How Can I Start a US- Based Company as a Non-Resident?
For a small business owner in China or an entrepreneur in Argentina, opening a business in the US may seem like a pipe dream, something seen in the movies or read about in an article, but nothing unattainable. How about you? You also may have guessed that the process of starting a business in the US would be too long and complex to be worth the blood sweat and tears. Think again. Opening a business in America may not be as hard as you think. To successfully open a business in the US as a non-resident, you must assemble a team of people to fight with you and you must have a basic understanding of the legal process. We will cover both of these aspects here. First, let’s take a look at why opening a business in the US is beneficial for you in the first place, then we will look at what the process involves so you can make an informed decision about if this big leap is the right step for you and your business.
Are there benefits of opening a business in America as a foreigner?
If you are in the financial position to do so, opening a business in the US can be beneficial in a number of ways. One of the most obvious benefits is access to the American marketplace. As one of the largest and most diverse marketplaces in the world, setting up shop in the US allows you to reach new audiences, while improving your brand reputation worldwide. In the long run, creating a US-based business can save you time and money as opposed to trying to access the American marketplace from your home country and continually dealing with US customs and tax laws. Basing your company in the US also means you have resources such as American angel investors and venture capital at your fingertips. Becoming a part of the US business scene will put you in the game with some of the top players in the world in industries such as technology, medicine, and aerospace. As a player yourself, you can learn from and form connections with some of the best minds in the world. Finally, starting a business in the US can help you earn permanent residency (although this is both not necessary and not guaranteed) through visas such as the E-2 Investor visa. If any of these benefits caught your attention, expanding your business to America may be a very wise business move. Let’s look at how it’s done.
What are the steps to opening a business in America as a non-resident?
Knowing English is an obvious but important first step if you want to open a business in the US. You don’t need to be an expert, but taking a few business English classes will go a long way. In that same vein, you should establish a relationship with a translation company you trust. Having good professional translators as a resource will help make the process smoother. Translation companies like lingy can handle at least one of your many concerns in this long process by providing professional translations of your official documents with a quick turn around. These translators will become part of your team.
Next, you will need to determine with which business structure you will want to proceed. As a non-citizen of the US you will need to choose between a C-corporation and a Limited Liability Company (LLC). There are advantages and disadvantages to both and which structure you choose will be determined by your financial situation and the industry in which you work. C-Corporations are easily expandable with unlimited stock. This option is best if you will have shareholders and want to be financed by investors. On the other hand, C-corporation are taxed twice as the corporation pays taxes as well as the shareholders on dividends. C-corporations are also more complex structures which means they are harder to set-up. Both structures however, are legally independent from you and thus protect your assets in the case of lawsuits or debt.
After you choose a structure you will need to decide upon a state in which to register your company. If your company will have a physical location in the US you must register in that state. Choosing which of the 50 states to be based out of will depend on your business. You will need to do market research to scope out your local competition, the demographics of the particular state and city and if there is a demand. Each state will have its own laws so you will want to research if those laws will be friendly to you. Take time to think this step through and do the proper research as it is expensive and a hassle to change states after you have committed. The registration process is relatively easy. First, you will select a unique name for your company. Then you will find a registered agent. This individual must have an address in the U.S. which is not a P.O. box. If you, as the company owner, have a physical address you can use yourself as a registered agent. The registered agent receives legal documents for the company and must live in the state in which the company is registered. Remember, this address is not the legal or mailing address of the company.
After registration, you will select a state in which to incorporate your company. Unlike registration, you can incorporate your business in any state regardless of where your physical business is located. It’s beneficial to incorporate in the state where you will be doing the most business. If your business is not localized, then Delaware or Nevada are the best options for their small business-friendly laws. For example, Delaware doesn’t require you to provide a physical address to open a bank account. Shareholders will be well-protected and corporate laws are more lenient in Delaware than in other states. Because it is such a popular state to incorporate in, you will find many tax advisors who are knowledgeable about the state laws. The state even makes the process easier by offering its corporate law website in ten different languages. You will complete a certification of incorporation form with such information as your business name, registered agent’s address and information about the amount of shares you’re able to issue. The fee for this form starts at around USD90 . After you are incorporated you will need to file a report and pay your first annual franchise tax which is around USD175.
Once you are registered and incorporated, you will need to apply for your employer ID number. This is issued by the IRS and mandatory for you to open a bank account or hire employees as well as pay your taxes. The application of your EID is free of charge. While registering and incorporating your company and applying for an EID may sound overwhelming, the secretary of state websites offer great free help. If the websites are not enough, there are agencies you can find online that will help walk you through the entire process.
Finally, if a US-based company has over 10% foreign ownership you will need to complete a BE-13 and submit it to the US Bureau of Economic Analysis. The BE-13 is a simple questionnaire that shouldn’t take too long to fill out, but it is important to complete this step within 45 days of the formation of your company. After all is said and done, the process for non-residents to form a US based company isn’t all that much different than the process for US residents and the benefits are many. With the help of tax advisors, online agencies, and a good translation company, you will never be alone throughout this process