Are you looking to register your company in the USA and have no idea how to do it? Here’s a step-by-step guide to registering a company in the USA hassle-free.
HOW TO SET UP A US COMPANY AS A NON-RESIDENT
Can you register a US company even when you are neither a US citizen nor a resident?
The short answer is YES.
Over the years, the United States has always been one of the best places on earth to set up a business remotely.
Foreigners can own a piece of the business world in the USA. As long as you meet some requirements set by the state and federal government, you’re good to go.
Read on to learn more about how a non-U.S. resident can incorporate and operate a U.S. business from abroad.
By the end of this article, you will have a solid understanding of how the entire process of incorporating a business in the US works.
When setting up a business in the USA as a Non-US resident, you can use either of the two main business structures. The Limited Liability Company (LLC) or the C-Corporation.
You have probably read many articles on the internet regarding the difference between both company structures (or maybe you didn’t). The issues with these articles are typically written for US residents, and some concepts are thrown at you (as a Non-US resident reader). If you are not well-versed with taxation concepts, it will confuse you more. Case in point, the oft-used benefit of “No Double Taxation” of an LLC doesn’t mean anything to you as much as the “Double Taxation” of a Corporation when you are a Non-US resident (formally known as Non-Resident Alien).
Our LLC for Non-US Resident guide briefly explained some differences in characteristics between the Corporation and the LLC. We won’t go through them in detail again here.
Instead, we will attempt to explain some of the salient issues that might concern you as a Non-US Resident in the table below.
Note: In case you still do not realize that the Limited Liability Company (LLC) is a unique structure to the US fiscal system, you just need to know the LLC is not what you think, and the Corporation is actually closer to your understanding of a “Limited Company” in your country. An LLC is a hybrid structure between Corporation and Partnership. We think a better word to describe the Limited Liability Company is “Partnership or Sole Proprietorship with Limited Liabilities”
Note: We are assuming the default treatment of the Corporation and LLC by the IRS.
The table does not cover the nuances when you elect your LLC as a C-Corp or elect your Corporation as an S-Corp. For Non-US residents, please don’t go down the rabbit hole of tax elections.
In some cases, you might need to elect the LLC as a C-Corp, but in most cases, you don’t.
For Non-US residents who are primarily non-resident aliens as defined in the Internal Revenue Code § 1361(b)(1)(C), you are not eligible to be a shareholder of an S-Corp. Your only options are Limited Liability Companies, C Corporations, and Partnerships.
Now that you have more or less decided on a structure, the steps to incorporate a US company are
With 50 states in the US, you might wonder which state is best for your company's needs. Each state has its laws, rules, and processes when registering a corporate entity in the state. For example, the requirements and steps for incorporating a Corporation in California differ from those in Florida.
The fact that each state has different laws that give different characteristics and attributes to corporate entities incorporated in that state makes choosing the right state for a non-US citizen both exciting and daunting.
US citizens or residents should typically only register in their state of residence unless they have a valid reason, such as incorporating a Delaware Corporation in anticipation of fundraising for a startup idea.
For a non-US resident, you don't have such a limitation. As a non-US resident seeking to operate an online business through a US company, you are free to incorporate your U.S. company in any state of the United States.
However, suppose you will rent an office, hire employees, or set up a physical presence in the USA. In this case, you should form your company in the state where you will have a presence, as this is where your company will be conducting business, thus triggering state economic nexus rules.
The best states to form a company for Non-US residents are:
Some states like Nevada and New Mexico could be suitable for non-us residents too, but they have their fair share of issues and problems; therefore, we don’t normally recommend it to our customers.
We wrote an article comparing Wyoming LLC vs. Delaware LLC vs. New Mexico LLC. Be sure to check it out.
Different states have varying naming rules for filing a corporation or LLC. Here are the general naming conventions that cut across most of all states.
Each state has its own rules and nuances when giving your US company an acceptable name. We wrote about the naming rules of each state that 95% of where our customers are here:
If you are too lazy to check for the name yourself, give us a holler, and we will do a free check for you.
