How to start your business in USA as a foreigner
Some times many foreigners intend to start a business in USA but they do not know the procedure how to start their business in USA as a foreigner.
Starting a new business is an exciting venture, but it can also be a scary one. The complexity of opening shop in a foreign country can be overwhelming. With changes constantly happening in the political and economic climate in the U.S., you may even be unsure if now is the right time to get your business going. However, the United States has welcomed foreign businesses for quite some time and will likely continue to do so.
The good news is that the steps to incorporating as a non-citizen are fairly simple, and there are plenty of resources available to help you along the way. This guide will help break down the complexities of opening your U.S. company. Read on to learn how to get started.
What kinds of corporate entities can I open in the U.S. as a non-resident?
At the moment, there are two types of corporate entities non-citizens can open in the U.S.:
Limited Liability Company (LLC)
There is an additional option, S-Corporations, which are often recommended to foreigners. However, though quite attractive, it’s important to note that they are exclusive to citizens and permanent residents.
While foreigners are often recommended to form a C-Corp, there are some distinct advantages to incorporating as an LLC. The most obvious of these is limited liability- meaning members are protected from personal liability for business decisions or actions, and personal assets are safe if the company incurs debt or is sued. LLCs are also free from the strict recordkeeping necessary for C and S-Corps, and have almost no restrictions on profit sharing between members.
That being said, many new businesses choose the C-Corp business structure. The advantages of forming as such are significant, with the most often-cited reason being the ability to expand by offering unlimited stock: a feature that is often attractive to investors. Foreign owners also find solace in the C-Corporation structure for its ability to protect them from close I.R.S. involvement. That shield, of course, comes with the price of double tax- but that financial damage is often avoided through careful tax planning, which can be structured to cancel out most of the double taxation.
Will I need a visa to open a U.S. business?
How to start your business in USA as a foreigner
Yes. The good news, however, is there are a few visa options to choose from.
The most popular one for entrepreneurs (and the closest thing the U.S. offers to a “start-up visa”) is the E-2 visa. There are three main qualifications for obtaining one:
You must be a citizen of a country that is part of a Treaty of Friendship, Commerce, or Navigation with the U.S. You can find a full list of eligible treaty countries at the Department Of State’s Treaty Countries website.
You must have already invested or be planning to invest a significant amount of capital in a U.S. business. At the moment, there is no set amount of money you’re required to invest, though, typically, it’s difficult to get the visa if you are investing less than $100k. Regardless, stipulations state that it must generally be a substantial portion of your personal funds.
You must be able to prove that you have a controlling share (50% or more) of your business
The E-2 visa also qualifies your spouse to be eligible for a work visa, and can be renewed indefinitely. However, the E-2 doesn’t create a clear path to obtaining your Green Card; starting your business and entering the U.S. on one will likely result in a permanent status as a non-resident alien.
If the E-2 doesn’t sound right for you, there are plenty of other visas to explore. You can find a full list of them on the U.S. Citizen and Immigration Service’s Entrepreneur Visa Guide, but some of the most common include:
The F-1 OPT (Optional Practical Training) Visa, which applies to students in the US with an active F-1 Visa who are opening a business that is directly associated with their university major.
The H-1B Specialty Occupation Visa, which requires you to work for in a position that typically requires a related bachelor’s or more advanced degree in a specialized field.
How to start your business in USA as a foreigner
The O-1A Extraordinary Ability and Achievement Visa, which is granted to individuals who can prove that they have “extraordinary ability” in the sciences, arts, education, business, or athletics. This can often mean you would have need to have sustained national or international recognition in your field.
If you’re able to invest a minimum of $500,000 in your business up front, you may also be eligible for a Green Card by Investment, which would make you a permanent resident of the United States.
What state should I register my business in?
The best state to register in is the one in which you will be conducting business. However, if you’re an online company or do business across a range of regions, you may want to consider registering in a state with lower tax burdens. Two states that are notoriously inexpensive for entrepreneurs are Nevada and Delaware.
Delaware is particularly popular, thanks to corporate law that provides significant protections to shareholders and directors. Incorporating in Delaware also doesn’t require a physical address or bank account. In fact, the state is so welcoming to foreign entrepreneurs that Delaware’s corporate law website is available in quite a few different languages.
What is the process for registering my company?
The process for registration varies slightly from state to state, and is somewhat dependent on whether you’re forming an LLC or a C-Corp. However, Delaware’s process is a good model for the basic steps and requirements:
You will need to choose a unique name that has not been previously registered in the United States. The U.S. Patent and Trademark Office has a trademark database you can search.
You or a named company agent must be available to receive the company’s legal documents.
Once your name and agent are established, you will fill out a certificate of incorporation. This document outlines the company’s name, the address of you or your company’s agent, the value of authorized shares, and the name and legal address of the incorporator. The fee for filing the certificate of incorporation starts at $89 and increases based on the amount of stock issued or raised capital.
Next, you’ll file an incorporation report and pay your franchise tax.
Finally, you must obtain an employer identification number, or EIN. The EIN will allow you to hire employees, open a bank account, pay taxes, and obtain whatever licenses you need. You can apply for an EIN online for free with the IRS. However, you or the company’s principal officer must have already obtained a Taxpayer Identification Number. If neither of you have, you can still get an EIN- but you’ll need to apply by mail or fax
The Transfer Wise Borderless account. For business without borders.
