What is the business model that I should open: LLC or CORP?

In this post we explain which are the most flourishing business models in the United States and which are the most common. What aspects should you take into account to open your company?

One of the most important decisions when internationalizing your business in the United States is deciding whether to create a Limited Liability Company (LLC) or one Corporation (Corp - INC).

Many myths have been woven around this topic: “that it is better to create an LLC because these are small companies”, “that the tax rates vary according to the business figure that is constituted”, etc.

That is exactly why we wrote this blog. We will explain how they are different and we will put on the public agenda the 20 most important companies in the United States according to the  fortune list 500. How many of those are LLCs and how many Corporations?

The first thing is to understand how these business models are different. About this we wrote a blog (Myths and truths: everything you need to know about taxation in the United States).

The truth is that LLCs are divided into two: LLCsDisregarded and the LLC Partnership, in both, the amount to declare -for the Income Tax or income tax, regulated by the Federal Government- is staggered: from 10% to 37% on the utility. The difference is that the Partnerships are made up of different partners, while in the Disregarded there is a single owner.

On the other hand, there are the Corporations, also divided into two: the C-Corp and the S-Corp. The C-Corp pays a fixed charge of 21% on profit, while the S-Corp, each of the partners pay taxes according to the shareholding they have; the value to be taxed will vary between 10% and 37%, that will depend on the utility generated. The big difference with the C-Corp is that this business model can only be created by US residents and citizens, manages shares and can participate in the stock market.

In relation to sales tax, something different happens, and it is that the tax rate is regulated by the States, so it does not matter if it is an LLC or a Corporation.

Now, there are many myths surrounding internationalization, the most common is that large companies are Corporations and not LLCs. Let's look at the following list: 20 of the 500 largest companies in the United States according to the Fortune 500 list:

We see that there is indeed a common denominator among large companies in the United States, they are all Corporations. However, that does not mean that only large companies operate under this business model. Next, we will see giant companies that work under the LLC model.

As we can see, this model is used by companies such as Alphabet, the main subsidiary of Google, LLC, or WhatsApp subsidized by Meta, that will depend on the business strategies that are decided in a board of directors, it does not mean that LLCs are only companies little.

Likewise, any entrepreneur can change the business figure of his organization, that is, move his company from an LLC to a Corporation. This procedure is called Amendment and it is very common to see it in the industry.