How to Set Up a Company in USA

Starting a business in the United States as a foreign entrepreneur is exciting and rewarding. The U.S. is very welcoming to foreign businesses. You can start any business type, like sole proprietorships, partnerships, LLCs, or C corporations.

Opening a business in the U.S. is simple, even for those from abroad. If you have a green card, you can start a business just like a U.S. citizen. But, you need to know the legal rules, tax issues, and visa options for your venture.

The U.S. is a great place for foreign entrepreneurs to start a business. It has a strong market and a stable legal system. Many non-U.S. citizens start businesses here, like sole proprietorships, partnerships, LLCs, or C corporations.

LLCs are popular for foreign entrepreneurs because they are flexible and avoid double taxation. C corporations are good for attracting investors, making it easier to get venture capital. Your choice depends on your business goals, investment needs, and tax plans.

To start a business in the U.S. as a foreigner, you must understand the legal, tax, and visa aspects. This guide will help you set up your American venture. We’ll cover choosing a business idea, visa requirements, and getting the right licenses and permits.

Open a business bank account

Opening a business bank account is key for foreign entrepreneurs starting in the U.S. It’s vital to find a bank that offers good services at a fair price. Fees and minimum balances can differ a lot between banks.

When picking a business bank account, think about your needs. Look at transaction volume, must-have features like bill pay, and fees for extra transactions and ATM use. For example, LendingClub Tailored Checking’s top account refunds all ATM fees worldwide.

To open a business bank account, foreign nationals need to show ID for both the owner and the business. This includes a driver’s licence, passport, business licence, and partnership agreements. Some banks might ask for a face-to-face meeting, but others might not if they have an office in your country.

Business bank accounts have many benefits. They help keep personal and business money separate, offer protection, make tax filing easier, and help build a business credit history. But, banks might have specific rules, like only allowing certain types of businesses.

Mercury and Brex are two banks that let individuals outside the U.S. open business accounts. But, your business must operate in the U.S. Banks also have rules against certain businesses, like those in illegal gambling, pornography, or firearms.

Register your business

Foreign entrepreneurs starting a business in the U.S. must pick a legal structure. The main choices are a C Corporation or a Limited Liability Company (LLC). Choosing the right structure is key, as it impacts liability, taxes, and funding.

LLCs give personal liability protection and pass-through taxes, appealing to many small businesses. They offer flexibility in management and are simpler to manage than corporations. Yet, LLCs might have a short life in some states and face self-employment taxes.

C Corporations, however, offer strong liability protection and allow stock sales. They’re good for businesses looking to grow and raise capital. But, they face double taxation and need a formal setup and detailed records.

After picking your structure, you must register your business at the state level. States like Delaware are known for being business-friendly. It’s crucial to look into each state’s rules and benefits to find the best place for your company.

Apply for licenses and permits

Starting a business in the United States as a foreign entrepreneur requires getting the right licenses and permits. The rules change based on the business type and location. Each state and local area has its own set of laws.

It’s important to do your research to follow all state and local rules. You might need a general business license and specific ones for your industry. For instance, a restaurant needs a food service license, health permit, and liquor license if it serves alcohol.

The cost of licenses and permits can be from $40 to $300 or more. Specialised licenses are pricier and might need extra paperwork. But, these costs are usually tax-deductible and are a must for starting your business.

Not getting the right licenses and permits can lead to big problems. You might face:

• Fines
• The government shutting down your business
• Legal trouble, including jail time if you deliberately avoided getting licenses

To avoid these issues and start your business smoothly, look into the licensing and permit needs for your industry and area. Talk to local business groups, chambers of commerce, and experts. They can help you understand the rules and keep your business in line with them.

Obtain an EIN

As a foreign entrepreneur starting a business in the United States, getting an Employer Identification Number (EIN) is key. An EIN, or Federal Employer Identification Number (FEIN), is a unique nine-digit number from the Internal Revenue Service (IRS). It’s given to businesses in the U.S.

This number is vital for many business tasks. It’s needed for hiring employees, paying taxes, and opening bank accounts. To get an EIN, you’ll need your business documents and an Individual Taxpayer Identification Number (ITIN).

