Everything you need to know to open a company in the US from overseas
Colvin Smith
As an entrepreneur and member of numerous investment platforms and communities, I see how valuable financial research can be in the long run. It allows for better financial management and more accurate decisions.
As the world’s largest economy, the United States is always welcoming local and foreign entrepreneurs to establish their business in the country. Incorporating a company in America is an exciting and thriving journey to your entity’s success, however, as a non-resident, you have more steps to go through than citizens.
The US has always been a magnet for entrepreneurs. Expanding your business to this fast-growing environment can ensure access to new markets and investors, while increasing your company’s credibility. If you’re based outside the US and want to set up your entity in the country, this article will help you complete the incorporation process with ease.
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What are the benefits?
There are many reasons why you should incorporate your company in the US. First, as mentioned before, it boosts your business’ credibility and attracts powerful markets and investors. In addition, your company will grow in a favorable economic environment, which will benefit your corporation in many ways. Here are some of them:
Incentives offered by local or federal governments
Many states and cities offer financial incentives in an effort to entice foreign investors, including tax credits. Recently, the US has lowered its commercial real estate taxes for foreign investors. In addition, federal assistance programs such as startup training grants or loans are available if you’re opening your business in America.
Top legal framework
The US has one of the best incorporation jurisdictions in the world. It protects your business regardless of politics and economy, also ensuring the safety of your company’s assets. The US law enforcement and court systems shield your entity under American legal protections.
US business bank account
Foreign companies can only open a USD bank account if they’re registered in the US. Due to compliance policies, banks require your EIN (Employer Identification Number) during the account opening process.
Payment processing
All US established companies gain access to Stripe, a reliable and easy-to-use USD payment processing platform, used by leading companies around the world.
Shipment of goods
Manufacturing or selling goods is easier in the US since the country provides efficient connections to global markets through air, sea, rail, and highway travel.
Do you need a visa to establish your company?
You can start your business in the USA without a visa, and even without flying into the country. However, if you plan to run your business from the US, and perform any duties within America, you’ll need a valid work visa.
The type of visa you’ll need depends on your business's current state. In case your business is trading outside of the US for at least 12 months and has a minimum of 4 employees, you’ll need an L-1A visa. If your business is operating for less than 12 months overseas and has less than 4 employees, then you’ll need an E-2 visa.
An E-2 visa is also a viable option if you don’t own a company outside of the US, but are planning to move to America to start one. It’s the most popular choice among entrepreneurs, coming close to being a ‘start-up visa’.
Registering your company
The process and documents required depend on the state in which your company is being incorporated, and the type of legal entity you’re forming. In general, all businesses pass through the same steps, which can take up to 5 weeks for the entire process.
1 - Choose a type of business
Once you’re aware of some of the benefits of establishing a company in America, you can decide how you want to incorporate. Non-residents can open two types of legal entities within the US:
Limited Liability Company (LLC)
LLCs are the most common choice among small business owners who live outside the US. They are structured by an Operating Agreement, a contract between members that specifies how it will be carried out and what percentage of the profits each member gets.
LLCs attract more entrepreneurs, mostly because they protect your assets from business debts and lawsuits. In practice, it means that your personal belongings will be protected even if your company goes through some financial crisis.
This option also offers cheaper structures for taxation purposes. With a ‘pass-through’ taxation, your earnings simply pass through to your income taxes, saving from administrative costs.
C-Corporation (C-Corp)
Startups and companies that plan to seek venture capital and want to have ‘shares’ often opt for C-Corp. This option attracts more investors as they can passively hold shares without worrying about the tax consequences.
On the other hand, Corporations are double-taxed when they earn income and issue dividends, resulting in a big monetary loss on taxes alone.
2 - Choose a state
In the US, there’s no registration at the national level, so you must incorporate with individual states. Ideally, your type of business should determine where it will be located. However, depending on the state you register your entity, taxes, and fees vary.
If your company is not going to be concentrated in any particular region, the most recommended places are Delaware and Wyoming, both low-burden states with no income and sales taxes.
Delaware is particularly interesting to foreigners and its business environment is ripe for the taking. It has outsider-friendly rules, like not requiring a local physical address or bank account, despite also offering generous protections to shareholders and directors. Delaware’s court is also known for reaching decisions quickly. In addition, the state offers a cheap annual reporting fee ($300) compared to other states.
Wyoming offers a foreigner-friendly environment to establish a business without US citizenship requirements. The state has a cheap annual reporting fee ($50 per year) and also has no state, personal, corporate, or capital gain taxes. Moreover, Wyoming doesn’t require LLC members to be listed in a public database.
3 - Choose a unique name
Your name is also your trademark, so you must choose one that is unique and has not yet been registered in the US. You can search for all trademarks that are being used in the US Patent and Trademark Office database.
4 - Get a registered agent
Being abroad requires you to select a registered agent, which is a business or individual responsible for receiving legal documents on behalf of the company. If your business has a physical address in the state in which it's being registered, then the entity can serve as its own agent. Your registered agent must be a resident of the state your company is being incorporated in, or an entity authorized to conduct business in that region.
5 - File your company with the state
To officially file an LLC or C-Corp, you will first need to fill out the Articles of Organization document, also known as Certificate of Formation, Certificate of Incorporation, or Certificate of Organization. This document outlines your organizational structure, in which you must provide the name and location of your business, the name and address of the registered agent, the management structure, and the number and value of shares. Registering your business in the US can take up to 5 weeks as you need to wait for other parties in order to complete the application. The total cost of incorporation depends on the state, but is usually around $300. Once the entity is registered, it must file a report ($50) and pay franchise tax that varies from state to state.
Get an EIN
An essential step for fully operating in America is to have an Employer Identification Number (EIN), which is your company’s social security or tax ID. It’s a necessary procedure to start hiring workers, open a business bank account, pay taxes and get a corporate license. You can apply for the EIN directly on the Internal Revenue Service (IRS) website. After completing Form SS-4, you can submit it by fax or mail. If you send a fax, typically, you’ll get a response about your application within a week, in the case of mail, it can take up to five weeks to receive the EIN.
Next step: open a business bank account
To fully ensure your company’s presence in the United States, you must also open a business bank account. It’s an essential step to start receiving and issuing payments in America.
Make sure to pick a bank that provides the essential services to carry out your business finances. We recommend having a US business bank account at Mercury, as it allows you to open it from overseas, despite having extremely low fees.
Check out Mercury's review.
About the author
Colvin Smith
As an entrepreneur and member of numerous investment platforms and communities, I see how valuable financial research can be in the long run. It allows for better financial management and more accurate decisions.
