Attorney Ili J. Subhan
Recipient of the Best Immigration Lawyer Award 2018-2020
- July 8, 2020
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How to Start a Business in the USA for Foreigners - 10 Actionable Steps
Today you are going to learn the 10 actionable steps on how to start a business in the USA for foreigners including, the types of entities, whether or not you need a visa, and the steps to start your business in the USA. Let’s get started.
Types of Business Entities a Non citizen can Form
Now let’s get started by discussing the types of corporate entities a non citizen can establish in the USA.
First, there are two common types of corporate entities foreigners can form in the U.S.:
- a limited liability company also known as an LLC or
- a corporation also known as a C-corp.
Start a U.S. Business as a Foreigner - Will You need a Visa?
Now, another question we often receive from our clients is do I need a visa to start a business in the USA as a foreigner.
The answer is no. You do not need a U.S. visa to start a business in the USA nor to purchase an existing business.
However, you do need a U.S. visa to be able to work for the business from within the U.S.
You can own the business from abroad and receive your share of the profits and or losses, but you cannot work for the business from within the U.S. without first obtaining a work visa or work authorization.
Let’s look at an example of how this could work.
Let’s say you form an LLC in Florida, and then you lease a commercial space to start a gelato shop in Sarasota, Florida. You handle all of the initial setup while outside the U.S. Then you hire a manager to manage the daily operations. Again, you do the hiring from outside the U.S. Now you are a passive investor in the business, you own the business, but you do not work for the business. This is permissible to do without a visa.
However, if you wanted to be at the gelato shop and run the daily activities including: overseeing sales, marketing, advertising, accounting, etc., then you would need a U.S. visa.
Think of it like this, you can invest in U.S. stocks from outside the U.S., and you can receive all the benefits from appreciation in the stock price and or dividends, but as a shareholder of that company, you are not involved in the daily operations. This is considered a passive investment and you would bot need a visa.
Now if you wanted to start a restaurant in the U.S. and you hired a manager to manage all the operations and you were not involved and you maintained residence outside the U.S., then again this would be considered a passive investment and you would not need a visa.
However, if you do want to be involved in the daily activities of the businesses and you want to live in the U.S., then you will be required to get a U.S. visa to be able to work for the business that you own.
To learn more about the 5 amazing visa options for starting a business in the USA for foreigners, please watch the video below.
5 Amazing Visa Options to Start a Business in the USA for Foreigners
10 Actionable Steps to Start a Business in the USA
Now let’s get into the 10 actionable steps on how to start a business in the USA for foreigners.
And, because we recommend that most companies that are entering the U.S. start as a limited liability company or LLC, we’ll discuss the 10 actionable steps to start an LLC in the USA.
Step 1: Choose State of Organization
The first step is choosing the state of incorporation, but for an LLC this is called the state of organization. Generally, the best state to register your LLC will be the one you will be conducting business.
However, if you’re an online company or doing business across multiple states, then you may want to consider registering in a state with a lower tax burden such as Nevada, Wyoming, or Delaware.
Delaware is particularly popular, thanks to its well-respected corporate laws that provide significant protections to business owners.
Ultimately, the right choice for you will depend on your particular circumstances.
Step 2: Choose a Name for Your LLC
Okay, so now you’ve picked the state of organization. Next, you’ll want to choose a name for your LLC. Remember, in all 50 states and U.S. territories, the name needs to end with LLC, L.L.C., or Limited Liability Company.
Now, you’ll need to check the name you’ve chosen with your state before registering your LLC to make sure that it is available.
You should also check with the U.S. Trademark and Patent Office’s trademark database to ensure that the name has not been trademarked.
Step 3: Select a Registered Agent
Next, you’ll want to select a registered agent. A registered agent is responsible for receiving notices from the state, notices of a lawsuit, and other important legal documents.
A registered agent can be an individual, trust, or another company.
We can help you select a company to serve as your registered agent.
Step 4: Decide on Management of Your LLC
After you’ve selected your registered agent, you’ll want to decide on how your LLC will be managed.
There are two types of LLC’s: (1) member-managed and (2) manager-managed.
In member-managed LLC’s, a single member in a single member LLC or all the members in a multiple member LLC will have an active role in the operation of the business.
A manager-managed LLC is formed where a single member in a single member LLC or members in a multiple member LLC only want a passive role in the business and the single member or multiple members depending on the type of LLC do not want to be a part of the daily operations of the business. In this situation, the member or members elect a manager or managers to run the everyday operations.
If you wanted to start a business in the USA as a foreigner from outside the U.S., you would form a manager-managed LLC and hire a U.S. manager to oversee the operations.
Step 5: File the Articles of Organization
Okay. So now you have chosen the state of organization, a name for your LLC, selected a registered agent, and decided on your LLC’s management structure, now it’s time to file the articles of organization with the state of U.S. territory that you have chosen to register your LLC.
Generally, you’ll be able to file the articles of organization online with the state.
Step 6: Draft an Operating Agreement
The next step is to draft an operating agreement that will be in compliance with U.S. immigration law.
The operating agreement defines how the LLC will be run on a day-to-day basis including:
- the management structure,
- allocation of distributions,
- LLC accounting,
- immigration compliance,
- voting rights,
- disassociation or dissolution of the business, and
- much more.
Step 7: Obtain a Federal Tax ID or EIN
Now that you have the LLC formed and and an operating agreement in place, you’ll need to obtain a federal employment identification number also known as an EIN.
An LLC’s EIN is used for reporting taxes, opening a bank account, and hiring employees.
