How to set up a company in the US as a non-resident?

A young entrepreneur named Reuben, lived in a small village in the western part of Kenya. Reuben always dreamed of opening a bakery, but he knew that the market in his hometown was limited, prompting him to explore other markets to make his dream a reality. He later learned that there were vast opportunities in the US where he could become a successful business owner by just establishing a small business as a non-US Citizen.

From his research, Reuben landed an opportunity to open his bakery in one of the states in the United States. However, as a non-US resident, Reuben faced many challenges that were unanticipated to him. 

Firstly, he had to navigate the legal requirements for starting a business in his chosen state. This included company formation, establishing a registered office address with the state’s government, obtaining an individual taxpayer identification number and securing the necessary licenses and permits.

Next, he needed the necessary visas (as he did not have a green card) and work permits to operate a US business legally. This was time-consuming and complex, but Reuben persevered and eventually secured the proper documentation. 

Once Reuben’s small business was established, he realized that he needed to build his customers by exploring various business recognition strategies in the new market, as the use of word-of-mouth and social media for advertising was not just enough. He learned about branding as a way of advertising and attracting more customers. 

Over time, Reuben’s bakery started to thrive and became successful to the point that he could hire more employees and even expanded his offerings to include custom cakes. Though Reuben’s journey was not always easy, his success showed that you could achieve your dreams by establishing a small business entity in the US as a non-US citizen and becoming a successful business owner. Below are some steps that can help Reuben and can also be helpful for your company formation process as a non-US citizen. 

Introduction: Set up a company in the US

Opening a US business can be challenging for a non-resident due to its legal structure and some logistical considerations. However, despite the challenges, most non-residents thrive as entrepreneurs in a favourable US market. In 2019, approximately 1.5 million non-US resident-owned companies in the US employed approximately 4 million workers and, as a consequence, generated more than $400 billion in total revenue. 

Today, non-residents establish businesses in the US, ranging from small boutiques to companies. The success of many businesses globally depends on access to the US market to succeed. Thus, the best way to access this market is through a US company, which can capitalize on the globally recognized national market while paying the lowest tax rate. To simplify your company formation process as a non-resident, you need the general knowledge of the applicable legal frameworks and an experienced team with good knowledge of company formation and immigration laws, import-export and supply chain regulations.

What Business Structures Can a Non-Resident Open in the US? 

There are three common types of business entities that a non-resident can form in the US. 

C Corporation (or C Corp)

A C Corporation is a separate legal entity that shareholders own, and the shareholders are completely isolated from any liability as long as the corporation stays in compliance. Therefore, the shareholders elect the directors whose roles are; to govern and set policies and goals for the corporation and evaluate its progress. The directors are also mandated to appoint officers to oversee the day-to-day operations of the corporation, including binding and signing contracts on behalf of the corporation. 

C Corporation offers the most protection against personal liability for its owner’s assets. However, setting it up can be more complex and require more paperwork than other entities. 

Regarding the tax implication of a C Corp, tax rates for both the resident and non-resident-owned corporations are the same. However, extra information must be available while filing foreign-controlled corporation tax returns.

Limited Liability Company (LLC)

An LLC is owned by members who control every activity of the LLC. The members form an Operating Agreement that sets out the rules of the company. Equally, members can elect company managers to manage their day-to-day activities. This is the best structure, mostly for a small business, as it provides the benefits of both a corporation and a partnership. It protects the owners’ personal assets from corporate liabilities in case the company goes into debt. This structure also requires less paperwork and formalities as opposed to a corporation.

Limited Liability Partnership (LLP) 

In a partnership set-up, the partnership agreement states the partner’s responsibilities and liabilities. A Limited Liability Partnership has the aspect of a managing partner who becomes liable for the actions of the partnership. This feature distinguishes a Limited Liability Partnership from a Limited Liability Company.

What Is the process for registering a company in the US as a non-resident?

