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Starting a business in a foreign country may seem complex due to the jurisdiction’s legal requirements that foreign entrepreneurs must comply with. Some countries may have complex processes for foreign entrepreneurs, but not the world’s leading global trader, the United States of America (USA).
With advances in technology, business solutions have made it possible for foreign entrepreneurs to start a business in the US without obtaining a Visa or a green card.
Want to know how to start a business in the US without a residency requirement? Read through this article to find out how.
What to know about starting a business in the USA as a non-resident?
It is legal
It is legal to start a business in the USA as a non-resident. However, non-USA entrepreneurs must follow business laws, tax regulations, state-specific requirements, and tax compliance.
No need for US citizenship or residency
Foreigners are allowed to freely own and run companies in the US without residency. They can, however, be restricted in some areas (such as employment or travel), and some forms of business entities (such as S Corporations) are limited to U.S. citizens and residents.
USA businesses are subject to federal and state laws
Whether you are a foreigner or a resident owning a company in the USA, you will be subjected to federal and state tax laws. State-specific laws include taxes, annual filing obligations, employment law, and privacy requirements. However, these will be factored by the state in which the foreigner decides to incorporate a company.
You will need a presence in the USA (even if it’s virtual)
To seamlessly operate in the USA, you will need a physical address. You don’t necessarily have to be physically located in the USA; you can rent a virtual address from a service provider, which can legally incorporate a company.
How to start a business in the USA
Let us explore the step-by-step process of starting a company in the USA to help foreign entrepreneurs easily launch their companies seamlessly.
Choose a business structure
In the USA, there are several business structures entrepreneurs can choose from. These business structures include:
Sole traders
Most entrepreneurs opt for this business structure due to its simplicity and quick setup. A sole trader is not formally registered apart from tax registration. Business owners who set up a sole trader must register for taxes according to the jurisdiction’s annual income tax.
The business owner is the business, meaning they are in control of everything from operations, accounts, administrative tasks, financial matters, and record-keeping. A sole trader’s assets are at risk of the business liabilities.
However, foreign entrepreneurs cannot set up sole trader business structures unless they live in the USA. To set up a sole trader business structure, you must consider applying for a visa and relocating to the USA.
Partnership
This business structure is formed when two or more individuals decide to share ownership. The structure comes in two types: general formation and limited partnership.
A general partnership does not require formal registration. The partners agree on how they will share profits, losses, and the business’s assets. They have unlimited liability for the company’s liabilities and debts. The partners are taxed on their income separately. At least one general partner has unlimited liability for the business, while other partners, known as limited partners, have liability limited to their investment.
These structures can be complex for foreign entrepreneurs due to tax implications. It also offers unlimited liability apart from LP, which can be risky for your assets.
Limited liability company (LLC)
An LLC is also a popular company structure since it offers limited liability to company owners, directors, shareholders, and members. Their assets are protected from a company’s liabilities, such as debts or legal implications.
It has fewer reporting requirements, and taxes are ‘pass-through’. Pass-through taxation is where the company’s income is passed to the owners, who pay income taxes for their share of the business. LLCs do not pay entity-level taxes.
This is a popular choice for foreign residents, as it does not require directors or officers to be U.S. residents.
C Corporation
This offers limited liability protection to the business owner from the corporation’s liabilities. C corporations must have a board of directors, officers, and shareholders and should hold regular meetings.
They pay tax returns on the company’s income, which means that the taxes are separate from the business owner and shareholders, hence double taxation.
This structure does not require residency, making it a good option for foreign entrepreneurs.
S Corporation
An S Corporation is a hybrid structure with pass-through taxation, with compliance requirements similar to those of a C Corporation. With similarities to an LLC and a C corporation, an S corporation is not the better choice for foreign entrepreneurs, as non-residents cannot be shareholders.
Choose a state to register your business
The USA has 50 states that foreign entrepreneurs can choose from. When selecting a state for your business, ensure you choose a state that is favorable for your business. The state that you choose will affect the growth of the company.
When choosing a state to set up your business, be sure to check its taxation, legal system, filing fees, franchise taxation, privacy, physical presence, professional support, and market access. Considering these features will help you choose the right state for your business.
Popular states for business registration include:
Delaware: It is known for its business-friendly legal system. It has a Court of Chancery that deals only with corporate litigations.
Wyoming: forming a business in Wyoming is affordable and easy to maintain. They offer low taxes and minimal regulatory requirements.
Nevada: Businesses incorporated in this state do not have to pay franchise tax and state corporate income tax.
Florida: Offers favorable tax policies, competitive costs, and a streamlined regulatory environment.
Registration
When registering a business in the USA, a registered agent must be appointed to incorporate the company. Here are the legal requirements for business registration in the USA:
Choose a registered agent
Every state has a legal requirement for a registered agent to act as the point of contact between the government and the company. The agent must have a physical address in the state where the company is being registered. They receive the official correspondence and legal notices on behalf of your business.
Register the business
Depending on the structure you choose for your business, file the required documents to register it. If you opt for the LLC structure, you must file Articles of Organization, also known as Certificate of Formation or Certificate of Organization in some states.
Obtain an EIN
If your company will hire employees, you must obtain an employer identification number (EIN) necessary for tax purposes. You can get the EIN from the Internal Revenue Service (IRS).
Business license and permits
Apply for a business license and permits based on the business activities and the type to conduct business lawfully.
Franchise tax and annual reports
Some states may require you to pay franchise tax and file annual reports. A franchise tax is a state tax levied for legally established in a certain state. It is essential to check if the state you are registering your business requires you to pay the franchise tax.
Open a business bank account
A foreign business owner will need a US bank account to transact money with customers and suppliers locally. A business account will also help you separate business from personal transactions and track your business cash flow.
To sum up, registering a business as a foreigner in the USA is a straightforward process if you understand the state’s legal requirements for registering your business. But as a requirement in every state, a registered agent may guide you on company formation.
As a Delaware registered agent, Icon Offices helps business owners set up their businesses seamlessly. Our address is physically located in Delaware, authorising your business to use our address for company registration and receive official correspondence and legal notices on behalf of your company.
We offer additional services like a business phone number and 24/7 call answering services. Want to register a company in Delaware? Contact us at [email protected].