Although it isn't related to state naming rules, here are a few other tips you might find helpful in your naming quest:
Your business must have a registered agent in the state to file for an LLC, corporation, partnership, or nonprofit corporation. A registered agent must reside in the state where your business is registered.
An LLC's or corporation's registered agent will serve as the entity's official contact in the state for receiving official communications from the state, service of process, other legal documents, etc.
Registered agents ensure that legal, tax and other official correspondence is received and forwarded to you; and that you are informed of any deadlines and actions you need to take. For example, legal notices or notices of a lawsuit will generally be sent to the registered agent's address, so you must ensure your registered agent will forward your mail on time.
After picking your registered agent of choice, you will then file your company documents with the state.
Depending on the company structure you are registering, you will need to file different documents with the state. You typically need to file:
To file a Corporation with the state, you will need to prepare the Articles of Incorporation.
The Articles of Incorporation is a document that formally establishes a corporation and is required for registration with the state. The document contains important information to incorporate into a business and outlines the corporation's corporate governance. In some states, this document is known as the Certificate of Incorporation.
While the content of the document varies from state to state, the following "articles" normally go into the document:
To file for an LLC, you do not file the Articles of Incorporation, but instead, you file the Articles of Organization.
It is also known as a Certificate of Formation or Certificate of Organization in some states. Your LLC Articles of Organization outline the organizational structure of your LLC.
Articles of organization generally must include the following pieces of information, even though they differ by state:
Once you have filed the company, you will typically need to prepare some documents that describe how the company will be governed or operated. Some states require these documents when an LLC or Corporation is formed, but others do not.
Typically, you prepare
Bylaws and LLC operating agreements give you a "roadmap" for running your business and give you legitimacy as a business. When an issue arises, they provide clear guidance and minimize disagreements about running the business. In case of a lawsuit, loan application, or other business dealings, your bylaws or operating agreement serves as evidence that your company is being properly managed based on established governance rules.
Keep in mind that you do not need to file these documents with the state. You simply create them, sign on them, and keep them in your records.
See the table below to determine if the Bylaws or the Operating Agreement are required in a few of the most common US states.
The articles of an LLC operating agreement contain information such as the name of the LLC, whether it is managed by members or by managers, the ownership details of the LLC, and the name and address of the registered agent. In addition, the operating agreement contains detailed provisions regarding the voting powers, management structure, rights, duties, and liability of the members and managers.
Bylaws include the rules and regulations that govern your corporation. Each state has its own requirements for what items must be included in the bylaws.
The bylaws of a corporation usually cover the corporation's structure, duties and responsibilities of the directors, information about when meetings of the directors and shareholders are held, details of the officers, and the type of shares issued, among other things.
When you are done with the company's filing and receive the papers back from the State by mail, the next step is to apply for an EIN for your company.
An EIN stands for Employer Identification Number. It’s issued by the United States Internal Revenue Service (IRS). The number is used as a tax identification number specific to your LLC.
You need the EIN to apply for bank accounts, merchant accounts for payment processing, loan applications, or a Shopify or Amazon FBA Seller Central account, just to name a few. Therefore, this is the most important next step you must complete before you can effectively use your US business.
According to federal law, US residents with a Social Security number can instantly apply for EIN. However, Non-US residents must apply for it by mailing or faxing the SS-4 Application for Employer Identification Number form to IRS. It takes 20-45 days to get a response from IRS.
Startfleet.io has an Express EIN service for Non-US Residents. With our service, you get the number in five to eight business days instead of the usual long wait (30 plaguing all non-us resident EIN applications. Take note that this is all done legally. Unlike some vendors, we do NOT use the SSN of a US resident to act as the Responsible Party of your company. According to the IRS, the "responsible party" is the individual or entity that controls, manages, or directs the entity and the disposition of the entity's funds and assets.
