Make that 1000 shares

We’re continuing on our series on starting a business in the US, and it’s time to form a corporation. There are an awful lot of corporation forms in the world, as can be seen from this handy list deciphering all of the different abbreviations for corporations around the world. Most of these corporate forms have one thing in common – they are all vehicles for entrepreneurs or investors to limit their liability when going into business. The US is no different, only the liability is (potentially) greater, due in part to the vagaries of our legal system. As a result, the protection more important.

For tax and liability reasons it’s generally better to form a corporate entity in the US than to simply set up a branch office. The most common form of corporation in the US is the so-called C-corporation, a basic stock corporation similar to the German AG or the French SA. The typical abbreviation is “Inc.,” although you may also see “Company,” “Corporation,” or even “Ltd.”

The second (and up-and-coming) form of corporation is the Limited Liability Corporation, or LLC, a direct offspring of the German GmbH. The LLC is somewhat less formalistic than the C-corporation, and is often best for business which don’t have the infrastructure or inclination to have regular meetings and that sort of thing. That said, many (particularly older) attorneys are still suspicious of the liability protection capabilities of the LLC, and special tax elections may well be necessary to prevent unintended tax consequences.

Most non-US businesspeople will be surprised (and perhaps pleased) to know that the concept of capital accounts has been largely eliminated for these two corporate forms, eliminating the need to maintain a certain amount of capital during the life of the corporation. Incorporation, particularly for C-corporations, can be fast, with expedited processing of one hour in certain states (such as Delaware) for a fee.

There are a host of other types of entities, mostly partnerships and the like, but truth be told they aren’t of much interest to non-US businesses entering the US market. Obviously, there are businesses which may be well-served by those forms, but if you read up on and understand the C-corporation and the LLC and you’ll probably be ahead of the curve.