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 US, 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 US company. Read on to learn how to get started.
At the moment, there are two types of corporate entities non-citizens can open in the US:
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.
Actually, you don’t need a visa to open a US business. Although having a US business doesn’t give you the right to live inside of the US, so many prefer to get one.
The good news is that there are a few visa options to choose from.
The most popular one for entrepreneurs (and the closest thing the US 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 US 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 US 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 US 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 US 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.
- 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.
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.
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 US 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.
You might need to provide industry classification codes for your business when registering it. Learn more about SIC codes.
The US 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.
This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date.
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