Business Taxes in the USA: an Overview of the Main Types - read in the blog of the company COREDO

Business Taxes in the USA: an Overview of the Main Types

Updated: 20.01.2022

The United States of America is the most attractive country for doing business. America cannot be called offshore, but the taxation system here is quite adaptable and developed, one of the most progressive in the world. Consequently, if you are planning to set up a business in America, you need to understand the taxation mechanism of this country.

What you need to know about taxes

The primary feature of the US tax system is its three-tier structure. It means that people in business must pay taxes at several levels:

  • federal;
  • state ;
  • local administration.

Federal and local taxes are independent. They can’t influence each other. Moreover, the federal government cannot interfere with the system that the state institutes. District authorities establish only those fees that are prescribed by the legislation of every state. In general, US companies pay the following charges:
• at a profit;
• sales tax;
• for real estate;
• for capital gains.

There are different types of taxes depending on the classification of the company.

What taxes do firms pay in the USA?

Corporation taxes in the US are set by both the house and state authorities. Companies are obligated to repay four main types of taxes. These are corporate income taxes, sales, real estate charges. Furthermore, capital gains are likewise taxed. Not only that, but payroll taxes are required at the federal and regional levels in America, and the quantity relies on the state.

As said before, taxation in the US exists at the local and regional levels — in these cases, taxes fluctuate. It can be an environmental tax or charges on the property or retained earnings.

In addition, do not forget about the benefits. Despite the rigidity of the US tax system, tax breaks are also present in it. For instance, the government offers massive bonuses to farms — in drought years, these benefits can reduce the taxation of farmers in America to zero.

Types of US companies available for registration to non-residents

There are two types of organizations available for non-residents in the USA.

The first is an LLC, and the second is a type C corporation, abbreviated as C-corp.


A C-corporation is a lawful entity that pays state income tax and federal income tax. First, the corporation pays corporate tax on its profits, and then its shareholders also pay income tax on two levels.

Most often, this type of company is chosen by large businesses or IT startups. Almost all major American corporations, including Google and Apple, are C-corps. And even if your business is still far from Apple, you should still think about organizing a business in the form of a C-Corporation.

Limited Liability Company

Limited Liability Company — successfully combines the advantages of taxation at the owner level (as in partnerships) and limited liability of participants (as in corporations). The simplest and most beneficial form is an LLC with one owner, the so-called single-member LLC, or the transparent structure. With one owner, the company will not pay tax, and it will be paid by the individual who owns this company. The earnings of the company are estimated to be the income of a person.

Corporate Income Tax

The amount of this tax primarily depends on the type of company. So, S-corporations do not pay this charge on their behalf. All gains, losses, and surcharges are divided between the members of such a corporation.
C-corporations pay federal income tax in America, and regional taxation differs from state to state. For instance, in Iowa, you will have to pay 12%, and in Delaware — not a cent.

The tax system can treat an LLC company as both an S-company and a C-corporation. This tax is growing. That is, its size grows step by step, depending on the amount of gross income. It is essential for smaller companies with low revenues. So, for the first fifty thousand dollars of payment, the company pays at a rate of 15%, for the next twenty-five thousand — 25%, for another 25 thousand — 34%, for the received more than 235 thousand dollars of income — at a rate of 39%. Finally, 34% income tax is payable on all gains of more than $335,000.

Income Tax

Income tax in America is levied on any income that an individual earns in the US. The average US income tax ranges from 10% to 39.6%. Income tax in the United States is paid on:

  • wages;
  • bonus payments;
  • compensation payments.

Opening your business in America, if desired, is real. The procedure consists of several stages: choosing the state and the optimal type of company, registering a company, opening a bank account, obtaining a tax number, selecting a tax strategy, etc.

It will be easier to draw up a plan, optimize assets, and keep track of all tax liabilities with the help of professionals. For more information about doing business in the USA, contact the company’s specialists.



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