The first thing you will ask when you hear about starting a business in the US is; can a foreigner start a business in the United States if he/she is not a resident? The answer is yes, it is possible. Foreign nationals have businesses in the US, every day they set up new US companies from small shops to major enterprises. The only best way to get into the US market is by US company as this would make the most of the worlds’ best and most integrated national market with the lowest tax rates. When you are a non-resident of US, but have links with experienced teams dealing in company formation, import-export, real estate, supply chain, international tax, and immigration, setting up a business in the USA can be very simple.
For the foreign nationals with a US company, it is easy to sell your products and services in the US market, but that’s from customs and tax viewpoints. It’s also easy to access capital markets for venture capital, public markets and angel investors in the US. You can enhance your company’s reputation to the overseas markets as well as US customers.
Foreigners willing to invest or do business in the USA do not necessarily need to start a US company. International Revenue Service bills foreign companies for all taxed owed. However, it’s much easier to manage with the US subsidiary. Before we look at the tips to follow to start a business in the US as a foreigner, here are some of the benefits you stand to enjoy by establishing a business company in the United States of America:
- You will have tax advantages. There are possibilities of being taxed less for the U.S. sourced income.
- Effortlessness when it comes to selling in the US market – from customs and tax points of view. It is also easy to access US venture capital funding, public markets and investors.
- Your business can be listed in the US stock market when it goes public.
- You are guaranteed of enhanced business reputation to your overseas customers as well as those in the US.
- There is also personal liability protection
Even though both residents and non-residents are required to go through the same process when opening a business in the US, limitations, and conditions are in place specifically for the foreigners. For example, foreigners will find it hard when it comes to international tax regulations, securing a visa and opening a bank account.
At least now a US non-resident have got a rough idea of the negative and positive things to expect when starting a business in the US. Now here are the four major things to know when establishing a business in the US as a foreign national:
The Company Structure
Foreigners have two choices, to set up either a corporation (C) or a Limited Liability Company (LLC). The third option is the S corporation, but this is limited to the US residents and citizens only.
In an Investopedia article, Richard Hartnig a lawyer and tax adviser at Schwartz International says that C corporation is more attractive to the foreign nationals regardless of the fact that they are double taxed as shareholder dividends and at the corporate level. As to why foreign nationals would prefer the C corporation, they can be made public and are also more scalable. Additionally, for business funding, investors always go for C corporation.
Citizenship by Investment
When a person invests a huge amount of money in a particular country that individual acquires the citizenship of that country and it is referred to as Citizenship by Investment. Countries such as Russia, Cyprus, and Austria offer this program to its foreign investors. Citizenship by Investment is also in the United States of America, and you can consider this option if you want to spend the rest of your life in the US with your family and all your wealth. The US Citizenship and Immigration Services (USCIS) calls this program Green card through investment.
USCIS may offer foreign investors a conditional permanent residence in the US when they invest a minimum of $500000 or $1 million or more in the areas that suffer high rates of unemployment. This includes their spouses as well as the unmarried children below the age of 21 years. There is a maximum of 10000 visas granted to qualified entrepreneurs every fiscal year.
Companies in the United States of America are incorporated at the state level rather than federal. States such as Nevada and Delaware are known to be low burden states, thus are more appealing to the foreigners. Nonetheless, Hartnig further cautions that integrating any of these jurisdictions does not relieve you from business responsibilities in states like California which is considered a high-cost state. For that reason, it is highly recommended that you register your business in the state you mean to dominate. Delaware is the first recommendation for foreign investors while Nevada comes second.
Although it is not a requirement when registering the business, Employer Identification Number (EIN) is a requirement when opening a bank account, obtaining loans, securing a business license, hiring employees, paying taxes, hence, a requirement in nearly everything you do at the bank.
You can apply for the EIN for free at IRS, but still, you can find a business formation specialist to guide you through the process. However, before starting any process of registering a business, first ensure you can open a US bank account without any complications. Opening a bank account can be tricky.
Surely, good things don’t just come on a silver plate; you have to work for them. Foreign nationals can form and run companies and businesses in the US. In fact, they can even obtain permanent resident status if they have made an extensive financial investment to US economy. If this is the path, you have chosen to trail, knowing the options as well as possible obstacles counts before you take the big step. However, it is advisable to consult with tax lawyers, immigration lawyers or an attorney for further clarifications.