In 2022, the US foreign-born population reached a record of 46.1 million, meaning that immigrants make up almost 15% of the total population. America is a wonderful melting pot of multiple cultures, and that’s what makes this country so great.
Chances are, you’re a foreign-born person yourself, and you might be interested in participating in the economy by creating a company. Is this possible, and what must you do to make it happen?
To find out more, read on. This article will demonstrate how to start a business in the USA for foreigners.
Can a Foreigner Start a Business in the USA?
First, we have to explore if it’s even possible for foreigners to start a business in the US. The answer is yes!
Also, the good news is that in comparison to other countries, it’s much easier to do so. In many cases, you won’t need a Social Security Number (SSN) or a US visa to become a business owner in the States.
How to Start a Business in the USA for Foreigners
US company formation for non-residents and non-citizens can be a little more difficult, but it’s definitely not impossible. There are several legal, financial, and operational steps, so make sure you follow each one carefully for a smoother process.
Choose the Type of Business Structure
The main business structures available are sole proprietorship, partnership, limited liability company (LLC), and corporation.
Sole proprietorship is the simplest form, which makes it appealing. However, there’s no separation between personal and business liabilities, so this option is a bit risky.
If you don’t want to tackle things solo, then consider a partnership. As it suggests, it involves two or more people, and you have shared responsibilities and profits.
Most entrepreneurs opt for LLCs since their biggest selling point is liability protection. Plus, there’s flexibility in management and other aspects too.
Lastly, corporations provide the most protection from personal liability but they involve more regulations. And typically, you’d have the choice between C-corp or S-corp; however, only citizens and permanent residents (resident aliens) can form S-corporations, so keep that in mind.
Choose a State to Register Your Business
Each state will have its own rules, regulations, and fees regarding businesses, so it’s good to do some research before you pick one. We have a great post about LLC state fees, so that’s a great starting point. However, keep in mind that additional costs and burdens will vary.
In general, some popular states to consider are Delaware, Florida, Nevada, and Wyoming. But usually, it’s easier to register in the state where you plan to operate.
Set Up a US Address and Phone Number
Typically, you’re required to have a US address for business registration, bank accounts, receiving official correspondence, etc. So it’s best if you sort out an American address and phone number before you proceed.
You don’t necessarily have to own or rent the space either. For example, we offer a virtual mailbox service that gives you a real physical address to use. You can have your mail and packages sent there, and we’ll scan, upload, and even forward anything to you.
Register Your Business
After you’ve chosen the state you want to do business in, file the necessary documents with the Secretary of State. These are the articles of organization for LLCs and the articles of incorporation for corporations.
To ensure that things are done correctly, and to make things easier, you can use our business registration service. We’ll handle your paperwork for free; all you have to pay are the state fees, plus any additional services you may want.
If you’d like to register your company in a different state than where you’ll do business, you may need to foreign qualify in that state. The “foreign” here doesn’t refer to your status as a foreigner, but rather, to your company doing business in a different state.
Get an Employer Identification Number (EIN)
To open an American business bank account, you’ll need an EIN. You’ll also use this number for tax purposes.
Fortunately, foreigners don’t have to go through anything different to apply for an EIN with the IRS.
Open an American Business Bank Account
An American business bank account is necessary for managing finances, receiving payments, and establishing credit in the country.
Most banks will require you to be in the US to open an account in person. However, some online services may offer alternatives, so look into those if you aren’t able to be here for the application.
Understand Your US Tax Obligations
American businesses are subject to state and federal taxes; sometimes, you may even have to pay local taxes. To understand your obligations, you should consult with a US-based tax advisor who can tell you all about how to handle your income, payroll, and sales taxes.
Be aware that foreign-owned businesses may also be subject to additional reporting requirements.
Comply With US Immigration Laws
You don’t need to be a US resident to start a business here, but you must comply with the immigration laws if you plan to be in the country. Here are some common visa options:
- E-2 Treaty Investor Visa: for investors from countries with a treaty with the US
- L-1 Visa: for transferring a manager/executive from a foreign branch of your company to the US
- EB-5 Visa: for substantial investment in a new commercial enterprise that creates jobs
Basically, if you want to manage a non-resident LLC from afar, you won’t need a visa. But if you want to be in the country taking on a hands-on role, then you’ll probably have to have a valid work visa.
Obtain the Necessary Licenses and Permits
The types of licenses and permits you’ll need to operate legally will depend on your location, as well as your business type. This is on the local, state, and federal levels.
If you need guidance, check the US Small Business Administration (SBA) website.
Decide Between Employees vs. Contractors
If you’re not going to run the company on your own, then you’ll have to decide between employees vs. contractors for help. Those opting for the former will need to understand American labor laws, including employment contracts, payroll taxes, and benefits.
The latter choice may be simpler and easier, as you can avoid the complexities of US employment regulations.
Set Up Accounting and Record-Keeping
You should implement an accounting system to manage your finances. More importantly, it’ll help ensure compliance with US tax laws.
Consider either using accounting software and/or hiring a US-based accountant, especially if you’re not familiar with the laws and regulations. An accountant can also help you save money in ways you wouldn’t have thought of, so that’s an advantage too.
Protect Your Intellectual Property
If you’re dealing with intellectual property, then register trademarks, patents, and copyright in the country. This may be complicated, depending on what you’re dealing with, so make an appointment with an intellectual property attorney to properly protect your business assets.
Consider Legal and Compliance Issues
One of the most vital things you must do is stay compliant with American business laws. This includes:
- Contract law
- Consumer protection
- Data privacy regulations
Again, it’s worth your time and money to consult with an attorney. That way, you’ll ensure you’re meeting all legal requirements and you won’t risk fines or closure.
Develop a Marketing and Sales Strategy
Now that everything’s set, you’ll want to market your company. Keep in mind that the average consumer is probably very different from that of your home country, so adapt your business model to the US market. Take into account cultural differences, consumer behavior, and your competition.
Use digital marketing to spread the word. Plus, make partnerships and do local networking to build your brand reputation.
Become an Entrepreneur in the US
This guide on how to start a business in the USA for foreigners should give you a fantastic start. While this issue can be complex, if you do proper planning and get professional guidance, you can successfully navigate the process.
So if you were thinking about becoming a business owner in the US, it’s certainly doable. Just don’t try to take any shortcuts and always double-check that you’re fully compliant and legal.
Sign up with Business Anywhere if you’d like assistance starting an LLC or corporation.
We can set your LLC up for FREE (just pay the state fees!) and you’ll see results fast.
