Company registration in USA

The United States has a fairly complex and multi-stage tax system. Taxes are paid at the federal, state, and local levels. Each state sets additional tax rates, which are often added to the federal rate.

In the USA, there are three main types of taxation regarding the income of companies: on the principle of "fiscal transparency", like C-Corporation or S-Corporation.

Taxation based on the principle of "fiscal transparency": taxes on the company's income are paid by the founders of the company, and not by the company itself. This is the case for all LLCs unless they elect to be taxed as a Corporation.

In this case, federal personal income tax rates apply.

At the federal level: Individual income tax rates are determined on a progressive scale: from 10% to 37%, depending on the amount of annual income.

All rates are applied based on taxable income, not necessarily the actual amount of money earned in a given year. Much depends on whether the tax return is filed alone or with a second family member (spouse/husband). It is also possible to take into account various benefits and deductible expenses.

Statewide: In addition to the federal rate, each state sets its own personal income tax rates.

Taxation by Corporation type

All Corporations and LLCs that choose to be taxed under the Corporation type pay corporate income tax. Again, there are three levels of US taxation to consider.

At the federal level: the corporate income tax rate is 21%.

State taxes:

If the company does not do business in the US and does not have a source of income in the US. In such a case, the company may choose to be taxed as an S-Corp and not pay US income tax.

The United States also has a sales tax. This is an indirect tax, the rates of which are determined at the state level and depend on the specific states where goods are sold or services are provided. Sales tax rates range from 2.9% to 7.25% at the state level. In addition to the state rate, local governments in 35 states charge an additional sales tax ranging from 1% to 5%.

Every company that sells goods and/or services subject to sales tax and exceeds state thresholds must register for sales tax in the state in which it sells goods and/or provides services. Typically, these are economic thresholds, such as annual sales or a number of transactions (for example, more than $100,000 (USD) in sales in a state or more than 200 transactions in a state).

Franchise tax  - a special tax that is levied on a company at the state level where it is registered. The purpose of this tax is to confirm the right of the company to exist as a legal entity and conduct business in the territory of a particular state.

Franchise tax is introduced in 13 states and Washington, DC, and its calculation varies from state to state. The tax rate can be fixed or calculated based on the net worth of the taxpaying company (as a percentage). For example, in Delaware, the minimum franchise tax is $175.00 and the maximum is $250,000.00. Payment of franchise tax does not depend on whether the company generates profit.

Absent.

The states have signed about 60 double tax treaties, including with Ukraine.

Under these treaties, residents (not necessarily citizens) of foreign countries are subject to a reduced rate or exemption from US taxes on passive income they receive from US sources. These reduced rates and exemptions vary by country and specific types of income.

Opening a company in the USA is a decision that will definitely bear fruit, but before you rush to register a business, you should remember the difference in state laws (Delaware, Wyoming, Florida and others) and take into account the peculiarities of local legislation. Each state has its own advantages and can be beneficial for certain types of activities. To find out which activity will be more profitable in a particular state, use the individual advice of our specialists.