It is a common misconception that only American citizens can form a company in the U.S. Not only is it easy to set up, maintain and own a U.S. business while residing in another country, but it is also affordable. This guide explores how foreigners can participate in the world’s largest economy.
Although non-residents are expected to undergo the same process as those living in the U.S. when forming a business, there are conditions and limitations specific to foreigners that you must know. For instance, setting up a bank account, securing a visa and dealing with international tax regulations can become complicated processes for non-residents.
Here are four points to consider when opening a company in the United States:
The U.S. offers different ways to structure a company for non-residents.
There are many types of business structures and corporations, but non-residents can only create a select few.
It is possible to gain U.S. citizenship through investing significant capital in the economy. To qualify for an EB-5 Immigrant Investor status, a non-resident must invest $1,050,000 in a new business enterprise while creating at least 10 full-time employment positions. The investment requirement is lowered to $800,000 if the investment is made in a targeted area or infrastructure project.
Qualifying for a green card by investing in the U.S. economy can be a complicated yet rewarding process. There are no education requirements for this type of green card, no long waiting times, no quota rules, and no skills requirement or sponsorship. An added benefit of this method is that spouses and children under the age of 21 will also receive a green card.
U.S. companies are incorporated at the state level instead of the federal level – and some states offer benefits for your business. Delaware and Nevada, for example, are known as low-burden states, which makes them extremely appealing to many foreign investors.
Here are some reasons to consider incorporating in Delaware:
You can register your U.S. company online. Online business formation specialists can function as your registered agent to facilitate the process.
While an Employer Identification Number (EIN) is not a requirement during the business registration phase, you’ll need one to open a bank account, secure a business license, obtain loans, hire employees and pay taxes.
You can apply for an EIN directly from the IRS for free, but if you’d rather not do it yourself or you find the forms and procedure confusing, look for a business formation specialist who can help you with the process. Before going through the motions of setting up a U.S. business, make sure that you can actually open a U.S. bank account. While this process does seem simple on paper, as previously mentioned, it can be tricky.
The Patriot Act, passed in response to the 9/11 attacks, has made it difficult for foreigners to open a U.S. bank account. It requires that banks verify the identity of any person opening an account with them and that these people pass all mandatory anti-money laundering and anti-terrorism checks.
There are several ways to satisfy this requirement:
Every business should consider taxes. The U.S. tax system is favorable to businesses and offers many different legal structures to award tax benefits while sheltering entrepreneurs from personal liability. The U.S Department of the Treasury offers many tax programs for businesses as well – especially small businesses.
The U.S. government is proactive about these tax benefits. During the COVID-19 pandemic, for example, lawmakers passed the American Rescue Plan Act that offered employee retention credits and paid leave credits. The U.S. is business-friendly and routinely works to attract global entrepreneurs.
The U.S. offers a diverse and wealthy selection of some of the most respected venture capitalists in the world. When you start a business in the U.S., you inevitably gain access to this deep-pocketed investment sector. For this reason, tech startups from around the globe set up businesses in America.
Not every state operates the same economically, however. The best state for attracting venture capital is Delaware. The most business-friendly corporation laws are also in Delaware. If you are starting a large business that wants to attract venture capital, consider creating a C Corporation in Delaware.
The U.S. has a stellar economic reputation. Not only does the country have the world’s largest nominal gross domestic product, but it also has the world’s largest nominal net wealth. The country prides itself on having a highly developed market economy.
This high reputation is an asset to businesses operating globally. American businesses are respected on the world stage. Branding is vital when operating a business, and the American economic brand is strong.
According to the World Bank’s 2020 report, the United States ranks 6th in “Ease of Doing Business.” The country has earned this ranking by providing low setup fees and convenient remote processes. Individual setup fees depend on the state in which the business starts. For example, the cheapest setup fee for a foreign corporation in the U.S. is in Wisconsin for as low as $20, while the most expensive is in Texas or South Dakota for $750. Even the most expensive state is considerably cheaper than other countries – especially when you consider the unwritten costs attached to operating a business in some places.
Dissolving a business is also affordable in the U.S.. Most states don’t require a fee to dissolve a business entity.
Maintaining a business in the U.S. is also stress-free, as it can be 100% foreign-owned and only requires annual reporting fees to maintain. There’s no need for an annual CPA audit or a nominee director within the country.
Ultimately, creating a business in the U.S. has a lot of benefits with fairly minimal downsides. The country offers many resources for foreign investors and entrepreneurs while maintaining a business-friendly environment.