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Starting a new business venture in the United States is unquestionably exciting, but it can be daunting, particularly for foreign entrepreneurs. The complexities of establishing a business in another country can feel overwhelming.
However, the procedure for incorporating your business as a non-citizen is simple, and there are many resources available to help you throughout the entire process. This guide aims to clarify the intricacies associated with launching your company in America.
How to Incorporate a Business in the USA as a Foreigner in 6 Easy Steps
1. Choose Your Business Structure
Foreign entrepreneurs who are not residents of the United States have the choice between two main business structures: the C Corporation and the Limited Liability Company (LLC). These options are highly recommended for foreign-owned businesses.
While U.S. citizens often favor S Corporations, they’re unsuitable for non-residents. Foreign entrepreneurs cannot form an S Corporation in the U.S. because all shareholders must be U.S. citizens or permanent resident aliens.
Now, let’s examine both the C Corporation and LLC to gain a better understanding of your options and determine if either of these business entity types is suitable for you.
A C Corporation is a distinct legal entity from its owners and shareholders, so their personal assets are safeguarded against any liabilities or debts incurred by the company. The corporation only bears responsibility for its profits and losses.
One can issue an unlimited number of shares or stocks in a C Corporation and even take it public if desired. Investors favor this particular business structure, especially when there are plans for expansion and external funding.
However, there are certain drawbacks associated with being a C Corporation. These include increased paperwork requirements and additional deadlines to ensure compliance with regulations specific to C Corporations.
Another disadvantage is the concept of double taxation, where the corporation pays taxes on its profits separately from individual shareholders who also pay taxes on their dividend income received from the company.
Limited Liability Companies (LLCs)
LLCs, or Limited Liability Companies, offer the same level of liability protection as C Corporations but with more flexibility in terms of compliance requirements.
The individuals who own an LLC are referred to as members, and the LLC itself can be taxed like a C Corporation or pass on its profits and losses to its owners.
Read more: How to Open an LLC for Non-US Residents
2. Choose the State for Business Formation
Entrepreneurs who reside in a particular state typically prefer to establish their businesses there. However, as a nonresident, you have the freedom to choose any state in which to file your business entity. Several states within the United States are popular options for this purpose, including California, Delaware, Nevada, Texas, and Wyoming.
When making this decision, consider various factors that indicate each state’s suitability. These include the business environment in terms of regulations and restrictions imposed by the state government.
It’s crucial to assess the availability of resources such as materials and employees within each location. One must consider the costs associated with conducting business operations in each respective state.
Tax rates also play a significant role in determining an ideal location for establishing your business entity. Some states impose high tax rates, while others offer tax incentives to attract new businesses.
Conducting thorough research will enable you to identify your optimal location based on these key indicators before proceeding with filing your business entity registration.
3. Appoint a Registered Agent
A resident agent, or registered agent, is an individual or organization officially recognized by the state where you establish your business. This registered agent must be located within the same state and is appointed by the company to accept legal documents on its behalf.
Since you’re not based in the United States, it’s advantageous to have representation within the country to handle legal paperwork such as service of process notices, correspondence from the Secretary of State, and other official government notifications.
Your registered agent can also assist with obtaining and renewing business licenses and ensuring deadline compliance.
The specific requirements for registered agents vary depending on the state. They must have a physical address within that state and be available during regular business hours. They must be at least 18 years old.
Alternatively, you can hire a company like CorpNet that specializes in providing registered agent services.
4. Obtain a Taxpayer Identification Number
Every business operating in the United States must possess a Taxpayer Identification Number (TIN). The TIN serves as an identification code used by the IRS to oversee tax regulations.
Various forms of Taxpayer Identification Numbers are:
- Social Security number (SSN)
- Employer Identification Number (EIN)
- Individual Taxpayer Identification Number (ITIN)
To acquire a business Employer Identification Number (EIN), American citizens are required to provide their Social Security number. However, for foreign entrepreneurs who do not possess a Social Security number, an alternative option is available, applying for an Individual Taxpayer Identification Number (ITIN).
To obtain an ITIN, individuals must fill out the IRS Form W-7, which is the application for this specific identification number. The Form W-7 necessitates the submission of supporting documents that verify the individual’s foreign status and true identity.
5. Set Up a Business Bank Account
To effectively manage a business in the United States, establish a U.S.-based bank account. Despite the increased complexity resulting from the USA Patriot Act, implemented after the 9/11 attacks, foreigners can still open bank accounts by adhering to specific guidelines each bank provides.
You will be required to provide your official corporation documents (including an official U.S. address), an ITIN number, and a passport.
