With its robust economy, welcoming nature, and abundant opportunities, the United States is one of the perfect locations for foreigners to live and invest. Have you been wondering how to own a business in the USA as a foreigner? This article got you! Establishing a business in the USA may appear complex, especially as a foreigner.
Who wouldn’t want to enjoy the American dream? No one! This explains why individuals wish to own a business in the USA as a foreigner. Aside from its thriving economy and market demands, the country offers other great opportunities. Starting up a business in the USA requires you to capture the market and as such, enjoy lower tax rates.
Furthermore, to open a small business in the USA, you do not need to have citizenship or permanent residency. The processes involved are also quite simple. In this article, we’ll take you through the required procedures to own a business in the USA as a foreigner. Let’s get started!
Procedures to Own a Business in the USA as a Foreigner
Below are the steps you need you take if you wish to own a business in the USA as a foreigner.
1. Pick Your Business Structure
To successfully run a business, there are two basic options of business structures available for businesses in the USA, which include:
ii. The Limited Liability Company (LLC).
Both business structures are excellent choices for foreign entrepreneurs. Even though the S Corporations is widely known among US business owners, it’s not an appropriate option for foreigners.
As a foreign entrepreneur, you are not allowed to initiate the S Corporation in the USA. Wondering why? This is because every member of the S Corporation shareholders must be a permanent resident alien or a citizen of the USA. Keep reading as we review the C Corporation and the LLC, so you can have a full knowledge of both and pick the best option for your business.
i. C Corporations
A C Corporation is a separate legal establishment from the owners/shareholders. Therefore, the owners’ and shareholders’ personal assets are protected from the actions and debts the company may have incurred. Likewise, profits and losses are only accountable to the corporation.
You can also put up for sale an unlimited amount of stock or shares in the C Corporation, as well as go public if you wish. Meanwhile, the investors favor the C Corporation business structure in case you need to expand and inject money from your reserve. The disadvantages associated with a C Corporation include plenty of paperwork, the extra deadlines you need to be in obedience as a C Corporation, and the presence of double taxation.
However, double taxation is the taxes the corporation pays on its profits, and then individual shareholders also pay their taxes on the dividend income they receive personally from the business.
ii. Limited Liability Companies (LLCs)
It’s similar to the C-Corporation in terms of liability protection, but not so harsh in terms of compliance requirements. However, the owners are referred to as members. The LLC has the liberty to choose whether it wants to be taxed as a C Corporation or pass the profits and losses to the owners.
2. Choose the Location for Formation
Most entrepreneurs in the US usually pick their business location to be in the state they reside. But as a foreign entrepreneur, you are free to file your business entity in any state of your choice. Some popular options within the US include California, Wyoming, Texas, Delaware, and Nevada.
However, before you make the decision, consider some essential indicators such as the regulations and restrictions of the state. As well as its access to resources like materials and employees and the cost effect of running a business there. Furthermore, some states have higher tax rates while others offer tax incentives to attract new businesses. You should pick a perfect location for your business.
3. Obtain a Registered Agent
A registered agent is also a resident agent. It’s an individual or company officially recognized by the state in which you incorporate. The registered agent resides within your state of formation and is certified by the business to accept service of process on behalf of the company.
However, it’s beneficial to have representation stateside to deal with legal paperwork if you do not reside in the US. These legal paperwork include service of process notices, correspondence from the Secretary of State, and other notifications from the government. Additionally, your registered agent will also make sure that you obtain and renew your business licenses.
Also, ensure that you meet all the compliance deadlines. Requirements for registered agents differ by state, but generally, the agent must have a physical street address within the state. And must be available at the address at the time of normal business hours, and must also be above 18 years of age.
4. Obtain a Taxpayer Identification Number
All United States businesses must obtain a Taxpayer Identification Number (TIN). The TIN is an identification number that is used by the IRS to regulate tax laws. Some examples of the Taxpayer Identification Number are as follows.
- Social Security number (SSN).
- Employer Identification Number (EIN).
- Individual Taxpayer Identification Number (ITIN).
5. Set Up a Business Bank Account
To successfully manage a business in the US, you are required to set up a bank account in the country. Although the USA Patriot Act passed after the terrorist attacks on 9/11, has made it difficult for foreigners to open bank accounts in the US. You can still open a bank account by following the bank’s specific guidelines.
Generally, you’ll need your official corporation documents (with your official US address), an ITIN number, and your passport. The ideal way to set up a bank account in the US is to visit the bank personally. But you can also check if the bank has a branch in your country that will allow you to set it up from overseas.
If all of these options are available, try to contact some global banks to verify if they have services that’ll enable you to set up your account online.
6. Maintain Business Compliance
In the US, business compliance does not stop even after you have started your business. However, you must file a yearly report, whether you’ve formed a C Corporation or an LLC. This document keeps details on file for your business’s physical location, registered agent, and shareholders.
Furthermore, you’ll need to submit this form annually even if no changes have been made from the previous year. Even as a foreign entrepreneur, you’ll be required by the Internal Revenue Service to pay taxes on the income earned in the US. Also, you may be required to pay a fee to the state where your business is incorporated annually.
Guidelines for Resident Foreigners Starting a Business in the USA
Before establishing a business in the US as a foreigner living in the country, you must do the following.
- Have a well-thought-out business plan.
- Be sure of your source of initial capital.
- Choose your desired length of stay in the US.
- Consider any immediate family who may likely be joining you.
- Select the type of business entity that you will register your business as.
- Confirm all the legal documentation and living situations before immigrating.
- Work with an attorney to ensure that you file correctly.
While this is not an exhaustive list, this could place you on the right path to start. It’s commendable that you’re venturing into a new country, potentially uprooting you and your family to start a new life and business in the US. Although this can be a terrifying process for individuals who are not familiar with the ins and outs.
It can come out successful and you can achieve your set goals. By exploring online communities/groups, you may as well find people and groups that have successfully done this same venture before. Also, through learning from other people’s experiences, you can be sure to watch out for areas of success and failure in your business. And to navigate the legal process as well as help your US-based business to succeed for a very long time.
Guidelines for Non-Resident Foreigners Starting a Business in the USA
Before you establish a business in the US as a non-resident foreigner, you must observe the following.
- Create a structured business plan.
- Verify your source of capital and potential for trade.
- Search for the appropriate tax documentation that you will need to file (annually).
- Select the appropriate business entity to register your business.
- Verify and file taxation appropriately while living abroad.
- Work with a US-based lawyer to ensure that your business is legally secured and operating.
Conclusion
We hope this article has enlightened you on how to own a business in the USA as a foreigner. The necessary steps you need to take and the documentation you need to acquire, among other things are all stated here. Kindly drop your comments and questions below. All the best!