You will fill out Internal Revenue Service (IRS) Form SS-4 and you should use a third-party designee such as our firm to help you complete this process.
In addition, if you are a single member LLC, after receiving your EIN, you’ll also need to file IRS Form 5472 and Form 1120. This is very important. If Form 5472 is not filed or filed incorrectly, the IRS charges a minimum penalty of $25,000.
If you have a multi-member LLC that is taxed as a corporation and has at least one foreign owner that owns 25% or more, you must file Form 5472 and Form 1120.
On the other hand – and very common – if you have a foreign-owned multi-member LLC that is taxed as a partnership, you are not required to file Form 5472 and Form 1120.
We’d recommend discussing this more with a tax advisor or certified public accountant.
Get accounting, bookkeeping, and tax service for your LLC with Xendoo. Get $95/month off Xendoo’s Boost plan or $615/month off the Venture plan for the first year. Make sure to let Xendoo know you were referred by Subhan Law Office, LLC, to receive your discount during onboarding.
Signup for payroll processing with Gusto. Make sure to let Gusto know you were referred by Subhan Law Office, LLC, to ensure you receive a great onboarding experience.
Step 8: Open LLC's Bank Accounts
Now that you have your LLC’s EIN, you are ready to open the LLC’s bank accounts.
Non-US residents can open a bank account online with Mercury bank.
To open up an account with Mercury, you’ll need your LLC approval documents, copy of your passport, your contact information, the LLC’s address, which can be the address of your registered agent, the LLC’s proof of an EIN, and submission of Mercury’s online application.
Please note that Mercury is a best fit for online businesses and not cash intensive businesses. If you will be handling a lot of cash deposits, then Mercury would bot be a good fit. However, if you will be accepting all credit card transactions online then Mercury would be a great fit.
You may also appoint a person who is living in the U.S. to act as a manager of your manager-managed LLC and give that person authority to open your LLC’s bank account. However, this is a risky proposition because that person will have access to the account.
Another option is to open a business bank account using Payoneer.com
Also, you may visit a multi-national bank near you. For example, Banco Santander, Royal Bank of Canada, Barclays, HSBC, J.P. Morgan Chase, etc. and ask if they can help you open an account for your U.S. based LLC.
The other alternative to opening your LLC’s bank account in the U.S. is traveling to the U.S. and opening the account in-person. If you are from one of the countries that allows for you to travel to the U.S. on your passport or ESTA also known as the Visa Waiver Program, then you can establish your LLC’s bank account that way.
Otherwise, if you need to apply for a visa, check out the video above on the 5 amazing visa options for entrepreneurs on how to start a business in the USA for foreigners.
Also, all banks have different policies concerning opening business accounts, so the best thing to do is to call the bank ahead of time and ask to speak with the branch manager.
Tell them you have a U.S. LLC, that you are a non-US resident, and that you do not have an SSN or ITIN, but you have an EIN for your LLC.
Ask them for all the documentation they require to open an account and take detailed notes. Also, ask if they can send you this information via email or if it is listed anywhere online.
Then ask the branch manager if you can email them your documents for review before coming into the bank.
If everything looks good, ask the branch manager if you can make an appointment to meet with him or her to open the account.
We’d recommend planning to stay in the U.s. for at least 1 to 2 weeks just in case there are any delays or extra things you need to do to open your account.
Additional things to do may be applying for a business license, permit, or other document with in the U.S.
Once you have opened your bank account, you’re ready to start doing business.
Step 9: Speak with a Tax Advisor
After setting up your LLC bank account, you should speak with a tax advisor or certified public accountant to oversee your bookkeeping and taxes.
Get accounting, bookkeeping, and tax service for your LLC with Xendoo. Get $95/month off Xendoo’s Boost plan or $615/month off the Venture plan for the first year here https://www.xendoo.com/?fp_ref=ili126 and make sure to let Xendoo know you were referred by Subhan Law Office, LLC, to receive your discount during onboarding.
Signup for payroll processing with Gusto here https://gusto.com/r/ilij15 and make sure to let Gusto know you were referred by Subhan Law Office, LLC, to ensure you receive a great onboarding experience.
Step 10: Get an Attorney to Help You
To get your LLC setup the right way, you should also get an attorney to help.
As we discussed above, the 10 actionable steps on how to start a business in the USA for foreigners, is not something to take lightly. There is much planning involved and you should partner with the proper professionals to help you start your business.
If you plan on working for the business and living in the U.S., then you will need to also apply for a U.S. visa.
Subhan Law Office, LLC, is here to help you start your business in the USA as a foreigner and we can aso help you get your U.S. visa to live the American Dream.
Please book a call with us to discuss your case in more detail.
Learn How to Start a Business in the USA for Foreigners - Online
If you know that you’re ready to get started an take the next step to financial freedom and start your business in the USA, then signup now for award winning attorney, Ili Subhan’s, on-demand course, where he will teach you in more detail the step-by-step process on how to start your business in the USA.
Additional Resources for Foreign Entrepreneurs
- Discover the step by step process on how to start your business in the USA as a foreigner through award winning attorney, Ili Subhan’s, on-demand course
- Open a bank account online with Mercury
Get accounting, bookkeeping, and tax service for your LLC with Xendoo. Get $95/month off Xendoo’s Boost plan or $615/month off the Venture plan for the first year. Make sure to let Xendoo know you were referred by Subhan Law Office, LLC, to receive your discount during onboarding.
Signup for payroll processing with Gusto. Make sure to let Gusto know you were referred by Subhan Law Office, LLC, to ensure you receive a great onboarding experience.
- Form a Delaware or Wyoming LLC or Corporation with Firstbase.io
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