By Sarah Mooney
More and more people are looking into how to start a company in the USA. Both permanent residents and foreigners are running small and large companies, delivering various services, and taking advantage of what the US system has to offer business owners.
Foreigners have the opportunity to expand their business, attract new clients or investors, and enhance their credibility. If you aim at creating a US company, the process is not tedious as it may look.
Non-US citizens can start a company in the USA and build their companies with one of the lowest tax rates in the world. Here’s how to start your company in the USA if you’re a permanent resident or a non-resident.
The following steps go through the process of choosing the right business type, settling a physical location, opening a US bank account, and other important details.
What business type to choose?
If you have the intention of starting your company legally, you have two options – to create an LLC or a C-Corporation. The choice of a business model depends on the tax responsibilities and level of personal liability for you. There is no specific restriction on the number of business owners or which country they’re from.
Limited Liability Company (LLC)
LLC is one of the most widespread types of business in the USA. It combines features of a corporation and a partnership giving its owners full protection from lawsuits or other events that can harm their business. Moreover, its owners can share profit the way they want to.
On top of the aforementioned, it protects personal assets of its owners. It has a clear taxation system which is called a “pass-through”, since it allows owners of the company to pay taxes on their income derived from their business on their personal income tax returns.
C-Corporation is rarely recommended for US citizens due to double taxation. But it’s useful if you intend to involve investors in your company. These businesses are taxed separately from its owners who are called shareholders as each of them owns a portion of the company. The most important drawback is that they’re “double taxed” – first for the income earned by the Corporation and secondly when the dividends are divided among shareholders.
Another option for starting a company can be an S-Corporation which is suitable only for US residents, since it allows them to avoid self-employment tax, which can take about 15% of your income. But if you’re a non-US resident, you can’t become a shareholder in this company. The main benefit of this system is that the business doesn’t pay “double taxes”.
Steps to start a company in the USA
First things first, you need to pick a state where you want to run your business. It’s possible to start a company in every state, but the decision depends on your goals. For permanent residents, it’s advisable to start a company in the state where they’re physically present.
If you’re not going to reside in the USA, Delaware, Nevada and Wyoming are the most internationally-friendly states to register a business. Their banks are more familiar with dealing with international clients without local offices. Delaware is the Mecca for LLCs due to its lower filing fees and business-friendly laws. Wyoming will be the best option if you don’t plan to have a physical office for your company and work only through a US bank account.
After you’ve chosen a preferable business type, the state, and the name of the company, you can begin the process of registration.
Find a Registered Agent
A Registered Agent is a person or a company with a physical address that will sign and receive official documents on behalf of the company. It needs to be registered in the same state and it should be easy to find information about this company or person. This is not a free service and in general, it can cost you about $45 or $100 per year. The law requires that all LLCs and Corporations must have Registered Agents available during working hours.
Obtain an Employer Identification Number (EIN)
This is an identification number for your company issued by the U. S. Internal Revenue Service (IRS). This is also your Tax ID, without a tax ID your company can’t begin its work. It allows you to conduct your business legally – open an account in the bank, hire employees, and pay taxes.
For residents who have a Social Security Number, it’s possible to apply through an online form on the IRS’s website. Non-residents should get a business lawyer to act as their third-party designee who will file the application and receive the number on your behalf.
For non-residents, this is usually the most complicated part since it’s hard to do without a permanent address in the country. The solution is to find an American bank in your country and consult with them what actions should be performed. If you visit the US, you can just walk into whatever bank you want and create your bank account.
Don’t forget to show your incorporation documents, EIN, and photo ID documents. According to the Patriotic Act, all foreigners trying to open a bank account in the USA have to go throgh necessary anti-laundry and anti-terrorism checks. Pay attention to Well Fargo, Citibank, or Bank of America.
Get a U.S. Mailing Address. This can be your business address if you have one. If not, there are several companies that provide US mail addresses. However, before using this type of service, you need to submit Form 1583 from the United States Postal Service (USPS).
You’re also obliged to open a bank account in your own country. This requires an Apostille, also known as the Certificate of Authentication, an agreement between two countries to accept documents from each other.
Open a U.S. merchant account to accept payments. This account allows your business to accept credit cards like Visa, MasterCard, and American Express. This account requires a U.S. bank account, phone number and business address.
How to maintain your business?
Whether you’ve decided to move forward with an LLC or Corporation, you need to learn how to maintain your company to avoid unwanted issues. To make this process as easy as possible, take care of annual fees to your Registered Agent.
Its importance; it maintains your legal and state documents which are required to conduct the company you’ve started.
You’re also required to fill an Annual Report about activities of your company. It’s a document which provides detailed information about all activities of the company during the year prior. There are numerous services that can take care of this, these services are available to answer any questions you may have pertaining to the report– when to submit, what information to include, etc.
An Annual Report provides state authorities with important updates concerning the addresses of your business, names and addresses of the directors, owners, and managers, purpose of your business, its Registered Agents, etc. It goes without saying, that any annual fees and taxes should be paid and on time. If you violate payment requirements and agreements, you’ll have to face unnecessary problems and put your business at risk.
For non-US citizens, compliance with the law is obligatory as it prevents them from tax and immigration problems. And make sure that your company meets all the requirements of your home county. Fill all the state forms, pay the appropriate fees, send reports regularly.
Bonus: Stripe has a very cool Atlas program, which allows you to start your company with less hassle.
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