Establishing an Online Business in the US

Basic Entities in the United States.

Anyone, even a non-US citizen and non-US resident can establish a sole proprietorship. This is simply operating the business under your own name. You have personal liability for the actions of any employees or any actions taken in the name of the business. The business can also have a trade name also known as a ” doing business as” name which is typically filed with the state. The advantage of a sole proprietorship is simplicity. There is not much you need to do to set up the business other than obtaining a tax identification number and possibly a trade name certificate from the state. Depending on how the services are rendered are rendered, there may be some licenses that are required but for most online businesses that it is not necessary.

Another advantage of the sole proprietorship is that it is taxed on the individual tax return. There is no double taxation. The sole proprietorship is simply taxed at the individual level for both federal and state purposes. Nevertheless, a significant disadvantage of a sole proprietorship is that if you want to add an additional owner to the business, it gets converted into a partnership. This requires a change in entity, a change in taxation and other issues.