Over the centuries, hard-working immigrants from all over the world have built up the United States, which is why entrepreneurship, private initiative and generous investment from abroad are still highly valued here. Doing business in America is equally convenient for both locals and foreign entrepreneurs. However, in this country, as in no other, it is extremely important to conduct business in full compliance with the letter of the law and the established rules – otherwise the idea of opening a company in the United States will result in huge material costs for you in the form of fines and penalties from lawsuits.
Imperial & Legal have prepared this article to give you the right idea about starting a business in America. The procedure of company registration in the US differs in sequence from similar processes in the UK and Europe. Before we dive into the details, let’s understand why our investors choose the United States to register a company abroad.
A stable political system combined with a strong economy and the inviolability of the dollar, until recently the universally recognised means of international payments, allow foreign entrepreneurs to do business, take bank loans for development and carry out long-term planning.
Special mention should be made of the well-developed infrastructure (from the famous American highways to the clockwork national postal service) and inexhaustible labour resources.
Americans have simplified the procedure for starting a new business as much as possible. In the United States there are no restrictions related to the citizenship of the founders. The owners of a company can be both individuals and legal entities. To open a company in the USA, you will not even need to leave your country, and the registration process itself takes no more than 2-3 working days.
The peculiarities of local legislation in certain states allow foreign entrepreneurs to significantly reduce business costs and optimise taxes.
There is virtually no grassroots corruption in the United States, and the government rarely interferes with private companies. Your business will not be terrorised by endless audits, you will not be extorted for bribes, and your firm’s interests can be defended in an independent court.
As already emphasised, one of the key strengths of this jurisdiction stems from its state structure. The 50 states have sufficient power to regulate tax policy and commercial activity in their territories.
If you want to open a company in the United States only to indirectly purchase residential or commercial property, the question of choosing the right state disappears by itself, as such a legal entity is better to register in the location of the acquired object.
If you need to register a company in the USA to be actively engaged in commercial activities, it is better to choose the most suitable state for your business, where there are tax benefits for business, and the authorities are loyal to firms with foreign founders.
Find answers to the following questions to make the right choice:
Where do the founders of the future company reside – in the United States or abroad?
What is the purpose of setting up a US company? For business immigration? To enter US markets? To acquire property?
Where will the business activities of the enterprise be carried out? Where will your office be located? Where will your employees live? Where will your suppliers and customers be located?
Is privacy important to you? Do you need to hide information about the founders, beneficiaries and management of your business? Is nominee service available in the state?
What incentives will help your business significantly reduce your tax bill? Which states have the most appropriate tax regime for your business? What are the trends (downward or upward fiscal payments) in the state?
Do you need a licence to carry out your activities? How much does it cost to obtain a licence? How often will it need to be renewed?
How long does it take the state to register a new company? How much money will you need to start a business in this territory?
Will the owner of the future company use his business to obtain a residence permit in the United States? Does he/she plan to work independently in his/her company?
As in any other modern country of the world, in the United States a businessman can choose a suitable legal form for his company from several options. The main forms of entrepreneurial activity in America:
Individual Entrepreneurship;
Corporations of two types: S-corporations and C-corporations;
Limited Liability Companies (LLC);
Branches of foreign companies;
Joint ventures;
Representative offices of foreign companies.
The choice of legal form for your US company depends on the type of planned activity and the composition of the founders. When registering a company in the United States, our experts strongly recommend choosing an option that allows you to limit the financial or property liability of the firm’s owners, partners in a partnership, or shareholders in a corporation.
Each form has its own unique advantages. For example, sole proprietorship is the easiest and most common way to do business in the United States because it is characterised by minimal requirements and simplified reporting.
C-corporation or Limited Liability Company is the most common choice for incorporation of a company in the US with foreign residents.
A C-corporation has advantages such as:
No citizenship requirements for founders;
Unless the founder has wilfully broken the law, he is not liable for the company’s debts and lawsuits;
You can receive investments in exchange for shares in the company.