The best way to apply for an EIN is online. The IRS’s online application is available Monday to Friday, 7 a.m. to 10 p.m. Eastern Time. It’s easy to use and gives you an EIN right away if approved. But, remember, the application will time out after 15 minutes if you’re not active.

Businesses can only apply for one EIN per day per responsible person.

You can also apply by fax or mail. Fax applications take four business days, and you’ll get your EIN back by fax if you give your fax number. Mail applications take up to four weeks, and your EIN will be sent to you by mail.

International applicants can call 267-941-1099 for their EIN. This number is not toll-free and is available Monday to Friday. Third-party designees need permission from the taxpayer. Their permission only lasts for newly assigned EINs until they’re released.

Starting 1 January 2024, some businesses must report who owns them to FinCEN. This is part of new rules on beneficial ownership reporting.

Write your business plan

Writing a detailed business plan is key for foreign entrepreneurs starting a business in the U.S. A good business plan acts as a guide, outlining your market research, financial forecasts, marketing strategy, and operational plan. Studies show that companies with a business plan grow 30% faster than those without one.

Your plan should be 15-20 pages long. It should cover your products or services, target customers, pricing, market size, marketing plans, and competition analysis. Also, include your management team’s experience, revenue projections, costs, profit expectations, and growth potential. The executive summary should give a brief overview of your business, goals, vision, and resources needed.

Doing thorough market research is vital to understand your industry and stand out from competitors. Summarize your research in your plan, focusing on what makes your business unique and how you’ll position it in the market.

The financial section should have income or profit and loss statements, a balance sheet, and a cash flow statement. Include a financial forecast for three to five years, using current or projected financial statements. It’s important to be accurate with your financial projections, so study past financial statements carefully.

Investors often trust the team behind a business more than the idea itself. They believe talented and experienced people can make a sound business idea work. Include bios of your management team, showcasing their relevant experience and expertise.

Startups may need to update their business plan often as they refine their target customers and products or services. More established companies should review their plans every few years to stay aligned with their strategies.

Choose your business name

Picking the right business name is key for foreign entrepreneurs in the UK. It should be easy to remember and say. Names like Apple, Nike, and Pepsi are good examples.

Make sure your LLC name follows state rules. You must include “limited liability company” or similar phrases. Some words, like “Insurance”, might need special approval.

Check if your LLC name is free on the state’s website or by contacting the filing office. You can reserve the name before filing to keep it safe. If you want to use a different name, you need a “doing business as” (DBA) registration. Not publishing DBA filings can make them invalid in some states.

Try to find a name that stands out but also makes sense. A name that’s easy to find online is a plus. Avoid names that might hold you back from growing. Also, do a trademark search to make sure your name is yours alone.

Choosing a registered agent

Starting a business in the U.S. as a foreigner means you need a registered agent. This person receives legal documents and government mail for your company. They must have a real address in the state where your business is and be available during business hours.

Choosing the right registered agent is key to avoiding legal problems. Here are some important things to think about:

• Make sure the agent has a real address in the state where your business is (P.O. boxes are not allowed)
• Check if the agent is available during business hours to get important documents
• Look for someone who knows state laws well and answers questions quickly
• Find a provider with good reviews and a solid reputation
• Compare prices, payment options, and any discounts for long-term or bundled services

It might seem smart to use someone close to your business as the registered agent. But, it adds extra work and risks. Many foreign business owners choose third-party services. These services offer help with staying compliant, monitoring your business, and filing with the state.

Not having or keeping a registered agent can lead to big problems. You could face penalties, have your business dissolved, or lose the right to do business in other states. By picking a trustworthy and experienced service, you get important documents on time. This helps keep your business private and lets you focus on growing in the U.S.

Fund your business

Getting enough money to start a business in the UK is key for foreign entrepreneurs. You can get money from personal savings, investors, loans, and grants. It’s important to look at all options carefully to find the best fit for your business.

Government grants are a good funding source. Since 2006, the National Association for the Self-Employed has given out $650,000 in grants. The UK government also has grants for specific industries through the Small Business Administration.

The Start Up Loan Scheme offers funding of £500 to £25,000. Loans have a 6% interest rate and can be repaid over five years.

