The USA is still considered as a land of opportunity. Many people from around the world want to live their American dream and become rich and successful. I personally believe that the US offers uncountable opportunities. The United States of America is the most populated English speaking country and has one of the biggest economy in the world. Almost anybody has a chance to start a business here even he or she is not a US citizen or resident! It means you can start a business as a non-resident or foreigner.
Even anyone can start and incorporate the business, and manage the company in the US. It doesn’t mean that you can permanently and legally live in the USA! Be aware you cannot actively work or be employed in your company unless you don’t have a proper visa. If you are interested in obtaining the proper visa please visit the official website. Probably the most popular visa for entrepreneurs is an E-2 visa. I can only recommend you search on Google, there are many articles about that. I am not a lawyer and everything I write here are my personal experiences. Not legal advice.
Who is a foreigner?
First of all, I want to explain who I consider as a foreigner. It is important to understand and avoid misunderstandings. For me, a foreigner is someone who is not an American citizen or American resident (green card holder) Sometimes I am going to use term non-resident. If you have a green card you can legally work in the USA and you have more options when it comes to starting a business.
In this article, we are going to mainly focus on the process of incorporating your first business in the USA as a non-resident. This post is primarily for foreigners however I hope it can also help domestic readers who are interested in forming their first business. I chose the business structure called LLC because I have personal experience with that. However, we will lightly cover both business entities that are suitable for foreign citizens.
1. Choose the right business structure
Types of Business Entities in the USA
There are basically four main types of business entities in the US.
- Sole Proprietorship
- Partnership
- LLC
- Corporation (INC)
As a non-citizen, you have probably only two possible options. It is an LLC and a corporation. If you are an American citizen or you have a green card you can also consider become sole proprietorship or be involved in some partnership. As a foreigner, you cannot start a business as a sole proprietorship or be part of some partnership. If you want to know more about all these types read this article. Now let’s introduce the two most popular types of business structures you can form and own as a non-American citizen.
LLC
Limited Liability Company is probably more simple than a corporation when it comes to management structure. Technically is LLC not a corporation but has similar advantages as a corporation. The biggest one is that members are protected from personal liability for business actions and decisions. LLC has typically one owner he or she is called a member or more owners that are called members.
How we call owners?
- Member – owner
- Members – more co-owners
Each member owns a certain percentage of interest in the LLC and the profit can be distributed in any way the members want to. A very important fact is there is no required annual meeting of members which saves your time and money.
Who manages the LLC?
Member or members typically manage the LLC. There is another option though. You can also hire someone else and then we use the term manager or group of managers. However, also a member can be a manager and you will choose this when you will incorporating your business. I suggest you choose that your LLC will be managed by the manager especially when you are a non-American resident.
Corporation
Corporation has very similar legal protection but the main difference is that owners are called shareholders because corporation issues shares and each shareholder owns the number of shares that shows percentages of his or her ownership. If you consider later sell some shares to investors in order to gain financial support for your business or startup then it is the right decision because most of the venture capitalists invest only in corporations. However, if you plan to own and manage your business by yourself than LLC is better option. Who manages the Corporation? Boards of directors
Another difference is that every corporation is required to hold annual shareholders meetings and this will increase your annual costs.
Tip: Form an LLC if you are a business beginner, startup, online business or you are starting from scratch. If you focus with your business to venture investors then form a corporation
2. Find the best incorporation service
When I was younger I tried to do everything by myself. It’s good to save some money and to know what you pay for and have some general overview but sometimes it is better to use some professionals instead of wasting time especially in cases when you later realize that you cannot do it by yourself for legal reasons. My advice is to put more energy into your business and earning money instead of wasting time. However, still stay smart and don’t waste money without reason. You must find some balance!
TIP:
Form an LLC if you are a business beginner, startup, online business or you are starting from scratch. If you focus with your business to venture investors then form a corporation
3. Select state for your business
The important question is what state should I choose for my business. Generally, the best advice is to choose the state you plan to be present with your business. For example, if you want to open a store in New York City then you should incorporate your LLC in the state of New York, in this case, you actually have to. But what if your business will be online and you do not know what state to choose? There are some very popular states below. For online and global businesses are probably best Nevada, Delaware, and Wyoming. I mentioned California because it is the biggest and probably the most popular state in the US.
Nevada
- no corporate state tax
- $425 LLC filling cost
- $350 LLC annual fee
Wyoming
- no corporate state tax
- $100 LLC filling cost
- $50 LLC annual fee
Delaware
- 8,7% corporate state tax
- $90 LLC filling cost
- $300 LLC filling cost
California
- 8,84% corporate state tax
- $70 LLC filling cost
- $800 LLC annual fee
What is LLC filling cost? It is the one-time price you have to pay typically to the state for LLC registration
What is LLC annual fee? It is a fee you have to pay typically every year in order to keep your business alive. Sometimes it is called an annual report or franchise tax.
Tip:
Remember that each state has different rules but everything is very similar. If you are considering different state just google it!
4. Choose business name
Rule number one do not pick the name that is already occupied. You have to find a name for your business that is free. Below you can find the links where you can check LLC name availability for mentioned states!
LLC name Search
Tip:
You don’t have to search for a name if you hire commercial service that will search for you but if you want to speed whole process of your LLC registration then click to links above and search by yourself. It is pretty easy!
5. Hire a registered agent
What is registered agent? A registered agent is a person or company with a responsibility to receive legal mail on behalf of your LLC. For instance, some federal or state organizations will send you some mail and the registered agent must receive it and should contact you immediately. Let’s say you registered your LLC in state of California so your registered agent has to have a physical street address (cannot be PO Box) in California.
Who can be registered agent? There basically three option
You
- must have a street address in the state
- only for US citizens or residents
- not for foreigners
Friend or Family
- must have a street address in the state
- for US citizens or residents
- can work for foreigners
Commercial Service
- must have a street address in the state
- for US citizens or residents
- for foreigners
Tip:
Hire commercial service especially when you are from abroad. You will be sure that all important documents will be forward or scan to you!
6. File Articles of organization