In turn, a limited liability company is characterised by the following features:
The profits of the company are distributed in proportion to the shares of the founders and are considered personal income;
Non-residents pay tax at the rate of 35%;
Losses, like income, are allocated in proportion to shares at the end of the year, but lawsuits are the responsibility of the company, not the founders;
The company cannot issue shares, each investor will have to allocate a share, which is inconvenient for them in terms of taxation.
Thus, the key difference between a C-corporation and an LLC is that the former cannot use “pass-through taxation”: the corporation acts as a tax resident and pays tax on the profits received. Whereas a limited liability company distributes profits to the owners, who, in turn, declare the income (or losses) received and pay taxes. Moreover, if there is only one owner of such a company, he can file only his personal tax return with the US tax authorities, as it will objectively reflect the results of his company’s activities.
C-corporation can also freely redistribute shares between owners, introduce new owners into the company, and raise additional funds by selling its shares. Changes in the composition of the founders and transfer of ownership rights within the LLC are more complicated, as these processes must be reflected in the company’s statutory documents.
A limited liability company is managed by its owners or a hired manager. A corporation involves separation of ownership and management of the business, so it is always managed by a designated officer. These are important points to consider if you decide to start a company in the United States.
The organisational structure of a firm is the link between those who are part of it, whether they are co-owners, partners or employees. It gives you a clear idea of how many people will be involved in your business, what tasks they will perform, and what your staff costs will be.
Employee expenses include not only their wages, but also the taxes you will be required to pay on their behalf. And wages must not be less than the minimum wage for the relevant occupation as set by the US Bureau of Labour Statistics.
Only after you know exactly what state to open a business in, what type of company it will be, and how many founders and employees you will have should you be concerned about finding the right name for your firm.
The naming requirements are not very different from those in other countries:
It is unacceptable to use offensive and discriminatory words and expressions;
The name cannot be the same as that of previously publicised companies;
The name is written in the national language (in this case English) and contains an indication of the legal form of the company.
All U.S. companies are required to have a registered office so that they can be contacted by government authorities. The legal address may be the same as the actual address, i.e. it may be the address of your leased or owned office or building, or it may be provided for an additional fee by your registered agent (most common for foreign-owned companies), or by a lawyer, or by a third-party organisation such as a co-working space.
Opening a company in the USA is done through a registration agent – an intermediary between the business and the government. It is not possible to refuse the services of an agent. The list of registration agents is usually published on the official website of the state secretariat.
If you hire experienced corporate lawyers to incorporate a company in the US, they will be sure to recommend a reliable registration agent. Optimal registration agent:
Able to perform assigned mediation duties in a professional manner;
Does not charge more than state-mandated rates for its services;
Has a physical address in the state where it does business;
Keeps in touch during office hours.
Information that must be provided to the Secretary of State in order to incorporate a company in the United States:
Company Name;
The number of authorised shares if you are registering a corporation, or the amount of authorised capital if you are registering a limited liability company;
The name and address of the registration agent;
Names, addresses and positions of the founders and directors.
If the company in the U.S. is opened by individuals, copies of their passports will be required. If the co-owner is a legal entity, it is necessary to prepare copies of its constituent documents. All data must be submitted in English, with certified translations if necessary.
In most US states, it takes 2-3 business days for an agent to register a new business. If your business is not subject to licensing, you can start working as soon as you apply for company registration in the USA.
The next important step is to register your business with the United States Internal Revenue Service and obtain a federal tax number.
The number is required by every U.S. firm to file tax returns and open a current bank account.
A fundamental difference between American corporate law and European corporate law is that the basic incorporation documents are usually executed after a company is incorporated in the United States, rather than before.
Corporate documents regulate the activities of your company, delineate personal responsibilities within the company and outline the principles of profit distribution. These documents include minutes of shareholders’ meetings, memorandum of association, articles of association, articles of association, etc.
