The United States economy is highly regarded by many as one of the strongest economies in the World. When starting a business in the U.S.A as a none resident there are a few procedures that must be fulfilled. There are no special requirement for starting a business in the U.S.A . You don’t have to be a Citizen , have a Green Card or even be physically located in the country to start a business entity there. The difference is that being able to start a business in The United States is not the same as being able to work or earn an income in the United States. You have to be a resident or have a permit in order to be able to work within the U.S.A. This article is to teach you how to start a business in the U.S.A as a none-resident.
Can A Foreign Citizen Start A Business In The United States
A foreign citizen business is one owned by a citizen of a country other than the US and based in the US. A lot of people wonder if a foreign citizen can start a business in the US and if they can, what kind of restrictions are imposed on them.
Yes. You can start a foreign citizen business in the US and the procedure for doing so is much the same as that for any American citizen that wants to start a business.
America is the land of plenty. It is a good place for businesses to flourish. Due to this, a lot of foreign citizens see it as a very good place to start a business. Some of the reasons why America draws a lot of businesses is:
- It has one of the largest and most integrated markets in the world
- It offers competitive tax rates
- It gives foreign citizens access to venture capital, angel investors and a variety of other public markets.
- Importantly, it makes it easier to get a green card.
Starting a Foreign Citizen Business in the US
The process of starting a foreign citizen business in the US does not differ much from the process American citizens have to go through. In fact, there are no restrictions on foreign citizens generally.
You do not even need to have a green card to start your business or purchase a corporation or Limited Liability Company (LLC) that is headquartered in the US. However, starting a business and actually working in the US are two different things.
Working in the US
Generally, as a foreign citizen, you can be listed as a corporate officer or director of a company. However, this does not make you eligible to work or live in the US. In order to do this, you would need a work permit, which consists of getting a green card.
Thus, while it is possible for you to own a business in the US and earn profits from it so long as you pay taxes, you would need to obtain a green card to actually work in the US.
Important Information for Starting your Business
The decision to start a business in the US cannot be made hastily or without due preparation. Even though the process is little different from that required for US citizens, there are some things that you should know:
- Most foreign citizens choose to start LLCs rather than C corporations. This is because C corporations are subject to double taxation on dividends.
- You would need to file an annual tax return for your business and a lot of states require incorporation renewal every year as well.
- You do not need a US address to incorporate your business in the US.
- If you decide to form an LLC, keep in mind that a foreign company can own the US LLC
What Non-Residents Need to Consider When Forming a Company in the U.S.
Can non-U.S. residents form a business here in the United States?
While the answer to my question is definitely a resounding, “yes”, not many foreigners are aware of this, especially those in the middle class. They tend to think that for them to form a company here, they’d have to be a U.S. citizen.
Were you thinking of the same thing too? Did you also want to open a company here in U.S. but ended up not pursuing your desire since you thought you’d need to be a U.S. citizen?
If you answered, “yes”, then it’s high time that you get your act together. I will share with you four very important points that you need to consider when starting a company here.
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Before that, allow me to share with you some of the benefits that you can enjoy when starting a company in the U.S.:
- Tax advantages: The possibility of U.S.-sourced income being taxed less.
- Ease of selling in the U.S. market (from the tax and customs perspective): Access to U.S. investors, venture capital funding, and the public markets.
- Enhanced company reputation to customers both in the U.S. and other parts of the world.
- When the company goes public, they can be listed in the U.S. stock market.
- Personal liability protection.
Although non-residents are expected to undergo the same process as those living in the U.S. when forming a business, there are conditions and limitations specific to foreigners that you must be aware of. For instance, setting up a bank account, securing a visa, and international tax regulations are three of the procedures that non-residents find the most complicated.
Now that you have a vague idea of the good (and bad) things that you can expect, let’s get right into the meat of things. The four points that you need to consider when opening a company here in the United States are:
1. Company Structure
Foreigners can form either a Limited Liability Company (LLC) or a corporation (C). However, the S corporation is exclusive to U.S. citizens or residents only).
Schwartz International tax adviser and lawyer Richard Hartnig, as quoted in an Investopedia article, says that a C corporation is attractive to foreign nationals despite the double taxation on its profits; that at the corporate level and as shareholder dividends.
