More and more people are opening their businesses in the USA. Both permanent residents and foreigners run small and large companies, deliver various services, and enjoy the advantages of the US business system.
They have a great opportunity to expand their business, attract new clients or investors, and enhance the credibility of their companies. If you aim at creating a US company, the process is not as tiresome as may seem.
Non-US citizens can open their businesses and develop their companies with one of the lowest tax rate in the world. This is a concise and efficient manual on how to incorporate your business in the USA if you are a permanent resident or a non-resident.
The following steps will explain you the process of choosing a suitable business type, settle a physical branch, open a US bank account, and many other important details.
What business type to choose?
If you have an intention to start your business 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 a suitable level of personal liability for you. There is no specific restriction on the number of business owners or which country they are from.
Limited Liability Company (LLC)
LLC is one of the most widespread types of business in America chosen by a significant number of entrepreneurs. It combines features of the corporation and a partnership giving its members full protection from lawsuits or in case of different unfortunate events that can harm their business. Moreover, its members can share profit the way they please.
It also protects personal belongings and bank accounts of its members. It has a clear taxation system which is called the “pass-through” as 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 not one of the easiest rarely recommended for US citizens due to the system of double taxation. But it is useful if you intend to involve investors in your company. Such business is taxed separately from its owners who are called shareholders as each of them owns a part of the company. The most important drawback is that they are “double taxed” – first when the income earned by the Corporation and secondly when the dividends are divided among shareholders.
Another type of business can be an S-Corporation which is suitable only for US residents as it allows them to avoid self-employment tax that can eat out approximately 15% of your income. But if you are a non-US resident, you cannot become a shareholder. The main benefit of this system is that such a business does not pay “double taxes”.
Steps to create your business
Frist of all, you need to choose a state where you intend to run your business. It is possible to open a company in every state, but the choice depends on the purposes you want to achieve. For permanent residents, it is advisable to develop their business in the state where they are physically present. If you are a foreigner, you should determine whether the physical branch will be opened and whether you plan to be present in the country.
If you are not going to appear 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 do not plan to create a physical branch of your company and work only through US bank account.
After you have chosen a preferable business type, the state, and the name of the company, you can begin the process of registration.
Find a Registered Agent
This 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 $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 of your company issued by the U. S. Internal Revenue Service (IRS). This is also your Tax ID without which your company cannot 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 Social Security Number, it is possible to apply through an online form on 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.
Create a U. S. bank account
For most non-residents, this is the most complicated part as it is 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.
Just do not forget to show your incorporation documents, EIN, and two documents with photos to identify your personality. According to the Patriotic Act, all foreigners trying to open a bank account have to undergo 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 – TravellingMailBox.com, USAMail1.com, or EarthClassMAil.com. The first service is the most widely used. This is not a free service and can cost you up to $100 dollars per year. But before using these services, you need to submit Form 1583 from the United States Postal Service (USPS).
You are as well obliged to open a bank account in your own country. This requires an Apostille, also called the Certificate of Authentication, an agreement between two countries to accept documents of each other.
Get a U.S. phone number. There are many variants to choose from – a toll-free number, A Skype number, or Google voice.
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 have chosen LLC or Corporation, you need to learn how to maintain your company to avoid unwanted troubles. To make this process easy and comfortable, take care of the annual fees to your Registered Agent. Its importance is pretty obvious – it maintains your legal and state documents which are required to conduct a business.
You are also required to fill an Annual report about activities of your company. It is a document which provides detailed information about all activities of the company during the year. There are numerous services that can help you with this procedure and answer all questions considering this report – when to submit, what information to include, how many pages is 3000 words, etc.
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 regularly paid and on time. If you violate payment requirements and agreements, you will 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 appropriate fees, send reports regularly, and check if you have all licenses and other documents.