US company formation - registered company vs sole proprietorship

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Personal liability

When you register your business in the United States, your company becomes a distinct legal entity that is responsible and accountable for the business's debts. This means that your company's creditors can only seek payment from business assets and not from the personal assets of the owners, directors, and shareholders. As a result, you can conduct business without risking your personal assets, such as your personal savings, home, landed properties, etc.

On the other hand, owners of unregistered partnership/sole proprietorship businesses are personally liable for both their personal and business assets. They are personally liable for every aspect of their companies, including losses and debts.

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Access to capital

When you register your business as a corporation in the United States, you can issue shares and raise equity capital. This will provide you with a much-needed financial boost at the start of your endeavour. The ability to raise funds and attract investors is important for the growth and development of your business. From the perspective of the investors, it is preferable for them to invest in a registered company (rather than a partnership or sole proprietorship) because a registered company has a formal structure in place to profit from their investment.

Moreover, a registered company is much easier to obtain a bank loan than a partnership or sole proprietorship. Registered businesses have access to a variety of alternative sources of capital, and banks are aware that such businesses can repay their debts through these sources. As a result, banks and other creditors are always eager to lend to them.

Also read: Easy steps for USA LLC Registration

Credibility and brand awareness

The advantages of having your company registered in the United States go beyond finances. Customers, suppliers, and other external stakeholders frequently believe that registered US businesses are more stable than unregistered US businesses. The addition of a 'Corp' or 'Inc' suffix to your company name conveys credibility and permanence, as well as your dedication to the success of the business venture. Clients and customers in the United States who have never worked with your company before will undoubtedly seek assurance about the legitimacy of your market. If your company is not registered in the United States, a potential client may perceive it as a 'fly-by-night' business and may be hesitant to spend his money on your services.

Registering your company in the United States will also provide you with significant advantages in future business dealings with reputable organisations. Many reputable companies in the United States only establish business ties and engagements with registered companies. A registered business is also better positioned to obtain supplier discounts and attractive wholesale rates, which are not available to unregistered businesses. Several government contracts are also only awarded to registered businesses.

Also read: US Nominee Director

Hire quality manpower

A registered business has the advantage of hiring full-time employees and paying them in accordance with state laws. When you register your company in any state in the United States, you will be given a State Identification Number, which will allow you to route State Taxes on behalf of your employees. It will also allow you to provide necessary health benefits, company contributions to retirement/pension plans, and other statutory benefits to your employees. Including these benefit plans in your employee policy will make your company an appealing proposition for qualified workers in the United States, and you will be able to hire and retain them with ease.

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