Does your LLC need a physical address? The answer is it depends. It is dependent on the objective you try to achieve.
If you are applying for bank accounts, some banks might need you to provide a US address different from your registered agent's.
Most banks will require a mailing or physical address to open a bank account. You can get an address by establishing a physical office in the state where you have registered your LLC. If you don’t plan to rent a physical office space, you can overcome this hurdle by renting virtual mailbox services where they’ll receive and scan mails on your behalf.
However, some US banks are not fans of virtual addresses; check if the address is not flagged as a CMRA address before you proceed with renting the address to maximize the chance of success. Commercial Mail Receiving Agencies (CMRA) are companies that rent out virtual mailbox addresses that receive mail from the Postal service on behalf of third parties.
You are about to complete the process; now what?
Due to AML and KYC guidelines, US banks must know their customers before opening a bank account for you. If you can travel to the US, you will be able to open a US bank account on the spot at the branch.
If you can’t visit the US, a handful of online banks could open your bank account remotely. However, the process will still be the same, and sometimes, the Know-your-customer policy of these banks is even more complicated than traditional banks.
Typically, you need to plan ahead of time and prepare the following documents with you:
We wrote about this in detail about Bank account opening options for Non-US Residents.
If you cannot travel, contact us at startfleet.io; we save you the hassle and help you with bank account opening at our partner banks.
An ITIN is an Individual Taxpayer Identification Number available to non-US residents. It’s an alternative to the Social Security Number (SSN) used by US citizens or residents. This number always starts with a 9.
Some banks might require an ITIN to open an account, especially if you are a foreigner and don’t have a Social Security Number.
Platforms like Paypal or Shopify Payments will also need you to provide an SSN or ITIN before you apply for an account with them. If your US Company needs to receive payments via Paypal or Shopify Payments, it is advisable to get an ITIN.
In addition to that, having an ITIN could allow you to apply for personal US credit cards, which come with huge signup bonuses and perks.
However, this is an optional step. Not all businesses need to use Paypal nowadays. As for Shopify, you could always manually request Shopify to process your credit card payments via your Stripe account instead of their Shopify Payments gateway.
Yes, you can. The US does not impose any restrictions on Non-US residents incorporating or registering a company in the USA.
Yes, you can own a Limited Liability Company under the H1B Visa as a passive investor, and you do not work for the LLC in any capacity.
As a non-US resident, we usually recommend registering your startup as an LLC. It offers far more tax advantages and less paperwork. However, please note that this depends heavily on individual circumstances and situations.
The registration process varies from state to state but takes about 1-4 weeks in most states. Depending on the state, paying an additional fee can shorten this process to 1 to 3 business days.
In this process, you must file the required documents with the Secretary of State and wait for the application to be approved for a Corporation or LLC.
State fees generally range from $50 to $800, depending on the location of the business, the type of business entity, and other factors. For example, it costs $100 to file an LLC with Wyoming and $125 to file an LLC with Florida.
Both are suffixes that appear at the end of a company's name. However, the INC suffix indicates that a business is a corporation, while the LLC suffix means the business is a Limited Liability Company.
Yes, foreigners can start a business in the U.S. without having a green card that allows them to live and work in the U.S. Since one can open and operate a U.S.-based business without being in the U.S., it is possible to open a business without needing a green card.
If you have any other questions or need further clarification on how to set up a US business as a non-US resident or foreigner, feel free to visit our website, startfleet.io, or email us at hello@startfleet.io
StartFleet helps you with your US Company formation. Apart from helping you to register a US company we offer a lot more:
Kathleen Schweitzer is an international taxation expert, providing strategic counsel to businesses with complex compliance, tax and financial issues in an effort to help them grow their business globally. She often gives lecture on U.S. tax developments, transfer pricing, taxes on the sale of goods and services, U.S. tax policy development, taxation of internet commerce and multi-jurisdictional global tax planning. Kathleen enjoys reading, photography, cooking and spending time with her husband and eleven-year-old daughter.
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