USA is the land of dreams and opportunities. It has the most prosperous economy the world has seen to this day. Moreover, the USA is home to a strong consumer market, as people in the USA spend generously on services. These factors make it a top choice for business entrepreneurs. This is coupled with a stable economic environment and easy-to-follow procedures. The best part? You don’t need to be a citizen or resident to start a business in the USA.
Anyone can establish a company, ensuring protection for their interests and assets within the USA.
Steps for starting a company in the USA for non-residents
This guide elaborates on the legal and practical steps to establish a company in the USA. It’s designed to help non-residents understand the different types of business entities and how to register a company online at a minimal cost.
1. Choosing the Business Type and State
Choosing the appropriate state primarily depends on your company’s purpose and its legal structure. For instance, if you plan to open a branch of your parent company in the USA or establish a new entity employing staff, it’s best to register in one of the major states to reach as many clients as possible.
On the other hand, if your goal is to set up a legal entity to protect your commercial interests as an online service provider or other businesses not requiring a physical presence or being in the USA, an LLC (Limited Liability Company) would be a preferred choice due to the simplicity of the process.
To establish an LLC in the USA, choose a state without a state tax, so you only need to pay the federal tax, saving money in the process. Some states like New York and California have high tax rates.
The best states to create an LLC are Delaware, Wyoming, and Nevada as they don’t impose taxes on registered companies not operating within their borders. Additionally, these states have a swift bureaucratic system and reasonable registration fees.
2. Choosing a Company Name
Naturally, the classic advice when creating a brand is that the name should be appealing and unique. Moreover, there are several conditions to keep in mind:
- The company name must include the phrase “Limited Liability Company” or its abbreviation, “LLC.”
- The name should not contain any word or phrase that associates it with any government agency.
- Some words are restricted and cannot be used without additional paperwork, or the involvement of a person with a specific professional status as a partner (e.g., “doctor,” “lawyer,” “university”).
- Ensure the domain name (URL) associated with your company’s name is available and register its rights in your name.
Try this free business name search service.
3. Appointing a Registered Agent
The registered agent serves as a liaison between you and the state authorities. They handle all registration stages and receive legal notifications on your behalf, such as notices and taxes.
Working with a company to provide a registered agent will typically cost you a small fee, around $100 annually.
However, there are specific requirements that your agent should fulfill to ensure your company’s interests:
- They must reside in the same state or be licensed to conduct activities within that state’s jurisdiction.
- They must have an official office and be available during business hours to receive mail at that address, as some transactions require signatures.
4. Submitting the Formation Document to State Authorities
The next step in establishing your legal entity is to fill out the company formation document, known as the “Articles of Organization.” In some states, it might have different names, such as the “Certificate of Formation.” Also, remember to review your chosen company name’s registration application on the governmental websites responsible for business name deposits to ensure it’s available.
To access the document, you can visit official websites. here is Wyoming website.
The required information varies by state, but typically includes the following details:
- Company name.
- Company’s main address.
- The purpose of establishing the company.
- Management and administration method.
- Contact information for the registered agent.
- Duration of the LLC.
It’s essential to ensure that the information you provide in the document is accurate before submitting it to the state authorities for review and evaluation.
Additionally, you’ll need to pay a registration fee that varies depending on the state of registration. These fees are often not included in the company formation packages offered by certified service providers.
After completing the application form, you’ll be asked to sign the document online or print and mail it to the designated address for submissions. Once your application is approved, the state will issue a certificate confirming your company’s official registration, which you’ll need in the subsequent steps.
4. Creating an Operating Agreement
The Operating Agreement, also known as the “LLC OPERATING AGREEMENT,” organizes all the financial, legal rights, and administrative details for the contributing members. This document governs each party’s contribution along with the profit-sharing method, thereby protecting your rights in case of emerging problems or future legal disputes, it is not mandatory in all states. However, it’s advisable to have it, even if you’re the sole member of the company.
As an entrepreneur and investor, you might bring on a partner or face unexpected legal challenges in the future. Therefore, the Operating Agreement is essential to safeguard your rights and acts as a robust defense for your company against opportunists and fraudsters.
5. Obtaining an Employer Identification Number (EIN)
The Employer Identification Number (EIN) is the company’s tax identification number. You can obtain EIN online by filling out the form on the U.S.
Treasury Department’s website. If you prefer paper applications, you can request the tax ID using fax at the listed addresses, and it may take about a week to get a response from the Tax Directorate.
You can also apply for an EIN by mail, but it could take longer, around 4 to 5 weeks, to receive an official response.
6. Obtaining a Genuine U.S. Mailing Address
Getting a real mailing address is essential for opening a bank account or registering your company in the United States, and without it, you won’t be able to move forward. You can secure a genuine address by renting an official headquarters for your company within the U.S. However, this option may not be suitable for LLCs (Limited Liability Companies) as it might not be cost-effective.
You mainly need a genuine mailing address, which can be easily secured, thus saving on the overhead of a physical location. The best solution is to utilize companies that provide genuine U.S. mailing address services at reasonable rates. These companies receive letters and packages, then scan the letters and email them to the owner. They also handle forwarding packages to any address worldwide, which can be changed per package if needed.
7. Opening a Bank Account
Banking policies in the U.S. are quite stringent. Therefore, you cannot open a full-service bank account in America without personally visiting a branch. However, this shouldn’t be an issue if you plan on traveling to the U.S.