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Miguel de Vega Rodrigo, a serial entrepreneur who successfully formed businesses in the U.S. as a non-resident also recommends choosing a C corporation for the following reasons:
- C corporations are more scalable and can be made public.
- If you want your business funded, investors prefer a C corporation.
2. Citizenship by Investment
“Citizenship by investment” is when an individual acquires citizenship in another country by investing a sizeable amount of money in that country. Many countries offer this program, including Austria, Cyprus and Russia. In the U.S., a form of citizenship by investment is also available, which is an option to consider if you plan to eventually make a life for yourself and your family in the United States. “Green card through investment” is how it’s called by the U.S. Citizenship and Immigration Services (USCIS).
Foreign investors who invest $1 million or a minimum of $500,000 in areas with high unemployment rates may be granted conditional permanent residence by the USCIS, along with their spouses and unmarried children under 21 years of age. A maximum of 10,000 visas per fiscal year may be granted to qualified entrepreneurs.
3. Business Registration
U.S. companies are incorporated at the state level instead of federal. Delaware and Nevada are known as low-burden states making them extremely appealing to many foreign investors.
However, Hartnig cautions that incorporating a business in either of these jurisdictions doesn’t exempt you from business obligations in high-cost states like California. Therefore, you’re better off registering your business in the state you plan to dominate. Otherwise, Delaware comes highly recommended. Next is Nevada.
Besides the low tax rates, de Vega Rodrigo suggests incorporating in Delaware because of these reasons:
- No need for a Delaware bank account or a physical address in Delaware
- No state income tax imposed on Delaware corporations not operating within the state
- Delaware’s corporate laws are fair, consistent, and well understood
- Investors prefer Delaware entities because, in contrast to California, common stockholders can’t block a merger, among others.
- Delaware laws offer directors generous protection, including indemnification from losses resulting from a lawsuit
Your U.S. company can be registered online. There are business formation specialists online who can function as your registered agent to facilitate the process.
4. Bank Accounts
While not a requirement during the business registration phase, an Employer Identification Number (EIN) is necessary to open a bank account, secure a business license, obtain loans, hire employees, and pay taxes, a necessity, therefore, in the overall scheme of things.
An EIN can be applied for directly from the IRS for free, but if you’d rather not do it yourself or you find the forms and procedure confusing, then look for a business formation specialist who can help you with the process. Before going through the motions of setting up a U.S. business, make sure that you can actually open a U.S. bank account. While it does seem simple on paper, as earlier mentioned, this process can be really tricky.
The Patriot Act, in response to the 9/11 attacks, has made it difficult for foreigners to open a U.S. bank account. It requires that banks verify the identity of any person opening an account with them, and that these persons pass all mandatory anti-money laundering and anti-terrorism checks.
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There are several ways this requirement can be satisfied:
- Get a visitor visa, travel to the U.S., go to your bank of choice, and personally open an account.
- Go to a U.S. bank with a local branch in your country of origin for identity verification, if their policies allow such an arrangement.
- Use third-party services to help you set up an account.
Steps in starting a business
- write your business plan- before getting started with any business you first need to write a business plan
- Fund your business- create a budget for your business for at least the first financial year of it’s existence or until it can fund itself
- pick a physical location for your business– Very important as it pertains to what demographic you are looking to target
- choose the best available name for your business– A good business name usually captures your spirit and tells customers the purpose of your business. It is very important that you check if the name you choose is already taken
- choose the structure that you wish for your business to be in– there are a few business structures so think carefully when choosing
- register your business– register your business in order for it to become apart of the legal system and also get certain benefits like tax wavers ect…
- Get the IDs required for federal and state taxes– Tax IDs are very important for businesses as they allow you to file for taxes, get tax exemptions (depending on federal and state laws) and accept tax returns for your business but not all states require a business tax ID
What does it take to start a U.S based business?
There are certain permissions needed to start . Creating a business that is based in the U.S can help as it relates to getting a work permit or American Citizenship. It is advised that before seeking to start a business within the U.S that you first seek a work permit as this would allow you to have a better idea of things like where you desire to setup your business. The United States has 50 States and depending on each one the business and tax laws may vary. Remember to write a business plan and seek help if possible as these things are very important. So now you know how to start a business in the U.S.A as a none-resident Always remember success is a mindset so visualize your goals and they will be manifested.