How To Start A Company In USA As A Foreigner: Top 5 Considerations

Introduction

I have started my journey as a young entrepreneur establishing my own companies, and later helped other entrepreneurs start their businesses in the United States. I have experienced similar challenges in life that you are about to face. Here, I am sharing the Top 5 factors to be considered when starting a business in America as a non-US citizen or a US citizen that resides abroad.

1. Do I Even Have To Register A Company In America?

It's not necessary to be incorporated to do business in the U.S. As a foreign company or a non-US citizen, if you plan to conduct significant business in the U.S., hire employees, or open an office in the U.S., it may be prudent, if not necessary, to do so. Depending on the U.S. state where you want to base your company, the law may require that the foreign company be at least "registered" to do business in the state.

Incorporating in the U.S. offers many advantages, including:

  1. Being able to open a U.S. bank account
  2. Direct access to venture capital and angel investors in the U.S.
  3. Increased visibility and credibility in the U.S. markets.

2. Which Type Of Business Entity Should I Form: LLC vs. Corporation?

There are several different types of business entities in the U.S. including corporations (C-Corp and S-Corp), limited liability companies ("LLC's"), partnerships, and sole proprietorships. Foreign nationals and companies generally incorporate their US business as an LLC or C-Corp due to restrictions for having foreign ownership in other types of business entities.

Neither the C-Corp nor LLC restricts the number of foreign owners ("shareholders" for corporations and "members" for LLC's) or restricts the type of owner (i.e., the owner or owners may be individuals or other companies). Both business entity types also protect individual owners from direct liability, unlike sole proprietorships or partnerships.

The most popular or common option is the LLC. The LLC has fewer formalities than a C-Corp and allows the company to avoid "double-taxation". C-Corps are subject to double-taxation, i.e. the company's income is taxed and then when dividends are issued, the shareholders are taxed on what they receive.

C-Corps, on the other hand, are a better option for new companies that intend to have multiple investors and are going to issue shares in the business. Investors prefer the C-Corp as they can avoid any type of taxation until they sell their shares.

While S-Corps are another popular option in the U.S., shareholders in an S-Corp must be U.S. residents.

NOTE:
The LLC is also a popular option for new businesses because it allows for more freedom in determining the company's tax liability. Depending on how many members are in an LLC, the LLC can elect to file taxes as a partnership, a corporation, or as a single member LLC, i.e. the business income can be claimed on the member's personal tax returns (Form 1040).

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3. Where In The U.S. Should I Register or Incorporate The Company?

Incorporation and registration laws for businesses in the U.S. are state specific. The U.S. has 50 states and Washington, D.C., which means 51 different places with different laws and levels of local taxation! Each state has its own set of incorporation laws and have a variety of other regulatory and tax regimes. Generally speaking, you should incorporate where you plan to do business. Companies that don't plan to have a significant physical presence in the U.S. can incorporate in any state.

If you're still unsure of where to incorporate, ask yourself:

  1. Where do I primarily intend to do business?
  2. Which state has greater potential for growth for my business sector?
  3. Which state(s) may be friendlier to new investments or entrepreneurs?
  4. Which state(s) may be more "tax" or "business" friendly?

It is possible for a company to incorporate in one state and have their primary office in another state. For example, for valid business reasons, you may choose to open new offices in State A and State B but choose to incorporate in State C. Once incorporated in State C, the company would simply need to be "re-registered" in States A and B.

NOTE:
If your company operates on an online model, like an e-commerce company, or it won't need to have a significant physical presence in the U.S., it may be most profitable to register the business in a state that has a lower tax and/or regulatory burden. Nevada, Wyoming and Delaware are 3 of the most popular options for just those reasons.

4. What Do I Need To Do To Form A Business Entity In The U.S.?

After choosing the type of business entity and the state in which to incorporate, what's next? There are several basic steps that need to be taken once you're ready to incorporate:

  1. Pick A Company Name: You need to choose a unique name for the company. No two companies can be incorporated with the same name in the same state. It's best to avoid generic names and choose a name that is unique but can be easily attributed to your company.
  2. Choose A Registered Agent: When incorporating a company, most, if not all states, require that a "registered agent" be chosen with a physical address within the state. The registered agent will be responsible for receiving important tax and legal information on the company's behalf.
  3. File Certificate of Incorporation or Articles of Organization: The company must follow the chosen state's procedures to formally register the company in that state. Generally, the application for formation will require the company's name, the name and address of the registered agent, and the names of shareholders or members.

5. Do I Need A Visa To Start A Business In USA?

You don't have to hold a U.S. Visa or Green Card to register or buy a company in the US. In fact, you don't have to be in the U.S. to do so. However, merely setting up a business in the U.S. doesn't authorize its individual owners to work in the U.S. In order to live and work in the U.S., a foreign citizen would need the appropriate visa. While there are a few visa options to choose from, the most popular option is the L-1 intra-company transferee visa.

The L-1 visa allows companies to move executives, managers and specialized knowledge personnel from companies abroad to their related companies in the U.S. This includes owner or investor executives. The L-1 visa not only enables transfer of individuals to established U.S. companies, but U.S. immigration has carved out a special category of L-1 visas for "New Offices", i.e. companies that have been doing business for less than one year.

The following are the main requirements for a New Office L-1 application:

  1. The U.S. Company must be a parent, subsidiary, affiliate, or a branch office of the Foreign Company
  2. The L-1 transferee must have been employed with the foreign company for at least 1 year in the past 3 years in a managerial, executive or specialized knowledge capacity
  3. The L-1 transferee must be coming to the U.S. to perform in a managerial, executive or specialized knowledge capacity
  4. The U.S. company must secure a physical office, and
  5. The U.S. company should be sufficiently capitalized.

If a qualifying foreign company does not exist, there are other viable visa options, including the E-2 Investor Visa, the H-1B for Professionals in Specialty Occupations and the O-1 for Aliens of Extraordinary Ability.

NOTE:
Individuals who are eligible for the L-1 and are executives or managers with the foreign company and who are coming to the U.S. to take on a managerial or executive role may have a direct path to the Green Card under the EB-1 Category. This route can result in a Green Card in as little as 2 to 2.5 years from the time the business is established.

Conclusion

The huge market size, business-friendly regulations, access to investors and cheap capital, boosting company's credibility and a chance to get a quick Green Card through business are the aspects that primarily influence foreign nationals to open a company in USA.

If you are looking to start a business or scaleup existing operations in the U.S. market, contact me today for a FREE Business Consultation.

I'll review your specific situation and develop the best strategy based on 3 decades of my personal experiences helping 1000+ entrepreneurs from 52 countries. I specialize in taking companies that have revenues, let us say $1 million and help them scale globally to $100 million.