The most recommended method for opening a U.S. bank account is visiting the branch in person. However, if this isn’t feasible, you can explore whether there’s a branch of the same bank available in your own country that allows for setting up an account remotely.
If these options aren’t available to you, consider reaching out to several global banks and inquire about their online services designed specifically for assisting with remote account setup.
6. Maintain Business Compliance
Business compliance continues once you have established your business in the United States. Regardless of whether you have formed a C Corporation or an LLC, submit an annual report.
This report ensures that the information on file for your business remains up-to-date, including details such as your physical location, registered agent, and shareholders. Even if there have been no changes from the previous year, submitting this form is required yearly.
As a non-resident business owner in the US, you’re obligated by the Internal Revenue Service (IRS) to pay taxes on any income earned within the country. There may be an annual fee imposed by the state where your business is incorporated that needs to be paid.
Incorporating in the US as a Foreigner – FAQs
Will You Need a Visa to Open a US Business?
In the United States, it’s possible to establish and possess a business even if you’re not a citizen. It’s legal to oversee an LLC or corporation from outside the country, but entry into the United States will only be allowed with a valid work visa.
If you have questions or require additional information regarding visa applications, contact either the US Embassy in your home country or the US commercial service.
While there are various types of business visas available in the US, entrepreneurs commonly opt for the E-2 visa. To obtain this particular visa, three main requirements must be met:
- Citizenship from a country holding a Treaty of Friendship, Commerce, or Navigation with the United States is required
- You should have made or have concrete plans to invest a substantial sum, at least $100,000, in a U.S. company
- You must be capable of proving your ownership of a controlling interest in your company, constituting 50% or more
Entrepreneurs who meet the requirements may be eligible for a ‘Green Card through Investment,’ enabling them to obtain permanent residency in the United States. However, this law specifically applies to foreign investors who can invest $1 million in a new business endeavor (or at least $500,000 in specified employment areas).
What if You’d Like to Move to the U.S.?
What occurs when the decision is made to relocate to the United States in order to manage a business? There are two available visas: the E-2 Visa and EB-5 Visa.
The EB-5 option is open to foreign entrepreneurs who invest a minimum of $1 million (or $500,000 if the entity is located within a targeted employment area) and generate 10 new job opportunities. The E-2 Visa is accessible for foreign business owners from countries that have treaties with the U.S., and it has fewer requirements regarding job creation and investment.
There are three fundamental prerequisites for obtaining an E-2 Visa:
One must provide evidence of legitimate control and possession of funds (such as U.S. tax returns). Personal financial risks like credit card debt and business loans should be taken on in one’s own name rather than in the name of the business. Secondly, it’s mandatory to directly supervise and operate daily.
Lastly, one’s investment must be substantial. Although there isn’t an exact amount set for an E-2 visa application, it should demonstrate that there are sufficient funds available not only to support one’s family but also to hire employees.
Since you have already begun your business operations in the United States, it’s crucial to show your dedication towards bolstering the American economy by means of investments and generating employment opportunities.
In case you have apprehensions regarding the approval of your Visa, it’d be wise to seek help from a knowledgeable professional.
What Is the Process for Registering a Company in the US as a Non-Resident?
The process of registering your business can differ slightly depending on the state and whether you’re establishing an LLC or a corporation. Once you have chosen the structure and location for your company, there are several steps that you will need to take.
- Select an original name for your LLC or C Corp
- Contact a registered agent service
- Complete the state’s incorporation process
- Acquire an Employer Identification Number (EIN)
- Secure a physical U.S. mailing address
- Establish a U.S. bank account
Can I Get a Green Card if I Start a Business?
The EB-5 Program is managed by USCIS. This program allows investors, along with their spouses and unmarried children under 21, to seek lawful permanent residence in the United States (become a Green Card holder) by making an appropriate investment in a commercial enterprise.
About the author
Dr. Alexander Sterling, Esq, a distinguished legal scholar with a business law degree and a Doctor of Juridical Science, is a leading expert in business registration and diverse business departments. Renowned for his academic excellence and practical insights, Dr. Sterling guides businesses through legal complexities, offering invaluable expertise in compliance, corporate governance, and registration processes.
As an accomplished author, his forthcoming book is anticipated to be a comprehensive guide for navigating the dynamic intersection of law and business, providing clarity and practical wisdom for entrepreneurs and legal professionals alike. With a commitment to legal excellence, Dr. Alexander Sterling, Esq, is a trusted authority dedicated to empowering businesses within the ever-evolving legal landscape.