Corporate Law of the United States

United States corporate law deals with the legal forms provided for corporations in the United States of America. The federal system of the United States allows each state to develop its own corporate law through its legislature. As a result, the possible forms of corporations vary significantly from state to state.

The Corporation

In particular, the corporations known as corporations are important to the economy. On the one hand, most large American companies are organized as corporations. On the other hand, some of the American corporate forms are popular as a vehicle for doing business on one's own because they can limit the liability of the trader to the company's assets without the strict capital raising requirements of German, Austrian or Swiss corporate law.

The corporation is characterized in particular by the fact that liability is limited to the company's assets (limited liability) and the company continues to exist beyond the death of the founders and shareholders (perpetual lifetime).

Incorporated companies are companies in the USA that have been entered in the commercial register in accordance with the applicable company law of a state there. It is not mandatory for a company to have its registered office in the state in which it was incorporated (incorporation theory).

The legal capacity of a corporation under U.S. law is recognized by the German legal system by virtue of the German-American Treaty of Friendship of October 29, 1954.

Corporations can use the name Corporation or abbreviated Corp. as a suffix to their name.

Shares of the corporation

Corporations can be profit-oriented or non-profit-oriented stock corporations. In the case of a for-profit corporation, a distinction is made between authorized shares and issued shares. All shares, the number of which is specified in the Articles of Incorporation, are called authorized shares. The so-called issued shares are those shares that have actually been taken over by shareholders. The shares do not have to have a nominal value.

Non-profit corporations do not issue any shares. Non-profit corporations include, for example, foundations, churches and other non-profit organizations.

The legal situation for USA companies:

U.S. corporations fall under non-European corporations because the place of their commercial registration is outside the EEA. However, most European countries and the United States of America have concluded an intergovernmental agreement with the status of law ("Law on Friendship, Trade and Consular Treaty between the given State and the United States of America" ).

Both governments thereby agreed on the unrestricted recognition of the legal entities of the respective other contracting state. This puts a stop to national jurisdiction's attempt to deprive U.S. companies of their legal capacity. National jurisdiction and legal interpretation cannot bend, override or override international agreements, even if European regional and higher regional courts repeatedly attempt to do just that with regard to the legal capacity of U.S. companies.

Tax Advantage:

The Federal Corporate Income Tax for active corporations is only 15% on net profits up to $50,000, and then increases progressively to the maximum rate of 34% (Only after net profits of $10 million does it go to 36%). Under President Busch's tax reform, the maximum tax rate is scheduled to become 30%. There are no sales, value added or business taxes (in Florida). Intangible assets (intangible tax) must be declared.

Asset protection with the US Corporation:

If, for example, you want to protect yourself against intrusive creditors, the taxman or estranged spouses, the corporation can act as the owner of your valuable assets such as boats, planes, real estate or bank accounts without revealing your name as the actual owner. Of course, this does not preclude you from using these assets: You simply lease these items from your corporation on terms that are optimal for you (since you can formulate them yourself). By the same principle, your corporation can also act as the owner of your domestic company and allow you to remain anonymous as the actual owner.

By the way: In the USA, European court judgments against a U.S. corporation are not recognized and are not enforceable. (The evil adversary would be forced to start all over again with a very costly and lengthy U.S. court proceeding). Also, in the U.S., a U.S. corporation is exempt from the withholding tax normally imposed on real estate sales made by foreigners.

Inheritance Tax Waiver:

One can avoid the 37% estate tax (which, by the way, begins in the U.S. in 1999 at estates of $650,000, in 2000 at estates of $675,000, and in 2006 at estates of one million) by distributing during one's lifetime the corporation's stock interests to one's heirs. In this regard, the creation of preferred stock should be considered to avoid the situation described under question "Can you lose your corporation to the other shareholders?" - described above. Since a corporation does not cease to exist upon the death of the owner, it can be continued without interruption.

It is also possible to set up a safe deposit box in the name of the corporation, which would not be accessible to creditors or authorities in the event of death (e.g. one could also keep one's shares or other securities here).