Old-world bank accounts only work properly in one country. They hold money only in one currency. And it gets expensive when you try to use them across borders. TransferWise’s new Borderless accounts solve all of this.
Now you can send, receive and organise your money internationally, without crazy fees or even-crazier exchange rates – just a small, fair charge when your money moves between currencies.
Where else can I find help?
The U.S. Small Business Administration is a great resource for more comprehensive information about opening a business. You’ll also want to give yourself a crash course on corporate law in the state in which you plan to register. While you may have to find these individually, Cornell University has a table of various state laws regarding corporations.
If you’re still looking for a deeper dive, check out the United State Government’s BusinessUSA; it’s a central, governmental platform for businesses to access information and services designed to help them get started and grow.
While you’re getting started, if you’re looking to fund your new venture from abroad at the least possible cost, consider using TransferWise. Not only do their real mid-market exchange rates generally beat the banks, but since your money is received and sent locally in both your home country and in the United States, all those nasty international fees magically disappear. Give it a try.
10 tips for doing business in the United States
United States seem to be very similar in terms of culture. However, there are some essential points that could be a deal breaker with an American. Here are ten communication tips for if you are planning to or are already doing business with Americans.
Results matter in the States. Therefore, if you are doing business or even if you are applying for a new job, remember to sell yourself and your achievements. Modesty won’t get you a new business contact or a job.
2. The United States is an individualistic culture, not a group culture. Therefore, heroes are often revered in American culture. Consider the cult status of Steve Jobs at Apple or Mark Zuckerberg at Facebook. Compare this to a more collective culture like Japan. How many of you can name a famous Japanese CEO?
3. The US is a short-term orientated culture unlike Germany or China. In other words, this year’s results matter more than over 10 years, so short-term strategies tend to weigh more heavily than long-term considerations.
4. On the whole Americans are more direct than the British, however, more indirect than the Dutch. This partly has to do with the adage “Time is Money”. Ultimately, it’s a results orientated country.
5. In some consensus-based cultures, like in the Netherlands, employees’ opinions are valued and are expected to be given and heard. In American culture, there is often an open forum for debate, however, ultimately, it’s the boss who makes the decision and is accountable for the decision. So, if you’re in a meeting with an American boss, don’t be surprised if he/she makes the decision without consulting the rest of the team.
6. American culture is not often comfortable with silence, unlike Scandinavian or Japanese culture. Therefore, engage in some chatter or let your American counterpart know that you are considering what he/she is saying. Otherwise, he/she may think you don’t understand or you disagree.
7. American culture tends to value generalists rather than specialists. Hence, don’t be surprised if your financial counterpart has studied Medieval English Literature, but is now heading an IT company. In the USA, results and experience matter, less so your background, age and your connections.
8. American culture is comfortable with uncertainty. For example, the agenda for a meeting is the starting point for discussion and does not need to be stuck to rigidly as in other countries e.g. Germany. This ease with uncertainty means that flexibility and adapting to constant change is valued in the United States.
9. American working hours tend to be longer than in Europe, so a breakfast meeting at 7 can be common as is a business dinner meeting at 8pm in the same day. Americans also tend to take fewer vacation days than Europeans.
10. If an American asks you “How are you?” simply answer “Fine thank you. And you?” even though you may be feeling terrible because your dog has just died. Don’t feel that an American is being dishonest when asking you this; “How are you?” is simply a greeting.
How to Set Up a US Company as a Non-Resident
While a non-resident will have to go through all the same steps as a resident, there are additional complications. For most non-residents, international tax law, getting visas and opening a bank account present the most problems. Each of these topics is very complicated.
The steps outlined below cover the critical steps that must be addressed before a business can be launched.
What type of company is being set up
S Corporation, C-Corporation Versus LLC Tax Comparison
Where the company is being incorporated
Where the company will be doing business
The type and activity of the business, and its need for licenses, registrations, permits etc.
The staffing needs, which in turn influence the need for physical location and size of facilities
Step 1: Determination Stage
Step 1, determine what exactly you want to do, where and how you want to do it, how much it will cost and whether or not you have the budget. In this step, you need to determine:
Where to establish your US business
Where to incorporate your US company
Your need for protecting your intellectual property
Whether you will need to obtain any special licenses
Your need for visas or other immigration needs
Your need for staffing for the business
Your need to access the capital markets in the US
Your need for marketing, supply chain and other support services
Are there any tax incentives available, and what options are available to minimize your tax burden
Free business planning templates are available from SCORE (Service Core of Retired Executives) As an alternative, you can use the lean canvas designed to organize the strategy for a startup business. It’s free for 30 days, and very useful. (We are not related to this site in any way).
Step 2: Planning Stage
In the Company Planning Stage you will determine such practical matters as:
The name of the company
Whether to be a corporation or a limited liability company
Which state to incorporate in and which states to register in
Determine the capitalization of the company (how many shares at what par value, and how much each shareholder will contribute to the company as their capital contribution
Determine who will be the shareholders, officers and directors
Determine the roles and responsibilities of the company’s officers and directors
Step 3: Action Stage
After completing the Company Planning Stage, the Action Stage should be very smooth and fast:
Provide the necessary documents
1. Form the company
2. Register the company in other states as needed
3. Hold the organizational meeting, appointing the officers and directors, issuing shares to the shareholders and taking such other actions as necessary
4. Obtain the federal Employer Identification Number
5. Open your bank account
6. Start business: buy, lease or rent office space, hire employees, market the products, etc