Registering a company as a non-resident involves several steps, and it varies from state to state and mainly depends on whether you’re forming an LLC or a corporation. However, the general steps involve; –

• Choose a company name for your Limited Company, LLC, or C Corporation. This should be a unique company name not already registered or used in your proposed state of the corporation. Each state has its register of names; therefore, your proposed company name will be checked in the state where you intend to incorporate your business.
• Choose a business structure. This should be a structure that fits your business needs best.
• Choose your state of incorporation. You may choose to incorporate it in the state where you do business or in another state. It can be cheaper if you incorporate it into the state of doing your business. While choosing the state of incorporation, it is important to factor in issues such as the laws and regulations, taxes and other associated costs.
• Obtain the federal Employer Identification Number (EIN). This unique business identifier is required to do business, open a business bank account, hire employees, and file taxes. As a non-resident, you can obtain this by completing Form SS-4 and submitting it to the Internal Revenue Service (IRS)
• Register your business. Company registration is usually done with the state government, and depending on the business structure, it involves filing articles of incorporation. Company registration involves completing the necessary forms and paying the required fees. The requirements differ from state to state. However, it includes registration with the Secretary of State of your selected state. 
• Obtain Necessary licenses and permits. Once you have established your business activities and the state where to operate, you can check with the government of that state to find out the applicable licenses and permits relevant for your business for the business to operate legally.

Registering a company in the US can be complex and time-consuming, so you might consider getting assistance from LegaMart lawyers to bridge the gap and navigate the process by ensuring all the laws and regulations are observed. 

Opening a business bank account as a non-resident

Opening a business banking account in the United States will be needed, and the business bank account should be in your company’s name and used exclusively by your company. Here are some factors to consider:

• Research and choose the appropriate bank that offers a business account to non-US citizens. 
• Check the requirements. Each bank has different requirements for opening a business account. It is, therefore, to know the information and documents to provide. Some of these are; -company registration documents such as articles of incorporation, employer identification numbers from the Internal Revenue Service, and proof of a registered office address or address services such as utility bills.

Do you need a visa to come to US for operating your business?

If you plan to operate your business in the US as a non-resident and actively engage in its day-to-day activities, then you will need a visa that permits you to work in the US. Several types of visa may be applicable to foreign entrepreneurs, including;

E-2 visa: This is a popular visa, particularly for entrepreneurs who wish to invest and run a business in the US. The E-2 visa allows you to stay in the US for up to two years with the possibility of renewal. The requirements for obtaining the E-2 visa are; 

• Be a citizen of a country in which the US has signed a Treaty of either Commerce or Navigation;
• Invest in a significant amount of capital in the US business (at least $100,000); and 
• Demonstrate ownership of a controlling interest in your business ( at least 50%).

L-1 visa: This visa is good if you have established a business in your home country and want to extend it to the US. This visa type applies to intra-company transferees, particularly those who work for a business outside the US and are transferred to a US subsidiary or affiliate of that business. This visa allows holders to work in the US for up to Seven years.

0-1 visa: If you have some expertise, such as in science, arts, business or athletics, then this visa can help, provided you demonstrate your expertise in such areas.

Are there laws and regulations that should be complied with while setting up a business in the US as a non-resident?

Being enlightened on the state laws and regulations is crucial as each state has different laws and regulations. General guidelines on specific laws and regulations include: –  

Business license and permit: Depending on the business entity you want to set up, you may need to obtain a license and permit, as many businesses need them to trade. Once you have established the state of your company formation, you may enquire with that state’s local government to determine the applicable licenses or permits for your company’s operations.

State taxes: all businesses that operate in the US are subject to both federal and state taxes. Depending on your chosen state, you will need to understand the applicable tax laws. For example, sales tax mostly applies to goods and services sold within a state’s border; income tax, property tax and state employer taxes.  

Annual report: Most businesses in the US require filing an annual report with the state’s Secretary of state. The annual report includes all the business information, including its ownership, management and financial status.  

Articles of Incorporation: The articles of incorporation need to be filed by businesses with the state’s Secretary of state. Information in the incorporation articles includes the company name and address, objectives and ownership structure.

Registered Agent: A registered agent is a person or entity designated to receive official legal documents on behalf of a business entity. Almost all states require a registered agent located in the state of the company incorporation.

Conclusion

Most businesses, especially small businesses, can capitalize on the various available forms of accessing the US market to help it expand. Similarly, a foreign company can access the market in the United States by opening a subsidiary in the United States. Another way of setting up a company in the US as a non-resident is in the form of an offshore company, which may be considered the best option for certain individuals or businesses, particularly those with international operations or assets. 

However, it is essential to note that offshore companies may be subject to various regulations and laws and require additional reporting or compliance requirements. You may need a professional such as a lawyer and a tax guide to give you insight into these requirements. Therefore the most effective way to access this market is through a US company, which can expose the business to the world’s largest and most integrated national market while at the same time paying the lowest tax rate.