Can A Foreigner Start A Business In The USA?
Choosing to establish a business anywhere in the world can be a daunting task, especially for the uninitiated. Fortunately, the United States has very simple laws when it comes to foreign business registration.
Most foreign businesses are welcome in the US since they bring work opportunity – and tax revenue – into the country. To keep you informed, we’ve outlined a few key points in this guide that will help you get started on setting up a company.
BASIC REQUIREMENTS TO STARTING A BUSINESS IN THE US AS A NON-RESIDENT
Before you begin filing any paperwork it’s important to establish a solid foundation for your business. As a rule of thumb, there are a few bases you should have covered before you sign for official registration. The earlier you get these basic requirements done the better off you’ll be.
Speaking the Language
Becoming fluent in English is a modern day business necessity. If you’re not very knowledgeable or literate in English it can be very difficult to conduct your businesses’ operations and acquire clients. This should be one of your earliest goals (if not the first) on your list.
Adapting to the Norms
Regardless of which state you decide to register your company, there are two considerations that are applicable nationwide. First off, it’s a good idea to develop a firm grasp of US business culture and standards in order to succeed in your industry.
By doing your research online you can find plenty of American business “do’s and don’ts” to get a head start.
Having a Plan
The importance of market research and adequate preparation cannot be stressed enough. Many companies rise and fall under the assumption that they will “learn as they go,” which is only acceptable until capital runs out. Take the time to strategically analyze and plan out every aspect of your business prior to making a serious commitment in a foreign country.
DECIDING ON A FOREIGN BUSINESS ENTITY TYPE IN THE UNITED STATES
As things currently stand, non-residents have two primary options for incorporating in the US. While there are numerous distinctions between them, they are both viable choices albeit in different ways.
LLC – Limited Liability Company
An LLC, while more constrained in scope than a fully incorporated company, has its own advantages. Most notably LLCs help reduce personal liability by separating the company’s majority stakeholders from the company’s activity.
In some ways it can be considered as a way to minimize financial risk to the individual, since you won’t go bust if your business does – legal issues and debt obligations are solely the responsibility of the LLC.
C-CORP – Corporation
By choosing to fully incorporate you can reap the benefits of having more free range over your establishment. LLCs often encounter roadblocks when financing the business whereas c-corps can take advantage of unlimited issuance of common shareholder equity. As a result, this makes it easy to acquire investment funding.
C-Corps also benefit from having more taxation shielding opportunities. While it’s easier said than done, intricate corporate tax plans (when properly formed) can avoid scrutiny from the IRS.
SELECTING THE RIGHT UNITED STATES VISA
Technically speaking, a visa isn’t actually mandatory if you plan on conducting your operations from offshore. While this might sound appealing in niche industries, neglecting visa applications means that you won’t be able to live near your company (or in the country for that matter).
In the vast majority of cases getting a visa is crucial to managing your business effectively. There are a few different types of visas available to choose from, but there’s one that stands out in terms of popularity:
E-2 Entrepreneurship Visa
The recommended route for all aspiring foreign businesses in the US is to apply for an E-2 visa. It’s the most general visa for start-up companies, and the requirements to obtain one are all very reasonable:
- Your current citizenship status must be directly tied to a “treaty country” (a country that has favourable commerce relationships with the United States). For a detailed list of participating nations it’s best to check the US government sources.
- You need to show proof of personal capital (that you’re willing to invest within your company). Currently there is no exact dollar amount to aim for; the general rule insists that the more the better. As long as your investment amount is substantial in relation to your individual income you should meet this requirement.
- It’s compulsory that you own the majority stake in the company (as its incorporator). In other words, you need to show control exceeding more than half (or 50%) of your company.
Other Visas for Non-Resident Entrepreneurs
If you’re looking for a less generalized visa that is more specific to your situation, there are several others you can apply for besides the E-2. Remember that at the end of the day not a single visa can substitute for citizenship – a visa only lets you conduct business under non-residential status.
Post secondary students are eligible for the F-1 OPT visa which stands for “Optional Practical Training.” This type of entrepreneurial visa allows foreign students to register a business that relates to their field of study.
One step further, more specialized professionals can acquire a H-1B Specialty Occupation visa. This visa is designed for individuals who are involved in a more advanced profession that requires elite schooling.
On the highest rung of the achievement ladder, the top 1% of professionals in their respective field (art, science, business, or physicality) can apply for a O-1A Extraordinary Ability Achievement visa. In order to qualify for this visa the individual must have already developed a significant international presence/reputation.
SETTLING ON A LOCATION
Believe it or not, certain states have more favourable corporation rules than others in the US. This is due to the simple fact that so many rules and regulations differ from state to state – there are relatively fewer laws that carry identical terms nationwide.
Of course a big part of where you do business comes down to personal preference – especially if you plan on living near your company’s headquarters.
The Eastern Coast
The most bountiful corporate opportunities can be found the eastern coast of the United States. States such as Delaware, Massachusetts, and Connecticut all have favourable tax set ups for new C-CORPS. Aside from having lower tax burdens than the national average, Delaware offers a simple incorporation process (one that doesn’t even require an address) making it super attractive to foreign businessmen.
FINALIZING THE BUSINESS REGISTRATION
Once you’ve become more informed on the foundational basics of setting up a US company as a non-resident, you should start learning about the actual registration process.
For the purpose of simplification, our overview describes a very general approach – your registration process may vary depending on multiple factors (i.e. your desired US state and whether you’re opening a LLC or C-CORP).
- Decide on a trademark-free name that you’ll use to officially label your company. The United States government has a publicly accessible database that contains unavailable trademarks and current registrations.
- File a “certificate of corporation” document. This form should include the business name, the incorporator’s address, along with any information on the company’s public shares (if applicable). In many cases you’ll be asked to determine your industry classification code or SIC.
- Pay the incorporation fee. It varies from state to state, but in the popular foreign incorporation states you can expect to pay around $100 USD.
- Once your business is officially recognized by the US government you can obtain an EIN (employer identification number). This number places you on the associated tax register but grants you permission to open bank accounts, obtain licenses, and hire employees.
FINAL THOUGHTS: STARTING A US CORPORATION AS A NON-RESIDENT
Although starting (and maintaining) a successful business anywhere is never easy, at least the United States welcomes foreign entrepreneurs with welcome arms. After all, the US is widely regarded as “the land of opportunity” for a reason.
In any case, if you’re an employee instead of an employer check out our guide to working remotely for a US company.