washington (the state of Washington and not the capital of the USA – the city of Washington, DC).

We also register companies in the state of California because this state has the greatest number of working businesses that we support.

Of course we can register a company under your name in any state. Guess who will pay for flights across the US from San Francisco and Las Vegas where our company is situated to other states? It is necessary to meet clients, tax inspectors, lawyers and accountants, licensed in this state. All these overheads in case of registering a company in other states will be paid by you. Do you really need it? We would like to remind you that if your US-based business is not “linked” to some specific place (a factory, a restaurant etc), you have the right to register in one state and work and rent an office in another state.

First of all our company deals with business management. We register companies only if we will eventually carry out business management of these companies or purchase real operating businesses on behalf of these companies. If you do not need that, we can advise you right away to turn to another company.

Registering a company is the easiest step. The main thing is to make your US company profitable. So that tax returns and other reports are filed, re-registration of the company is carried out (where necessary), and all the necessary licenses are received etc.

E.g. if we register a company in the state of Florida, we need to file tax returns according to the format used in Florida. Our accountants simply do not have these forms and software of the state of Florida, and they do not know all the requirements of this state. I.e. we need to find an accountant from the state of Florida who knows all these aspects as well as a CPA (also from Florida), who can bring all the accounting records and reports in compliance with requirements of this state. Leaving alone lawyers, who have the right to practice in the state of Florida. You should not forget that filing federal tax returns to IRS is still the issue in the state of Florida as well. If you want to minimize taxes, you will have to minimize them both at the federal level and at the level of state.

The most terrible state according to the number of various compulsory documents (and fines if you miss some paper or miss the deadline for its submission) is New York. From all the cities, the most “difficult” is the city of New York. In addition to all the hassle with formalities related to maintaining the company standing that we described earlier the same should be done for the city of New York (and do not forget about federal reporting and reports for the state of New York).

The state of Delaware which is so much preferred by Russian businessmen is already not even in the top ten states with the most beneficial business environment. Besides, taxes in Delaware amount to 8.7% (and do not equal 0 as in Nevada or Wyoming).

That is why practically in many states maintaining a company standing could cost more and sometimes much more than its registration. A lot of people do not take it into account for some reason. At the same time they start asking – why is it so expensive? Before registering a company you should calculate how much it will cost you to maintain it in the state you like so much.

A lot of people ask us to register a company in this or that state because they want to buy a house there or because their relatives and friends live there. You should better think about the fact that if you do your business in a state that is not beneficial for your business, the taxes can cause you more losses than your house will cost. The fact that you did not know or did not think about it does not excuse you from paying taxes. (Please refer to the article “link to the article” for more details about this). As a managing company we must warn you about it.

Why do we register companies in the USA only together with opening a bank account?

Because we do not want to spoil our relationship with IRS, or with Immigration Agency, or with local authorities of various states. If we do not open a bank account for the company we register and do not register the company with Internal Revenue Service (IRS), it is a serious signal meaning that the company either is not intended for carrying out any real business activities in the USA at all, or its future financial flows are quite suspicious.

In order to open an account in a US bank and register the newly established company with IRS one of the future directors of the company has to provide a Social Security Number. This number is issued to US citizens and people having a green card. If the company engages in illegal activities – money laundering, tax evasion, or causes some other trouble to the authorities, then the first one to be prosecuted is the company president, and the second one is the person whole SSN was provided to tax authorities or to the bank.

In this way if we register a company in the USA without registering it with IRS and without opening a bank account for the company, we give a good reason to federal or local authorities to suspect that we are engaged in illegal activities. We do not really want to suddenly find out that this company makes multi million transactions via some bank in the Baltic states and we have no idea about it. In the USA, you have to file tax returns and pay taxes on all company transactions all over the world. If somebody “accidentally” forgets about it, this “forgetfulness” is subject to the whole bunch of laws and charges, starting from money laundering and tax evasion and ending up with financial terrorist activities. We definitely do not need this. If you want to do something like this we will not work with you.

Authorities of California, Nevada, Texas and other states actively welcome new businesses in their states. Only those businesses that do not comply with the state laws but also create new jobs and pay taxes to the state budgets. During the past seven years we managed to earn certain trust at various administrative levels. That is why we work only with real businesses and do not register companies in the US without their registration with IRS and opening accounts for them in US banks.

In what state should you register a company?

Consider the following.

First of all if your US business deals with international trade or international services provision, which means that you do not have to be tied to a certain place (unlike when having a restaurant or a store etc.), you should better register your company in the state with minimal taxation – Nevada, Wyoming, Texas – and do not pay state income taxes at all which is absolutely legal.

Secondly, annual registration fees and local income taxes are different in different states – from 9.99% (Pennsylvania) to 0% (Nevada, Texas, Wyoming, Washington). You will find more information about state taxes here:

Look at State Corporate Income Tax Rates – 2007.

However the sales tax (5-9%) is almost in every state. You will find more information about sales taxes in every state here:

http://en.wikipedia.org/wiki/Sales_taxes_in_the_United_States

This tax is charged on a corporation if the corporation sells its products or services at the territory of the state where this company is registered. E.g., if you register your company in Nevada, you do not pay this tax on the sale of goods and services to any other state, but you pay sales tax in Nevada, i.e. in the state of registration. This rule works almost in every state of the USA.

Thus, if your business is about (having registered the company in California) buying something in California and sending it to Russia for sale, you pay both Californian corporate taxes and Californian sales taxes. But if your company is registered in Nevada, you do not pay anything. It will help you save 15% – 18% of the cost of goods. It’s quite a lot – possibly the bigger part of your profit from this transaction.

The third thing to consider is about prestige. Stay as far as possible from Delaware. It is a great place to spend a vacation but you should associate your company with this state. A combination of these two things (a company in Delaware and Slavic last name of its founder) is really annoying both bankers, and tax authorities, and immigration authorities. Do not salt their wounds. Once upon a time Delaware zeroed its local taxes and after some years reestablished them. Russians knew that some time ago taxes were put down to zero, but they did not know that they have already been brought back. In this way a myth about offshore companies in the state of Delaware was born. With the help of banks in the Baltic states, emigrants from the USSR created in the companies registered in Delaware, a complete anarchy in the area of paying taxes (both state taxes and federal ones). Authorities of the state prayed to God and turned to prosecutors, stating that Delaware is not Virgin Islands and that “there are no bananas here”. “Russians from Delaware” were not interested in bananas – they had to save the “cabbage”. Now, US people are allergic to Russians from Delaware. So we do not recommend registering your company in Delaware. Besides, we still remember the notorious banks from the Baltic states. The Baltic states are of course already EC members, but we still remember this impression they made and it will not evaporate soon.

How to register a company?

We will take care of that, and our clients do not need to worry about it. Send us the filled in company registration form. We will figure out the option that is best for you.

What should foundation documents consist of?

Composition of foundation documents varies from state to state.

In contrast to Russia where original documents are not that important, what is important is their registration in various databases of state authorities. Employer’s ID, tax payer’s ID, the number of the business license etc. It is critical to have the corresponding numbers of your corporation entered into administrative databases of respective states. The very documents do not play any important role. You can order them any time in any number of copies. They are often sent by fax and their design is much simpler than the design of the Russian company state registration certificate or tax inspection registration certificate. The most important thing here is to be entered into databases.

That is why nobody in the USA needs notarized copies of such documents, seals and other bureaucratic stuff. We can congratulate you on successful registration of your company the moment when your company registration data is entered into computers of administration of the state.

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