In American business culture, articles of incorporation and minutes and orders are strictly internal company documents, so they are kept by the director, attorney, or registration agent.
While registering a company in the United States takes days, obtaining a licence for some activities can take many months. Therefore, you should find out at the planning stage of your business whether you need to apply for a government licence. And if the answer is yes, find out what regulatory requirements apply to licensed businesses so that you can get your licence as soon as possible after you open a company in the US and get up and running.
Financial institutions in the United States are highly reliable. They greatly simplify the company’s settlements with partners. But unlike business registration, you will not be able to open a current account in an American bank remotely. A service agreement with the company will be signed only after a personal meeting with the founder and director.
As you have just seen, it is not difficult to register a company in the USA. But in order to take full advantage of all the opportunities of the new country, you will have to practically simultaneously solve several tasks at once.
To ensure that the registration process and the first steps of a new American business are not accompanied by headaches and additional costs, it is better to seek advice from experienced specialists at Imperial & Legal. Together with our specialists, you will be able to choose the most suitable state for registering your company and optimise your taxes.
Our qualified consultants will help you to save time and money, no matter what the issue is: choosing the type of company, drawing up constituent documents, registering with the tax office, obtaining a licence or opening a bank account.
Since Imperial & Legal actively practises a comprehensive approach to solving the set tasks, our work is not limited to business services only. At the client’s request, we provide visa support and even organise a comfortable relocation of your family to the USA!
The reader unfamiliar with American realities will be surprised, but under current US law, a founder cannot work on his or her own company without prior authorisation. The United States authorities consider that starting a company and working in that company are completely different processes.
To be able to work for themselves in America, a foreign entrepreneur can register their business as:
A separate branch of an operating overseas company;
Representation of an operating foreign company;
A self-resident company (e.g., a C-corporation).
The US IRS applies the “pass-through taxation” principle to S-corporations, which reduces the fiscal burden, as in this case the company only reports on its performance, and taxes on retained earnings are paid by the members of the corporation. A S-corporation not only reports, but also pays tax on the profit received.
The second difference between S-corporations and C-corporations is that shareholders can be individuals who are citizens and tax residents of the United States. Shares of C-corporations can be freely traded if necessary, and the founders and directors can be both corporate entities and individuals, including foreign tax residents.
The third difference between S corporations is that there can be no more than 100 shareholders. Also, S corporations are not allowed to engage in certain business activities, such as insurance or international trade.
In some cases, in order not to waste time, foreign entrepreneurs prefer not to register a company in the United States, but to buy a ready-made American business. This solution has its advantages and disadvantages.
What opportunities are available after the purchase:
Opportunity to make a profit immediately after purchase;
The opportunity to implement your ideas in an established, proven business project that can be objectively evaluated;
Opportunity to save significant time and money on marketing;
Opportunity to obtain a business visa and move to live in the United States with your family.
The disadvantages of buying a ready-made business in America:
If you are buying a US company with assets, prepare in advance for significant expenditure of time and money, as you will need to make a full inventory of the acquired property complex;
Buying even a small US firm should be accompanied by a thorough due diligence process involving a variety of professionals, from corporate attorneys to experienced accountants;
The buyer should be legally savvy or at least consult a competent lawyer to understand all the nuances of transferring ownership of the business.
Because only with the help of a practicing professional attorney will you be guaranteed to get a statute that considers all the latest changes in American law, whether federal or state laws.
A random document found on the Internet usually does not fully meet all the requirements of an existing business. If you are starting a company in the United States to capitalise on the US market and enjoy the tax advantages of individual states, you will need unique articles of incorporation.
We will work with you to find a customised solution for your immigration, second citizenship, business, tax and other needs.
Start a business in UK
Open a bank account
Tax solutions
Worldwide business support
Accounting services
Financial & Wealth management