Starting a business in the United States? As anywhere else in the world, this involves some paper work and a few accounting, tax and legal hurdles. To avoid making it harder than need to be, let’s look at the benefits of owning a business in America, before moving on to the steps you need to take.
Benefits of starting a company in America
Here are a few reasons why so many international companies choose to operate in America.
Limit your liability
Registering as an LLC could be the best way to go, not only because it is the standard format for a limited liability business but also because the rules for LLC setup are the same for everybody, regardless of your citizenship.
Avoid double taxation
LLC also provides a benefit of no corporate income tax, saving you money and guarantees protection from paying your income tax on top of your business tax. You’ve got to thank pass-through taxation legislation for this perk.
In order to hire in the States and pay your due taxes you will need to submit an EIN Application or an Employer Identification Number, which offers flexibility and means you as an owner don’t have to live in the States. See the last point for more information on this process.
Get a low-rate business loan
You can even get special small business loans from the US government. These are called Small Business Administration Loans and designed to favor small international startups. As a new business owner, you can get good loan rates and more flexible terms through this scheme.
Register as a director
Because you can’t work in America unless you hold a valid working visa, US regulation allows you to operate as a director in your company. This protects your legal status and makes your business compliant with Inland Revenue, often referred to the IRS.
Now that you’ve decided to open your company in the United States, let’s look at the basic steps you need to follow in order to do it right.
Choosing a state for your business
Although some states like Delaware and Nevada have low costs of running a business or having clients in, and certain states, like California, have extremely high costs to operating a business in, the state tax system works so that you ought to contribute to the state where your customers and suppliers are.
But if your business won’t be covering a specific market then choosing a ‘cheaper and more flexible’ state is a way to go. And Delaware and Nevada are always a good choice as most tax and accounting firms are very familiar with their registration processes. All you’d need there is a proof of a bank account or an address.
Checklist for business registration
However, most states have very similar registration requirements, some might just be more vigilant on due diligence than the others, but here are the things to keep in mind. As a rule of thumb, you will need:
- Unique business name
- Legally registered agent
- Certificate of incorporation (cost from $89)
- Employer Identification Number
Getting an Employer Identification Number
As mentioned above, you need EIN for hiring in the Sates. The number is also needed for paying your taxes, getting a business license and even opening a business account. Although you can apply for this tax ID directly from IRS, the forms might be confusing and the process might be more time consuming than expected, as it might involve pasting and even faxing documentation. To make a correct EIN application, you will need to tick a few boxes as it’s another potentially lengthy exercise.