Our International Business Planning Attorneys Can Assist in Creating an LLC for Your Business Ventures in the United States
An LLC, or Limited Liability Company, is a business structure used in the United States that combines elements of both partnerships and corporations. At MEG International Counsel, our international business planning attorneys assist successful Mexican and Latin American entrepreneurs and investors in using LLCs to expand their global business interests.
Benefits of an LLC
The benefits of choosing a limited liability company for your U.S. business ventures are numerous.
- Limited liability. Owners of an LLC, who are known as members, are typically not personally liable for the company's debts and liabilities. This means that in the event of legal action or business debts, personal assets are usually protected. All members have limited liability.
- Pass-through taxation. In an LLC, profits and losses flow through to the members according to the operating agreement, their capital accounts, or local law, which is generally proportional to their contributions. If the LLC elects tax treatment under Sub-Chapter S of the Tax Code, then the member can divide their income between salary and income from participation in the profits and losses of the LLC, and that way, save significant money on social security and retirement payments. However, this election is not available if the LLC has foreign residents as members.
- Flexibility in management and ownership. LLCs offer flexibility in how they are managed. The LLC can be member-managed, or manager-managed. There are no restrictions on the number or type of members.
- Ability to be owned by a trust. An LLC can be owned by a trust, which gives you the benefit of allowing the general manager of the LLC to handle tasks such as making investments or overseeing the business in general instead of having the trustee directly review all decisions.
- Fewer formalities and record-keeping requirements. Compared to corporations, LLCs often have fewer ongoing formalities and requirements, such as holding annual meetings or maintaining detailed corporate minutes. This makes them ideal for managing the requirements of a cross-border lifestyle. For example, the best way for a foreigner to own a house in the United States is via an irrevocable trust that owns an LLC that owns the house.
State-Level Differences to Consider When Setting Up an LLC
If you are interested in establishing an LLC in the United States, it’s important to keep in mind that each state has different regulations associated with establishing this type of business. Here are some of the factors to consider:
- Naming requirements. Each state has its own rules regarding the naming of LLCs. This usually includes restrictions on using certain words (like "bank" or "insurance") and requirements that the name be distinguishable from other business names on file with the state.
- Need for a registered agent. All states require an LLC to have a Registered Agent with a physical address in the state where the business is formed. This agent receives official documents on behalf of the LLC.
- Potential differences in formation documents. The name of the document required to form an LLC varies by state. It's commonly called the Articles of Organization, but some states may refer to it as a Certificate of Formation or Certificate of Organization.
- Requirements for operating agreements. While most states don't require LLCs to have an Operating Agreement, it's generally recommended. Some states, like New York, have specific requirements regarding Operating Agreements.
- Publication requirements. Some states, like New York and Arizona, require LLCs to publish a notice of their formation in local newspapers. This can add to the cost and complexity of setting up an LLC in these states.
- Reporting and compliance requirements. Many states require LLCs to file annual or biennial reports and pay a filing fee. The specifics of these requirements, including the information required and the fees, vary by state.
- Filing fees. The cost to file the formation documents differs significantly across states. Some states have relatively low fees, while others can be quite high. Additionally, some states have annual fees or franchise taxes that LLCs must pay.
- Taxation. Beyond the initial filing fees, states may impose additional taxes or fees on LLCs. California, for example, charges an annual franchise tax to all LLCs.
- Duration of the LLC. Some states require you to list a dissolution date for your LLC in the Articles of Organization, while others presume perpetual existence.
Special Considerations for Mexican and Latin American Investors Doing Business in the United States
Although LLCs offer many benefits, experienced legal assistance is vital if you wish to take full advantage of this business structure. Setting up banking and financial transactions can be more complex for foreign-owned LLCs, requiring additional documentation and compliance with federal regulations. Do not trust these important matters to an attorney who does not regularly work with clients in Mexico or Latin America.
MEG International Counsel’s experienced international business planning attorneys are uniquely equipped to meet the needs of successful entrepreneurs like yourself who wish to establish an LLC in the United States. Antonio Gastélum and María Elia Gastélum are dual-licensed, bilingual, and skilled in navigating the challenges you’ll face bringing your business interests to the U.S. market.