In this summary, we cover:
- The types of companies foreigners are allowed to set up in the US
- The process of setting up a company
- The best states to set up your company in the US
- As a foreigner, you can only set up two types of companies; an LLC and a C-Corp. S-Corps can only be established by US nationals.
- The process of forming a company in the US as a non-resident will basically involve having a unique business name, an US-based agent to receive legal documents, filling out the certificate of incorporation, filing the certificate and paying the franchise tax, and lastly, applying for an EIN. Be sure to check out and plan for the charges for some of these services.
- As a non-resident, you don’t need a visa to set up a company in the US. You only need a green card or a work permit even when working in your own company.
- Nevada and Delaware are some of the states with great incentives for foreign investors looking to set up companies in the US.
- The crucial documents for registering a company in the US include a business entity registration, an EIN and/ITIN (see the ‘point to note’ in the ‘documentation that you need’ section), an Articles of Organization (in case it’s LLC), then permits & licenses.
America, they say, is the “land of opportunity”. A number of individuals have taken this seriously and are literally looking to be a part of the American dream. Perhaps, this is one of the reasons as to why a sizable number of people migrate yearly to live and work in the US.
But then, what if you wanted to live the American dream on your own terms? What if you needed more than just an income? And what if you needed all this yet you don’t have an American citizenship?
This where the idea of starting a business as a non-resident comes in…
Starting a business could be overwhelming to many due to the huge number of uncertainties such as political instabilities, insecurity, competition, and so on. In fact, it could even be more challenging to set up one in a foreign country. Despite countries such as the US encouraging foreign investments, the process is still marred by uncertainties to many an investor.
However, as you will soon find out, incorporating a company as a non-citizen is as easy as ABC.
This guide will break down the whole process for you; in the simplest of terms.
Let’s jump right in!
Is a Visa necessary for me to open a Business in the US?
No, it isn’t. You can set up and run a business without a visa. However, you will need a green card or a permit to work in the US—including in your own company.
What corporate entities can I establish as a non-resident in the US?
“Under the current laws, a non-resident can only set up two types of entities namely; Limited Liability Company and a Corporation (C-Corp).”
One of the distinct advantages of starting an LLC is the fact that it is a limited liability entity. This essentially means that its member or owners are protected from personal liability in case the company incurs any problems such as lawsuits or insolvency. With an LLC, you can share profits without any restrictions—unlike C-Corps and S-Corps.
Even with the seemingly attractive advantages that come with an LLC, a number of investors prefer going for C-Corps. “A C-Corp allows you to expand through floating unlimited stock to potential investors.” Also, as the owner(s), find C-Corps to be great shields against close association with the IRS.
What are the steps and costs involved in registering a company?
The registration process of a company in the US will depend on the type of entity you wish to form (LLC or C-Corp) as well as the state where the business will be located.
To get a general view of the process, consider this Delaware one.
- You will be required to identify a unique business name—a name search will be done to verify this.
- A representative of the company will need to be present in the US to receive the legal documents of the company.
- You will fill out a certificate of incorporation once your identity and that of your agent are verified. The certificate basically outlines the name of the business, address, number and value of authorized shares, and the name and legal address of the owner(s). The fee required for filing the certificate is $89 and may vary depending on the capital raised or stock issued.
- The next step would be to file your incorporation certificate and pay for your franchise tax.
- The last stage of the process will require you to acquire an Employer Identification Number (ENI). The number will be used to hire staff, set up your bank account, and obtain other licenses. The EIN can be applied online if you or your principal officer has a Taxpayer Identification Number. If neither you nor your principal officer has a U.S social security or ITIN, then you’ll have to enter “Foreign” on line 7b in the form SS4 and apply by fax or mail.
The costs on the other hand will come in two parts. The first one is a one-time fee for the company formation package ranging from $450 to $850 and an EIN registration fee of $95. The second cost aspect would be a recurring annual fee of $50 for a registered agent; and a further filing tax of $125 for foreign corporations for the Delaware franchise tax. Here is a link to guide you on how to calculate the Delaware Franchise Tax.
These figures may vary—you should always try to find this out from the relevant authorities or your appointed agent.
Which is the best state to incorporate my business in considering the US has many states?
You need to register your business in the state that it will be situated. “If it will be an online business, you might consider going for a low-tax state—Nevada and Delaware are great places to start your entrepreneurial journey in due to generally being low-cost states.” You should check their websites for more incentive for foreign investors.
What do I need in terms of Documentation?
As a non-resident, you will need the following documents to register a business in the US:
- Business entity registration
- Individual Taxpayer Identification Number (ITIN)
- Employer Identification Number (EIN).
- “Tо form аn LLC, уоu muѕt file а document called “articles оf organization” wіth thе Secretary Оf State оr anоthеr аррrорrіаtе state agency”
- Permits & Licenses
Point to note: If a non-resident alien is the owner of or responsible for the formed entity, then he/she doesn’t need to have an ITIN to obtain an EIN.
How long will the incorporation process take?
The processing time may vary depending on the state you register your business in. However, you can check with the individual states to have an estimate of the processing time. For foreign applications, it may take about a month for the EIN alone to be obtained.
How will I obtain the Company Tax ID (EIN)?
You will be required to apply for an EIN through preparing and filing form SS4. The application form has to be signed by the IRS and the EIN will be issued within 30 days through the address on form SS4.
What about a partnership?
A foreign company is permitted under the US laws to form a partnership with another firm either through an oral or written agreement. However, it would be advisable for foreigners to seek legal advice regarding this prior to any commitments.
How do I go about initiating credit card payments in my Company?
You may need to visit the various credit card companies for possible partnerships. Still, there are a number of other ways your clients can pay you. Take a look below:
- PayPal аnd іtѕ equivalents
- Bitcoin аnd оthеr virtual currencies,
- Checks (which саn bе deposited online)
- Money Orders & Cash
- ACH Payment Services
- Western Union аnd similar services
Generally, investing in a foreign country could be quite beneficial—and you certainly should consider it. “However, you need to carry out due diligence in your area of interest, the state you wish to invest in, the barriers of entry to certain markets, and so on.”
Finally, I hope you found this guide to be useful. If you need any form of assistance regarding this process, don’t hesitate to get in touch with our specialized team of experts today.
I hope to see you on the other side!