If you’re a foreigner who plans to set up a business in the U.S. You must know right away that it is light-years away from setting up your yearly summer garage sale. The complicated process and dozens of requirements might easily discourage someone to push through. But these ‘rough roads’ will lead foreigners to a whole new working environment and new opportunities.
Foreigners who plan to establish their business in the U.S. would be encouraged to know that it has a low cost of living. They can certainly learn from American businesses’ focus on efficiency and meritocracy when doing business. Foreigners would also be introduced to business culture. That is typically less formal and less hierarchical than in other countries.
The United States is literally a big land of possibilities that can expand and transform one’s business into a whole new level. It isn’t called the ‘Land of Milk and Honey’ for nothing.
But having a big slice of these opportunities requires you to take the legal process of establishing a business in the U.S. It sounds complicated and costly, and in a way, it is, but this would be the most important step for foreigners to experience the big opportunities that are just waiting to be tapped.
Let us guide you with the legal process of establishing a business in the U.S
Table of Contents
1. ASK FOR A LEGAL ASSISTANCE
Foreigners should seek legal assistance to ensure that every process of establishing a business in the U.S. would go smoothly. It is for their best interest to follow and execute every step legally. And properly to avoid any serious legal issues in the future.
It is best for foreigners to seek assistance. Most especially with legal matters, to ensure that every step they take is done right. Tripping on legal lines can be too costly for them.
2. ACQUIRE NON-IMMIGRANT VISAS
Let’s assume you are a non-U.S citizen. You would be required to get non-immigrant visas, like an E2 visa as per Ashoori law. This type of visa will allow you to operate a business in the country. And at the same time will allow you to live in the land of milk and honey.
Here are other visas you can acquire.
- EB-5 Immigrant Investor Visa
- H-1B Visa
3. START WITH CHOOSING A COMPANY STRUCTURE
There are a number of company structures to choose from. But most foreign nationals prefer a structure called a C corporation. It is a legal structure for a corporation in which the owners or shareholders are taxed separately from the entity.
This structure is typically more attractive to outside investors. Even if its profits are taxed twice. But foreign owners can hire tax planners who can legally reduce the imposed double taxation that the company needs to bear. Also, the C corporation structure can shield foreign owners from the scrutiny of I.R.S. (the U.S. government agency responsible for tax collections).
Foreigners might also consider this structure called ‘Limited Partnership’. In this structure, the general partner oversees and operates the business. While the limited partners are not involved in managing the business, but here’s a catch. The general partner has unlimited liability for the debt. And any limited partners have limited liability up to the amount of their investment.
4. YOU NEED TO CHOOSE A STATE TO REGISTER YOUR COMPANY
Your business should determine where it is located. One important note for foreigners is it is better to incorporate a state that dominates its market.
Also, they should be aware that each state has “different natures” that might affect their business.
California has a high-cost jurisdiction while Nevada or Delaware are known as ‘low-burden’ states. The nature of each state must also be considered when navigating through a list of states where their business would be located.
One more thing about Delaware is it has favorable corporate law that offers a wide range of protections to directors and shareholders.
But what’s more notable is their foreigner-friendly rules that allow a smooth process for foreigners to conduct their business.
The Delaware state makes itself attractive through their ‘friendly’ laws that magnet business owners to establish their businesses there.
5. AFTER CHOOSING A STATE, OFFICIALLY REGISTER YOUR COMPANY
Foreigners must be informed that the forms and other requirements for forming a business entity are not a uniformed one, but varies depending on the state.
But we can layout a simplified model by showing you how incorporation works in Delaware; Which can serve as a model for many states.
First. The company principals will choose a unique name for their business.
Second. They will select a registered agent that is in charge of receiving legal documents for the company.
(Note: the physical address of the company can serve as its own agent, but not in other states, like California)
Third. The company will fill out a one-page certificate of incorporation that identifies these important things:
- Corporate Name
- The name and address of its registered agent
- The total amount and par value of the shares the corporation are authorized to issue. And the name and mailing address of the incorporation.
(The fee starts at $89 and will increase principally based on the amount of stock issued or capital raised.)
Fourth. After the business is incorporated. It must file a report which costs $50 and pay a franchise tax annually that starts at $175.
Online services can provide straightforward paperwork that may reach several hundred dollars. And states can give assistance online, through their secretary of state, to file the proper paperwork.
6. ACQUIRE AN (E.I.N.) EMPLOYER IDENTIFICATION NUMBER
An Employer Identification Number is needed not just to employ workers. But also to open a bank account, get a business license, and pay taxes.
Foreigners can apply for an E.I.N. directly with the (I.R.S.) Internal Revenue Service for free. They should be informed that they should avoid online services that charge for this service. Again, it is free.
Note: If the U.S. company’s principal officer has already obtained a separate Tax Identification Number from the agency, it is not allowed to apply for an E.I.N. online. The company should apply by mail or FAX and enter “foreign/none” when the form asks for the Tax Identification Number.