The U.S. is ranked top among the countries with the biggest economies, with a 20.49 trillion GDP. Additionally, American-based businesses are considered reputable, making the U.S. a great business destination for non-residents. Setting up a business in the U.S. as a foreigner allows you to leverage tax benefits, protecting you from personal liability.
If you’re ready to start a business in America as a foreigner, first learn how it’s done. This will prepare you for what to expect and how to navigate the process. This article guides you on how to set up a business in the U.S. as a non-resident.
Table of Contents
1. Select a business entity
The United States allows foreigners two key business structure choices, an LLC (Limited Liability Company) and a C Corporation. Setting up an LLC company safeguards you as a foreign entrepreneur from personal liability over corporate actions or decisions. It also protects your personal assets should the business get into debt or other problems. While incorporating a company offers the best personal liability protection, Corporation formation costs are higher than other business entities.
Setting up a Corporation provides unlimited shares, allowing you to expand, which is often appealing to potential investors. Assessing the pros and cons of each entity can help make an informed decision on the business structure to settle for.
2.Acquire a registered agent
You must have a registered agent when registering your business as a legal entity in America. The agent receives legal documents on your company’s behalf. They should have a physical address in your state of formation, not a post office box. Their availability during business hours is also required. Your agent is a resident of your state. If your company is registered in other states, you must have a registered agent for every state.
3.Get a taxpayer identification number
A foreign entrepreneur starting a business in America needs a federal EIN (Employer Identification Number). This nine-digit tax ID number functions as your company’s Social Security Number. This number is helpful when filing business tax returns, opening a bank account in your business name, establishing business credit, and accounting for and paying company employee wages and payroll. While a Social Security Number isn’t a requirement when registering an EIN, it simplifies the process.
If you don’t qualify for a Social Security Number (SSN), use an IRS Form W-7 to get the ITIN (Individual Taxpayer Identification Number). Nonetheless, ITIN only lets you acquire business EIN online. Without the ITIN or SSN, you can’t apply for the EIN online. However, you can use the IRS Form SS-4 to apply and then file by fax, mail, or phone.
4.Open a business bank account
A U.S. business bank account for non-residents is crucial when setting up a Corporation or LLC. With a bank account, collecting payments and handling clients becomes easier. It can also help lower your taxes and provide asset protection. To open a non-resident business bank account, you must have a business formation document (Certificate of Incorporation or Articles of Organization), operating agreement/ by-laws, and a federal tax ID number. You also require a U.S. business address, passport, and a list of owners with over 25% ownership.
Endnote
Starting a company in America as a foreigner can be challenging. However, following this guide can help you easily set up your business as a non-resident.
