Registering a business company in the USA can bring a number of benefits to entrepreneurs from other countries. However, citizens of some national states are not eligible to apply for company formation in the States for political reasons. If you or one of your business partners lives and/ or works in one of the countries listed below, reading on would be a waste of time for you because you cannot register a company in the USA. This is why we put the list of ineligible countries at the very beginning of the text:
· Belarus
· Burundi
· Venezuela
· Democratic Republic of the Congo
· Zimbabwe
· Iran
· Iraq
· Yemen
· Cuba
· Liberia
· Lebanon
· Libya
· Nicaragua
· Republic of Congo
· Republic of Crimea
· Russia
· North Korea
· Syria
· Somalia
· Sudan
· Central African Republic
· South Sudan
If you are a citizen of one of these countries but you would like to establish a business company in the USA anyway, acquiring second citizenship could be a possible way out for you. If you live somewhere else, we invite you to read on because we provide useful information below.
Opening a company in the USA can be a wise business decision for a foreigner. What is especially attractive is the fact that this can be done from the comfort of your home. You can engage in regular business operations in the USA or start an online business. However, if you are not a citizen of the USA or a legal resident in the country, there are some specifics that you have to account for if you would like to establish a company in America.
Can a foreigner start a business company in the USA?
The answer is a definite ‘yes’! Whether you are a multinational brand or sole proprietor, you can register a company in the USA. There are several tasks that you will have to solve to achieve the goal but these are solvable. First, you have to decide what form of ownership your company is going to have. The following types of companies can be registered in the USA by foreigners:
· Sole Proprietorships;
· Partnerships including General Partnerships and Limited Partnerships;
· Limited Liability Companies including Professional Limited Liability Companies;
· C-Corporations;
· Non-profit organizations.
An S-Corporation is one more form of company ownership in the USA but its shareholders shall be citizens or legal residents of the USA. This is why S-Corporations are excluded from the list above.
The most popular and the most economically favorable form of company ownership in the USA is a Limited Liability Company (LLC). Apart from limited liability, an LLC has another very important advantage: you won’t have to pay any corporate taxes in the USA if you do not do any business in the country via your company registered there.
In addition to that, an LLC is a very flexible type of company as far as taxes are concerned. You can pay taxes as a sole proprietorship, as a partnership, or as a corporation – the choice is yours. The organizational form will suit most types of business activities. American LLCs are engaged in software development, consulting, export-import operations, and many other business spheres. Finally, it is possible to open an LLC in the US remotely.
Six reasons why a foreigner should open a company in the USA
Banking structure. The account maintenance costs are low in the country, the national currency is stable, and money transfers can be made almost everywhere. The banking system is not ideal in the USA but it has many strong sides anyway. Most digital banking products and credit cards issued in America are functional in other countries too.
State duties. Company formation can cost thousands in state duties and legal and notary fees in some countries plus the mandatory annual fees can be high there. For example, if you want to open a tourist company in Spain, you have to make an upfront payment of 140,000 euros when registering a company plus you have to leave a 180,000 euro deposit. When it comes to registering a company in the USA and extending its registration, we are talking about a few hundred dollars only.
International reputation. You may be offering high-quality services but you are going to lose many clients if your country is registered in the ‘wrong’ jurisdiction. Working via a US-registered LLC, however, you will feel the trust because American companies are well-respected everywhere.
Payment processing. You can gain access to an inexpensive and secure payment processing system that can be easily integrated with other applications. In particular, many experts believe that Stripe serves as the golden standard in the payment processing industry.
Ease of reporting. In some countries, you have to spend a lot of time on bureaucratic matters related to annual reporting. Things can become even worse for you if you don’t speak the local language.
If you are a non-resident of the USA and you have a company registered in the state of Wyoming, for example, you don’t have to spend more than one or two days in the country to do the reporting.
In simple cases, the reporting related to your Wyoming LLC will be rendered down to the following procedures:
- File an annual compliance report;
- Extend the agreement with the registration agent;
- File Form 5472 with the title page of Form 1120.
Some registration agents can fulfill the tasks for you. In this case, the extension and the reporting will cost you approximately US$ 500. Forms 5472 and 1120 do require your personal attention but if your agent helps you with them and if you have been keeping accounting records throughout the year, you’ll have to spend around 30 minutes on them.
Taxes. Registering an LLC in the USA can also bring you substantial tax benefits. If your company does not generate any income on the territory of the USA and does not make any income that is ‘effectively connected’ to the country, no corporate taxes are payable at all. The taxes are paid at the personal level. In addition, legal deductions are widely available, which can lessen your tax burden even further.
You have to realize, however, that the tax system is quite complex in the United States and you do need professional assistance to be able to use all the benefits available to taxpayers in the USA.
Corporation vs LLC: what is better for a foreigner?
As a rule, foreign nationals registering companies in the USA opt for creating LLCs or C-Corporations. None of these forms of company ownership imposes any restrictions on foreign company owners. Partnerships and sole proprietorships are not so popular because they make your liability unlimited.
If you are a small business owner, an LLC will suit you ideally. However, if you are planning to raise money and grow your business, you should register a C-Corp. in the state of Delaware, for instance. This form of company ownership is especially popular with startups looking for venture capital.
What American state should you choose if you do business online?
Most foreigners register companies in two American states: Delaware and Wyoming. These states are best suited for online business as well as any other type of business. Wyoming and Delaware:
- Require minimal investments;
- Charge no corporate income tax (if the business is done outside the state);
- Charge no sales tax (on the same condition).
Delaware is best for companies looking for investors. The state corporate legislation is highly favorable for businesses. Please note that even though there is no income tax in Delaware, a flat ‘franchise tax’ of US$ 300 per year is due.
Wyoming is best for small companies. If you do business alone or with a few partners, Wyoming would be your best choice. The company registration and maintenance is cheaper in Wyoming in comparison to Delaware and it involves less paperwork.
If you are planning to register a company in the United States, we highly recommend that you consider the states of Delaware and Wyoming first.