Other funding options include fintech lenders like Kabbage and OnDeck. They look at your online sales and revenue. Business credit cards are also flexible for borrowing, needing a good personal credit score.

Investors can also help fund your business. Angel investors are high-net-worth individuals who invest in startups. Venture capital firms offer bigger investments but might have a say in how you run your business. Crowdfunding is also a way to get funding.

To get funding, you need a solid business plan. It should explain your vision, goals, and financial plans. This will attract investors and show they can trust your business idea.

Get business insurance

Starting a business in the US as a foreign entrepreneur is exciting. But, it’s vital to protect your business with the right insurance. Insurance covers your company’s assets and finances from risks and liabilities. An experienced insurance agent can help you find the right coverage for your business.

Some key types of insurance to think about include:

• General liability insurance: Protects your business from claims of bodily injury or property damage that may occur on your premises.
• Professional liability insurance: Covers legal costs and damages arising from negligence or errors in your professional services.
• Business income coverage: Helps replace lost income due to covered property damage like fires, storms, or theft.
• Commercial property insurance: Safeguards owned or rented buildings and equipment used for business operations.
• Workers’ compensation insurance: Required by most states for businesses with employees to provide benefits in case of work-related injuries or illnesses.

You might also need extra coverage like commercial auto insurance, data breach insurance, or employment practices liability insurance. A Business Owner’s Policy (BOP) is a great option. It combines general liability, commercial property, and business income insurance into one package.

The cost of business insurance varies a lot. It depends on your industry, business size, and coverage needs. Starting an insurance business might need £40,000 to £400,000 or more. The right insurance helps reduce risks and lets you focus on growing your business in the US.

Pick your business location

Choosing the right location for your business is key to its success. As a foreign entrepreneur in the U.S., think about zoning laws, accessibility, demographics, and competition. These factors are crucial when picking a spot.

Different states in the USA have different tax rates and rules for starting a business. Some states have special business types, like benefit corporations. Others might be more open to new ideas. Also, local rules can limit what businesses can operate in certain areas. So, it’s important to check these rules before you decide.

• Rent and maintenance costs
• Parking and foot traffic
• Other businesses nearby and what you need
• Corporate tax rates, especially for big ventures or those across state lines
• Incorporation rules, fees, and regulations in each state

Demographics are also key. Urban areas might be better for service businesses targeting professionals. Other places might suit different customers. Use sites like City-Data, the Census Bureau, and Proximity to find out more about demographics.

When picking a commercial property, look at crime rates, property condition, and parking. Also, check how close it is to competitors and traffic. Talk to local business groups, the Chamber of Commerce, city offices, and SCORE chapters for more information before you choose.

Choosing a state

Starting a business in the United States as a foreign entrepreneur means picking a state to register in. Each state has its own rules, taxes, fees, and reporting needs. It’s key to research and compare these to find the best fit for your business.

States like Delaware, Nevada, and Florida are known for being business-friendly. Delaware, for example, has easy corporate laws and no state income tax for non-residents. Nevada has no state corporate income tax and no fees on corporate shares.

But, think about the long-term effects of your choice. If you pick a state like Delaware or Nevada but work elsewhere, you’ll need to qualify your business in those states too. This adds to your costs and compliance needs.

When picking a state, look at:

• Formation and annual fees
• Tax obligations and incentives
• Liability protection for owners
• Management flexibility and statutory options
• Compliance requirements and reporting obligations

The best state for your business depends on your needs, industry, and plans. Getting advice from legal and financial experts can guide you. They help ensure your choice supports your business’s success in the United States.

Determine your business concept

Starting a business in the U.S. as a foreigner requires a clear business concept. You need to know your target market, what makes your product unique, and how you stand out. The National Federation of Independent Business Education Foundation (NFIB) says only 40% of small businesses make a profit. Another 30% just break even. So, understanding the demand for your product or service is key.

Start with a brief statement about your business. It should be just 1-2 sentences. This statement should explain the problems your product or service solves. Do thorough market research to find out who your customers are and what they need. Figure out how you’ll make money and set goals for the short and long term.

