Opening an LLC in America

The LLC is a very widespread corporate form in America. According to data published by the IRS in 2023, there were about 21.6 million active LLCs in America [data for the fiscal year 2020].

Opening an LLC in the USA begins with the filing of the Articles of Organization with the Department of State of the American state in which you choose to open the LLC. These are the details that must be included in the Articles of Organization:

• ​​​​​​​Name of the LLC; must include the notation LLC or Limited Liability Company
• Address of the LLC's Registered Office. It must always be in the state of the LLC's formation
• Address of the Principal Place of Business [if different from the Registered Office] The principal place of business can be in a state different from that of the LLC's formation
• Name and address of the Registered Agent who must be authorized to operate in the state of the LLC's opening
• Name, address, and signature of the LLC's Organizer [Corresponds to the incorporator in the opening of corporations]
• Name of the persons authorized to manage the LLC
  If the LLC is member-managed, the information of each member must be included
  If the LLC is manager-managed, the information of each manager must be included

Approval of the Articles of Organization

The process of opening the LLC formally concludes with the approval of the Articles of Organization. The state department normally approves LLCs in 5-7 business days. Once the LLC approval is received, the state department will send the stamped Articles of Organization for approval.

Operating Agreement

Following the approval of the Articles of Organization of the LLC, it is necessary to create the Operating Agreement, an internal document that regulates the management of the LLC and which, for the role it plays at the governance level, is halfway between the typical bylaws of corporations and the Shareholder Agreement. The Operating Agreement is not a public document and therefore does not need to be filed with the Department of State.

These are the essential details to include in the Operating Agreement of an LLC:

• Ownership percentages of the LLC, the distribution of shares, of each member, and profit-sharing percentages if these are different from those of LLC ownership
• Rules for Corporate Governance
• Powers of the members and managers of the LLC
• Non-Compete Clause
• Rules for the inspection of the accounting books and corporate records by the members
• Arbitration Rules and Choice of Competent Forum
• Rules for the resignation of members
• Fiduciary Duties of members

The name of the LLC must be unique

It is of fundamental importance to verify that the name chosen to open your LLC is available before starting the procedure and filing the Articles of Organization. If the name is already in use, or even just too similar, to that of another LLC, the state department will not give you approval to open. Below we have listed links to quickly verify the availability of LLC names in all American states. We have highlighted in bold the names of the most popular states for opening an LLC in America:

Fiscal Classification of LLCs

The IRS - the American Revenue Service - will treat an LLC as a corporation, a partnership, or as a disregarded entity. Specifically, an LLC with at least two members is classified as a partnership for federal income tax purposes, unless it elects to be treated as a corporation. For income tax purposes an LLC with a single member is considered as a disregarded entity and therefore not separate from its owner, unless it chooses to be considered as a corporation for income tax purposes. However, for the purposes of paying social security contributions and Sales Tax, an LLC with a single member is still considered a separate entity from the members.

Taxation of LLCs in America

LLCs are pass-through entities: the income flows to the members and they will file the tax return and pay the taxes. In other words, LLCs do not file tax returns and do not pay taxes, instead, the members do.

Below we have reported the updated federal tax rates to be used for the 2024 tax return [related to income earned in the fiscal year 2023] in case the members of the LLC are individuals. Since LLCs are taxed transparently, the rates for the personal income tax will apply whenever the members of the LLC are individuals, while the flat rate of 21% of corporations will apply when the members of the LLC are capital companies [in that case, the additional 5% as Branch Tax is also applied].

Income brackets and rates for the 2024 US tax return as a single person [Filing Single] Use these rates when the member of the LLC is not married and presents the tax return in America as a single individual.

• Taxable income from $0 to $11,600 Tax rate of 10%
• Taxable income from $11,601 to $47,150 Tax rate of 12%
• Taxable income from $47,151 to $100,525 Tax rate of 22%
• Taxable income from $100,526 to $191,950 Tax rate of 24%
• Taxable income from $191,951 to $243,725 Tax rate of 32%
• Taxable income from $243,726 to $609,350 Tax rate of 35%
• Taxable income from $609,351 onwards Tax rate of 37%

Income brackets and rates for the 2024 US tax return as a couple [Married Filing Jointly]

• Taxable income from $0 to $23,200 Tax rate of 10%
• Taxable income from $23,201 to $94,300 Tax rate of 12%
• Taxable income from $94,301 to $201,050 Tax rate of 22%
• Taxable income from $201,051 to $383,900 Tax rate of 24%
• Taxable income from $383,901 to $487,450 Tax rate of 32%
• Taxable income from $487,451 to $731,200 Tax rate of 35%
• Taxable income from $731,201 onwards Tax rate of 37%

The situation is different for corporations that must always file a tax return, even when they have not made taxable profits during the reference fiscal year.