The process to incorporate a business in the USA is roughly the same for citizens and non-citizens as you don’t require citizenship or residency to incorporate a business in the country. Non-Americans are welcome to create or expand a business in the country without jumping through unnecessary hoops. However, there are still some things to consider and some things to do. Keep reading to learn how to incorporate your business in the USA and expanding your company overseas.
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How to Incorporate a Business In the United States
Incorporating businesses in the US is handled on the state level rather than the federal one. The process may vary between states, but generally you start by applying to register a business in that state and then establishing a registered agent with a physical address within that state. The registered agent can be the business owner or another person authorized to obtain legal documents on behalf of the business. These documents are typically related to legal or business matters.
You must file formation documents with the state agency, often the Secretary of State. This includes paying the filing fees. This document is typically called the Articles or Certificate of Incorporation. The Articles or Certification of Organization refer to LLC formation documents. Formation paperwork informs the public and state of details about the company. Formation documents are the formal record of reference for the existence of the company.
If you are a US resident you will probably need a Federal Tax Identification Number (EIN) to start your business. This means you need a Social Security Number. An Individual Taxpayer Identification Number (ITIN) is enough for non-residents. Both tax numbers are given by the Internal Revenue Service (IRS) to people who pay taxes in the country but doesn’t qualify to receive a Social Security Number from the government.
Which Business Type is Best?
Business vary in format, including LLCs, corporations, and sole partnerships. The business type can affect whether a non-citizen can own a US-based business. There are no limits on the number of investors allowed for an LLC and no restrictions on non-US citizens becoming members/owners. However, if such a corporation pays dividends to members, those distributions may be taxed.
Also, read Why Starting a Business in 2021 is a Smart Investment
US tax laws allow non-citizens to own shares in a C-Corporation but not an S-Corporation. S-Corporations allow shareholders to report their business-related income and expenses through personal income tax returns to avoid corporate taxation. The tax rules stipulate non-citizens cannot hold shares in an S-Corporation, which is why many foreign nationals choose to form an LLC. It is the safest and clearest route to incorporating in the United States.
Which State Is Best?
With 50 states to choose from, you need to think about which would be best for your business. The answer depends on a few factors, such as if your company already has a physical presence in the company. If you have a Miami office, for example, it would be wise to incorporate in Florida. If you don’t have a physical presence – and don’t plan to have one – then we recommend Delaware or Nevada. These are the friendliest states for overseas businesses. Please keep in mind you need to register with all states you intend to do business in.
The laws for the country you live in could dictate which type of business you can incorporate in the US – and where you can do it. It’s worth hiring an attorney familiar with both domestic and foreign tax laws to make informed decisions about setting up shop in the U.S.
Do You Need An American Address to Incorporate?
You will have to name a registered agent for your business. This agent needs to have a physical address in the state you wish to incorporate. The agent receives important documents, such as legal documents and tax documents, including the Service or Process or Notice of Litigation. The designated agent must be available at their address during regular business hours.
You can’t use the address of the registered agent as the legal address. Their address is intended to be where you receive official documents, such as lawsuits and taxes. The legal address for your company should be the address of your home or office in your home country.
How to Determine Resident Status
Non-residents are taxed only on income sourced from the United States, while residents are taxed according to their whole income. Resident status is for those who have a green card or a physical presence in the country. For example, a person may be treated as a resident if they spend at least six months in the country. Even if you meet these requirements, you may be treated as a non-resident in certain situations. Businesses that don’t operate in the United States don’t owe federal income taxes but may be subject to charges and fees on the state level.
Can You Get Financing?
Access to financing is one of the many reasons people consider incorporating in the United States. United States banks tend to be more willing to loan money to small businesses than international banks. A non-US company can apply for financing through American banks once they have been operating for at least two years. You’ll have the same access to financial products as standard US companies. However, you can’t get finance before then.
Different companies have unique needs and there’s no simple and easy answer to every non-US company for selling goods and services in the United States. The steps your business must take depend on a careful assessment of your business plan, current and future success, the legal rules of the United States and your home country, financing issues, and other potential problems. At the end of the day, the main goal for both citizens and foreign nationals is to operate their business in the United States without risking personal assets through incorporation.
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