Think about how lifestyle changes or new market needs can inspire your business. Look for gaps in the market where you can offer something better. Let your hobbies and interests guide your business idea. Passion can help you succeed in sales and overcome obstacles.

Study your competitors to plan how you can stand out. Look at their strengths, weaknesses, revenue, and market share. The Internet is vital for modern businesses, offering lower costs and faster start-ups. But, it also means more competition and the need for good digital marketing.

In 2023, a record 5.5 million new businesses were started in the USA, a 20% increase from the year before. The West and South regions saw the biggest growth. While this is good news, many new businesses fail in the first few years. So, a well-thought-out business concept is crucial for success in the U.S. as a foreigner.

Get federal and state tax IDs

Starting a business in the United States as a foreign entrepreneur means you need federal and state tax IDs. These are key for legal operation. They’re used for taxes, banking, credit, and sometimes for licenses or permits. Here’s how to get your federal and state tax IDs.

The federal tax ID, or Employer Identification Number (EIN), is a nine-digit number from the IRS. It’s like a Social Security number for businesses. Most businesses need an EIN, like corporations and partnerships. But, single-member LLCs and sole proprietors might use their Social Security number for taxes, unless they have employees.

You can apply for an EIN online, by fax, mail, or phone. The online method is the fastest, giving you the EIN right away. Mailing it takes longer, about four to six weeks.

After getting your federal tax ID, you also need a state tax ID. This is for state taxes like sales and income tax. You’ll need it for state payroll returns too.

Businesses must file annual income tax returns. Employers also have to pay taxes like Social Security and Medicare. Some businesses might face federal excise taxes, like taxes on certain products.

Getting your federal and state tax IDs and knowing your tax duties helps you run your business legally. This way, you avoid penalties and stay in compliance with U.S. laws.

Obtain a taxpayer identification number

Foreign entrepreneurs without a Social Security Number (SSN) need an Individual Taxpayer Identification Number (ITIN) to file taxes in the U.S. The IRS issues the ITIN. You get it by submitting IRS Form W-7 with the right documents. An ITIN is key for taxes and also for opening bank accounts and getting business licences.

To get an ITIN, fill out Form W-7 and attach documents like a passport or birth certificate. The process takes weeks. So, apply early to meet tax filing deadlines.

Businesses might also need an Employer Identification Number (EIN). You need an EIN if your business is a corporation or partnership. This includes LLCs with more than one member, if you hire employees, or if you file certain tax returns. You can get an EIN online in about 10 minutes from the IRS website.

It’s important to avoid mistakes when applying for a taxpayer ID. Don’t apply for multiple EINs for the same business unless it’s changed a lot. Don’t give wrong info, as it can slow things down. And make sure you have the right person’s permission if you’re letting someone else apply for an EIN for you.

Getting the right taxpayer ID, like an ITIN, SSN, or EIN, is key for your business in the U.S. It helps you follow IRS rules. This way, you can run your business smoothly and deal with U.S. taxes well.

Navigating Business Visa Requirements

If you’re a foreign entrepreneur wanting to start a business in the United States, knowing your visa options is key. The E-2, EB-5, and L-1 visas are popular for entrepreneurs. Each has its own rules and application steps, making it hard to navigate alone.

Types of Business Visas

The E-2 visa is great for entrepreneurs from treaty countries. It needs a big investment of $250,000 to $300,000 USD and you must own at least 50% of the business. The EB-5 visa requires a bigger investment of $800,000 USD for certain areas or $1,050,000 USD elsewhere. You also need to create at least 10 jobs for two years.

Other options include the L-1A visa for new offices, the O-1 visa for those with extraordinary ability, and the EB-1A visa for international acclaim.

Eligibility and Application Process

Each visa has its own rules and application steps. For example, the E-2 visa needs you to fill out Form DS-160 online and have an interview at the US embassy. The EB-5 visa requires a $3,675 USD fee and other costs like the $1,000 USD EB-5 Integrity Fund fee.

Because the visa system is complex, working with an experienced immigration attorney is wise. They can help you through the process and ensure your business in the United States goes smoothly.

Contact us

You can find all the information you need on new company formations in the UK by visiting Start Company Formations. The platform offers company registration services on just about every continent and country on the planet and can complete your company setup process in no time.