The United States of America is the second-largest contributor to worldwide revenue, accounting for 13.5% of the global GDP. It is a great place for foreigners to launch a business due to its strong economy and high market demand.
Nonresidents might find it difficult to start a business, but the country makes it simple to register and operate a firm. In addition to gaining access to this market, nonresidents can benefit from lower tax rates and improved legal safeguards.
Venturing into a new business in the US doesn’t require citizenship or residency, and the process is relatively straightforward. Let’s start by exploring this article on the formation processes for launching a business in the United States.
The Steps for Foreigners to Establish a Business in the US
1. Business Plan DevelopmentÂ
A business plan serves as your company’s road map. It assists you in determining your destination and your route to get there. It’s also an excellent tool for demonstrating to lenders or investors whether you require funding to launch your company.Â
The following are what to include in your business plan development
- The activities of your companyÂ
- Who are your clients?
- How you’ll generate revenueÂ
- How much cash is required to get started?Â
- Your strategy for marketingÂ
- Your financial projectionsÂ
2. Choose a Business Name
Your business name needs to be original and not already exist in the state where you plan to operate. To confirm, you can use name search tools to see if the name is available in the database of your state. Additionally, you must review the business naming guidelines to make sure you comply.Â
3. Decide on a Business Structure Â
It is crucial to understand the different kinds of corporate entities one can open in the US as a nonresident. There are different types of corporate entities nonresidents can open in the US:
C Corporation
The C Corporation is a distinct legal entity from its owners and shareholders. The Personal assets of the owners and shareholders are protected from the company’s debts and activities. Similarly, the firm alone is responsible for gains and losses.
You have the option to sell an infinite number of shares or stock in the business corporation, and you can go public. Investors prefer the C Corporation form because you can anticipate growing your company and require outside funding.Â
However, the disadvantages include:
- More paperwork.
- More deadlines to meet to maintain compliance.
- The possibility of double taxation.
C corporations are not a good choice for nonresidents, even if they are a common choice for US citizens. Foreign business owners are not allowed to form a C Corporation in the United States.
Limited Liability Companies (LLCs)
A Limited Liability Company is the most popular structure among many business owners, as it offers personal liability protection. It means personal assets are protected from any risk if the business experiences any financial difficulties.
However, their compliance requirements are less strict, and members are the owners. An LLC has the option of passing on profits and losses to its owners or being taxed like a C Corporation.
Most business owners choose an LLC because of its flexibility in ownership, management, control, and transfer. The owners are not required by law to be US citizens or residents.
Partnership Â
There are two types of partnerships: limited partnerships (LP) and general partnerships (GP). Two or more people own both. Partners receive profits and losses, which they report on their tax returns. Non-US citizens can be partners. However, general partnerships have complicated tax ramifications, as partners are individually liable for business debts.
Sole Proprietorship
Just one person holds a sole proprietorship and is the most straightforward business structure to establish. In legal terms, the owner and the company are the same. Income from a sole proprietorship is reported as a personal tax return.
Foreigners are not allowed to form sole proprietorship since the owner must also manage the business. As a result, several laws pertaining to work permits and visas may conflict.Â
4. Choose a State to Register Your Business in
The business operations should decide the location. It is better to incorporate in a state where the market is dominated. You are free to choose any state to file your business corporation in as a nonresident.Â
When making this decision, consider various factors that indicate each state’s suitability. These include the business environment in terms of regulations and restrictions imposed by the state government.
It is also crucial to evaluate the resources, including personnel and materials, available at each site. The expenses related to operating a business in each state must also be taken into account.
Tax rates are also a major consideration when choosing the best place to establish your business entity. While some governments offer tax incentives to entice new enterprises, others have high tax rates.
Conduct in-depth research before registering your business entity to determine your ideal location based on these important variables.
5. Register Your Business
The procedure for foreign businesses to register in the US differs slightly from state to state. These procedures depend on whether you’re founding a C-Corp or an LLC.
6. Decide on a Distinctive Name
They choose a registered agent who can accept legal paperwork on behalf of the business. The company completes a one-page certificate of incorporation that includes the incorporation’s name, business name, and mailing address.
It also includes the total number and value of authorized shares, and the name and address of its registered agent. The certificate of incorporation filing fee starts at $89 and goes up according to the quantity of capital raised or stock issued.Â
You must file an incorporation report and pay your franchise tax. Lastly, you need to get an employment identification number. This number helps you open a bank account, hire staff, pay taxes, and get any licenses you want.
The IRS offers a free online application for an EIN. However, a Taxpayer Identification Number must previously have been acquired by you or the primary officer of the business.
Requirements to Start Your Business
- Get an office space: Consult a commercial broker if you wish to buy or construct your own office space or lease a sizable amount. You can rent an office for a few people in large cities and share amenities like a conference room and reception area. Additionally, you can buy affiliate memberships that let you use conference rooms on occasion.
- Hire employees: Verify the state’s minimum wage laws where you are incorporated. Think about using a PEO or payroll firm that hires employees on your behalf. Investigate nearby universities, particularly those offering two-year associate’s degree programs, as they can readily provide job seekers. Advertise locally for non-specialized work.
What are the Benefits of Registering a Business in the US as a Foreigner?
- Tax benefits
- Market accessibility
- Great banking system
- Low set-up and maintenance fee
- ReputationÂ
Final Thoughts
Millions of businesses are registered in the US every year, which is advantageous to both US citizens and foreigners. The complexities of establishing a business for a foreigner can be overwhelming.
However, many resources are available to help you throughout the process. Protect your investment by getting an expert to handle your case from start to finish.
