How to start a business in the US as a foreigner
Starting a business is a culmination of an enormous idea harbored in the mind for many years. Most startups may have been kept at bay for many years. In most cases, a lack of financial resources is the major drawback when it comes to starting a business. After overcoming this, one can start a business anywhere around the globe, including the U.S. How exactly can you do this and succeed? This article aims to explain some things to keep in mind when starting a business in the U.S, mainly as a foreigner.
Choose your company structure
Selecting the kind of business venture you want to establish is the first and most vital step. Currently, non-citizens have two viable entities that they can start in the United States: Limited Liability Company (LLC) and Corporation (\C corporation). S corporation is another option, but it is exclusive to citizens and permanent residents. For most foreigners who want to establish a business in the U.S, a C corporation is the most suitable business model. The C corporation model also shields foreigners from direct scrutiny by the Internal Revenue Service (IRS).
The most often-cited advantage of forming a C corporation is the ability to expand by offering unlimited stock. This benefit is often attractive to investors and especially foreigners. Even so, there are distinct advantages to starting as an LLC that should not be ruled out. The most obvious of these advantages is the protection an LLC provides people with personal assets in case of debt litigation.
Choose a state for registration of the company
The company’s primary business and focus should determine where the owner locates it. If a state dominates its market, that is the best place to settle a business that specializes in that same area. This implies, for example, that there is not point in establishing a business in California when most of your clients are located in Nevada. However, you can establish small branches in other states if the company has clients across the United States.
You should know states that offer the most favorable terms for foreigners starting a new business in the U.S. If you are staring an online company and plan on doing business across regions, you will need to register in a state with low tax burdens. Two states famously known to be inexpensive for entrepreneurs and generally business-friendly are Nevada and Delaware. Most notably, Delaware is known for its corporate law that gives protection to shareholders and directors. Besides, there is no need for a physical address or bank account while incorporating in Delaware.
Register your business
Registration requirements may vary from one state to another. For instance, here are some of the conditions in Delaware, which serves as a simplified model for various states.
The entrepreneur or company director(s) choose a unique name
They select a registered agent that receives legal documents for the company.
A company director or entrepreneur fills out a one-page certificate of incorpration that ascertains the corporate name. In addition, the certificate should include the name and address of its registered agents and the number of shares that the company should issue.
After incorporating the business, the management must file a report and pay franchise tax annually. The report costs $50 while the franchise tax may be at least $175. The paperwork involved is generally straightforward, and there would be no need to engage online service providers. Almost every state offers online assistance to help people file the correct paperwork.
Obtain an Employer Identification Number
An Employer Identification Number (EIN) is essential in hiring workers. It is also crucial in opening a bank account, paying taxes and getting a business license. The IRS uses the EIN to identify the tax accounts of employers. and to identify others who may not have employees but rely on the services of independent contractors.
All items that a business sends to the IRS should always have the EIN. Moreover, all items sent to the Social Security Administration should have the EIN. This helps to differentiate your business from other businesses. One should be able to apply for an EIN with the IRS. As mentioned earlier, there is no need for online services with pseudo-government internet addresses that will charge for something that you can do yourself.
In most cases, experts suggest that starting a domestic corporation is the best option for a foreigner who wants to start a business in the U.S. The tax and incorporation requirements may be different from those in your native country. Therefore, you require experts in these areas. At Mount Bonnell Advisors, our experienced staff will give you advice on all legal and general requirement. Get the best advice from Mount Bonnell Advisors and make informed decisions.
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