You can legally bypass this obstacle by opening a bank account under your LLC’s name, ensuring access to all essential banking services. Also, having a U.S. account allows you to deal with U.S. payment gateways, managing funds from your clients and making payments with lower fees.
Owning a bank account linked to the company enables you to transfer money directly to your home country without facing the complexities of administrative procedures or suspicions of money laundering.
8. Tax Filing
The United States is among the most proactive countries in combating money laundering and fighting tax evasion.
If you live or operate a business in the U.S., you should fear nothing in business but the IRS.
The U.S. Internal Revenue Service (IRS) regulates taxes and specific rules for Limited Liability Companies (LLC) based on the number of members.
You can check this out to determine the tax form suitable for your business type. I’d like to emphasize the importance of filling out the form accurately before your tax declaration deadline to avoid a failure-to-file penalty.
For instance, with the tax form Form 5472, the penalty can be as much as $25,000, not including fines for each period of delay. It’s worth noting that the U.S. tax system is very fair and efficient. It also boasts good digital mechanisms that allow all transactions and payments to be made even without being present within U.S. territory.
9. Consulting a Law Firm or Accredited Service
Now that we have familiarized ourselves with the procedures required to set up a company in the U.S., it’s time to share a golden tip that will save you time and prevent unforeseen issues.
If you’re looking to establish an LLC to gain credibility and facilitate your international transactions easily, I recommend dealing with an accredited service firm like Firstabse. Their team will assist you in preparing and verifying all documents and provide you with the necessary consultation from day one until you receive the company’s paperwork in the mail.
The Types of Business Entities in the USA for Non-Resident
The laws in the US categorize businesses into various types, each governed by different regulations. Therefore, as a foreigner looking to establish a company in America, it’s essential to understand these distinctions. Additionally, it’s crucial to be familiar with both federal laws and the laws of the state where you will register your business, as this will help you avoid administrative hurdles and legal issues.
There are many types of business entities, but in this article, I’ll discuss the two types that are most relevant to non-US citizens looking to set up a company.
Limited Liability Companies (LLC)
The Limited Liability Company (LLC) model was first introduced in 1977 by the state of Wyoming, and now it’s recognized by all states. This structure combines elements of corporations and partnerships, offering limited liability for everyone involved.
The main similarity between an LLC and a C-Corporation is the limited liability feature, and it shares with partnerships that it’s subject to income tax laws.
LLCs are known for their flexibility, making them an optimal choice for businesses with a single owner, especially if that owner is a foreign resident who doesn’t need to be physically present in the US to conduct business.
C-Corporations
C-Corporations, often referred to as C Corps, are entities that are taxed separately from their owners under federal income tax law.
The C Corporation is the most common organizational structure among medium and large-sized companies, as it ensures some federal tax benefits with unlimited growth potentials. Some of its main features are:
- A distinct legal entity.
- Can accommodate an unlimited number of shareholders.
- Directors or shareholders don’t need to be U.S. citizens.
- Capital can be increased by selling shares.
- Easy transfer of shares.
- Taxes are paid at the corporate level.
- Might be subject to more government oversight because they benefit from certain tax advantages.
- Its establishment can be costly due to high fees.
Advantages of Establishing a Company in the U.S.
Businessmen aren’t rushing to set up their companies in the U.S. for no reason, but rather to benefit from numerous advantages, including:
- Unrestricted access to the US market.
- Flexible administrative and legal procedures.
- Enhancing the reputation and credibility of the brand.
- Tax benefits offered to foreign investors.
- The ability to open a full-service US bank account.
- The opportunity to apply for financing loans.
- Enabling global payment gateways like Stripe, 2Checkout, and Authorize.
- Simplified procedures for obtaining a U.S. business visa.
The Cost of Establishing a Company in the U.S.?
Most first-time entrepreneurs looking to establish a U.S. company fall into the trap of trusting the attractive prices of service offices. These prices are only meant to lure clients and then later surprise them with additional fees or halt the company’s progress.
Today, we will only address the costs of establishing a U.S. LLC, which is often shrouded in mystery and misconceptions in advertisements. Many offices promote company formation services for less than $200 but avoid mentioning the final fees or explaining the real-world company operating requirements.
Here are the primary expenses for establishing and operating a company in the United States:
- Office fees, starting around $200 but can escalate to thousands when engaging a law firm.
- Fixed state fees ranging from $40 to $500 annually, depending on the state. For example, Wyoming charges $100 for registration and $60 for annual renewal, whereas Delaware charges $90 for registration and $300 annually for renewal.
- Issuance of an Employer Identification Number (EIN) is free. However, non-resident foreigners can only apply for it through a registered agent.
- Costs for drafting the Operating Agreement and other necessary documents range between $200 and $600, depending on the service provider.
- Accounting fees for the company, which start at least at $125 per hour when hiring a certified accountant, depending on the required working hours.
In summary, the overall cost to establish and operate a U.S. company typically ranges from approximately $2000 to about $3000 at the very least when dealing with a Registered Agent. This cost can double when engaging a specialized law firm.
Many digital nomads may find the costs of starting a business daunting. This is precisely why numerous startups specialize in facilitating LLC creation for individuals like us.
I chose Firstbase because of their seamless process and affordable pricing. Now, as my company enters its third year, my annual expenses remain under $1000. It’s an investment well worth considering!
