Things to consider while setting up a business in the USA as a Non-Resident

Numerous popular ex-pat destinations offer reduced taxes and living expenses compared to countries such as the United States. This indicates that if you are setting up a business in the USA, your capital will go much further. Moving to a foreign nation can be an exciting prospect for entrepreneurs, but the ability to start setting up a business in the USA makes it much better.

Do you aspire to set up a business in the United States and live the American dream? New York eatery, San Francisco bakery, Los Angeles ready-to-wear boutique, Miami start-up… Due to its international influence, vitality, and overall attractiveness, the United States is ripe with prospects for international entrepreneurs.

As a non-resident seeking to set up a business in the United States, you must complete additional formalities so that you navigate through the potential challenges effectively. For instance, there are greater income tax concerns for non-residents who wish to export their income from the United States. Obtaining a valid US work visa and creating a bank account are further obstacles. Each of these subjects is quite complex. In summary, you must not only develop a viable business strategy, but also ensure that it fits inside the United States’ tax, legal, and economic framework.

Well, let us help you understand why and how you should set up a business in the USA.

Why you should set up a business in the USA?

  • There is a strong spirit of entrepreneurship. Uncompromisingly business-friendly, the United States is THE destination of choice for entrepreneurs. Regardless of your endeavor, the country delivers a prosperous, innovative, and dynamic commercial climate. According to a French study that analyzed the entrepreneurial ecosystems of 75 cities around the world, New York, San Francisco, Los Angeles, Boston, and Chicago are among the top 10 enterprising cities in the world.
  • Setting up a business in the USA is quick and simple. Even for a non-citizen, setting up a business in the USA is typically straightforward and quick. However, this may differ according to the legal status chosen. In some states, taxation is especially favorable for corporations.
  • The market is enormous. Setting up a business in the USA gives you access to over 329.5 million prospective customers across 50 states and 9.83 million square kilometers. You will benefit from a vast network of partners, a qualified staff, and a variety of opportunities in a vast array of high-performance company sectors.
  • The economy is robust and steady. As the second largest economy in the world after China in 2021, the United States offers a stable, solid, and reassuring market for international investors. In addition, the dollar is a globally respected and robust currency.
  • A launching pad for global growth. Due to its worldwide reach and cultural richness, the nation also provides a great launching pad for global development.
  • What are the growth industries in America?

There are numerous economic sectors in the United States, including:

  • Biotechnology
  • Fintech
  • Automotive industry
  • Accounting and Taxation
  • Real estate
  • Agribusiness
  • Agriculture
  • Telecommunications
  • Digital
  • Aeronautics
  • Clean energy, etc

However, the most profitable industries depend primarily on the location of your business. You should therefore investigate the potential options in the state or location where you intend to set up a business in the USA.

How to go about setting up a business in the USA?

1. Obtain all necessary federal approvals.

Foreigners do not typically require a green card to operate a corporation or be identified as a corporate officer or director of a U.S. company, as long as they pay taxes. To work in a business in which they have invested, individuals must obtain U.S. government approval through either an E-2 Treaty Investor Visa or an EB-5 Visa.

2. Select the type of business entity.

There are limitations on the business structures that overseas entrepreneurs may establish for their U.S. firms. Non-residents cannot form an S Corporation, as each shareholder must be a citizen or permanent resident of the United States. C Corporations and Limited Liability Companies (LLCs) are typically chosen as business entity forms because they offer personal liability protection for business owners and some tax flexibility. An entrepreneur must file business registration paperwork in the state(s) where the business will be operated to form either entity.

3. Valid Work Visa Essentials

If you are planning to manage an LLC from within the States, you need to have a valid work visa.

Here, if you have an existing business outside the US that has been functional for at least twelve months having four or more employees, you should have an L-1A visa.

However, if this is not the case, and your business has not been there for twelve months and you have less than four employees, you will need to have an E-2 visa. This visa is also apt for those who are entrepreneurs. Remember that this visa remains valid for 2 years after which your business activity will be reviewed.

4. Location Consideration

A key element to keep in mind while registering your company is the actual location since each state encompasses different legislations that affect taxes and profits.

Currently, Florida and Delaware are the two most lucrative states that you can consider for foreign-owned or domestic businesses because they offer immense advantages compared to other US states.

5. Obtain a Tax ID (Employer Identification Number)

All U.S. businesses are required by the IRS to have a Taxpayer Identification Number (TIN). For companies and LLCs, an EIN is required. Since mid-2019, only individuals possessing an SSN (Social Security Number) or ITIN will be permitted to be the “responsible party” on EIN applications. Existing EINs cannot be used to apply for further EINs.

Due to the fact that foreign entrepreneurs lack Social Security numbers, they can apply for an Individual Taxpayer Identification Number instead (ITIN). The IRS form (W-7) demands identification proof (such as a driver’s license or birth certificate) and proof of a relationship to a foreign jurisdiction (e.g., a passport). Foreign business owners can request an EIN using Form SS-4 after receiving an ITIN.

6. Open an American business bank account.

To establish a U.S.-based entity, you must open a U.S.-based bank account. The USA Patriot Act has made it more difficult for foreigners to open bank accounts in the United States, although it is still possible with appropriate papers and identity. Typically, the essential elements consist of:

  • Documents containing a corporation’s official U.S. business address
  • ITIN and EIN numbers
  • Passport
  • Obtain the necessary licenses and permits.

Non-citizen-owned businesses must apply for licenses and permissions relevant to their industry, business activities, and operating areas, just like any other business. It is essential to verify with the Secretary of State, county clerk, and local government authorities to establish which regulations apply to your business.

7. Maintain Awareness of Ongoing Compliance Tasks.

Depending on the corporate type and the location of the business, entrepreneurs must complete several compliance procedures. For instance, they must timely file and pay taxes. In addition, they may be required to file an annual report with the state, renew licenses and permits, and hold shareholder or member meetings. Failure to comply with reporting laws and pay due fees can result in fines, penalties, loss of personal liability protection for business owners, and possibly suspension or dissolution of the business.

As a non-citizen, you will face additional responsibilities and potential obstacles. However, these hurdles are not insurmountable if you seek the assistance of dependable professionals to guide you through the procedure.

Thus, we urge you to seek the assistance of accountants and attorneys who have experience assisting foreigners to establish enterprises in the United States. In addition, SCORE mentors, who have knowledge and experience with launching firms in a diverse array of industries, can offer invaluable advice as you explore entrepreneurship in this country of opportunity.

8. Hire a CPA Firm

Setting up a business in the USA can seem to be very confusing and difficult. However, hiring a CPA firm to handle your incorporation procedures will not just simplify your work but will also allow you to seek additional guidance for the same and help you understand the best solutions for you.

Which US states should you consider setting your business up in?

  1. South Dakota
  2. Massachusetts
  3. Washington
  4. Colorado
  5. Idaho
  6. Delaware
  7. Utah
  8. Georgia
  9. Rhode Island

As we read throughout the blog, Setting up a business in the USA constitutes a lot of steps and things to keep in mind. Hence naturally, Setting up a business in the USA can seem to be an overwhelming task but it won’t be so if you have a CPA firm by your side!