If you are a foreign citizen ready to jump through hoops to start a business or expand on American soil, you must be wondering how complicated the process is and what tax issues you will face. There is also a myriad of other factors to consider, including differences in language and business practices. By establishing their operations in the U.S., companies owned by foreign nationals can, however, seize major business opportunities in the country with the largest economy in the world.
Here’s what you need to know if you are about to access the United States marketplace, which has proven to be the key to success for many companies around the globe.
You don’t have to be a U.S. resident to set up a US-based business
Non-American citizens are welcome to establish a business in the States and don’t even have to have a green card. To incorporate a business in the U.S., you don’t need a U.S. address or citizenship. Setting up a company as a non-resident is similar to the procedure required for a U.S.-born business owner.
Gain understanding of the United States legal system
The process of forming a corporation or company in the United States varies from state-to-state but generally speaking, to form or register your business entity, you have to file the required application documents and obtain the necessary permits and/or licenses.
Where the company will be doing business matters. Regardless of whether you are a foreign national or an American citizen, when you are doing business in the States, you are subject to parallel systems of laws made at the national, state, and local levels.
There are areas of law exclusively governed by federal law, while other areas are primarily set by individual states. Each state has their own set of state and local laws, including those that apply to sales transactions, contracts, and employment relationships. Many other areas of law are regulated by both state and federal law. It’s always best to consult with private legal counsel before submitting the application to avoid errors and increase your knowledge of the business world in the United States.
Choose the type of business entity
Will your business be a limited liability company (LLC), a corporation or a partnership? Each type of business entity has its own merits and demerits and needs to be formed in compliance with the laws of the U.S. state in which the entity is to be registered.
Only in case of a partnership, organizing documents are not required to be filed with the state government. Although you don’t need a written agreement, it is advised that you formalize the arrangement if you decide to form a partnership.
It’s recommended that you have the help of a team of legal professionals skilled in company formation in the United States to get acquainted with all case-specific business and legal factors before you establish which type of entity matches your needs best.
Immigration: obtain work visas
If you plan to maintain your presence in the United States with offices and foreign employees, keep in mind that all non-US citizens coming to the U.S. to work should obtain the proper type of visa for their stay.
American visa laws are strictly federal, meaning that no individual state provides or regulates visas. Most types of work visas need approval from the US Citizenship and Immigration Services (USCIS). Many business entities seek expert advice from a U.S. immigration attorney to avoid application errors.
Seek legal counsel to address taxation and transfer pricing regulations
Foreign business owners face unique international tax issues that are often crucial to the successful formation of a company. It’s essential that you understand your compliance needs and budget your costs accordingly.
All companies, corporations and partnerships doing business in the U.S. are subject to federal, state and local taxes. The United States has bilateral tax treaties with a number of foreign countries to prevent tax evasion and double taxation, as well as to encourage commerce between countries.
New companies have to obtain an Employer Identification Number (EIN) from the IRS. Only when your business entity is assigned this unique number by the Internal Revenue Service are you able to apply for the appropriate licenses and tax returns, and to open a business bank account.
If you plan to offer services or sell products, before you establish price points, make sure that your business is in accordance with U.S. laws and transfer pricing regulations. Given the complexity of U.S. law, thorough planning and legal counsel is strongly advised to avoid possible penalties and mistakes.