US Incorporation for Foreign Business Owners

Establishing a presence in the United States can provide financial opportunity for foreign businesses and their owners. While the amount of formal paperwork and administrative requirements involved with expanding into the US can seem daunting, non-citizens can usually get a business up and running with little effort beyond that required of nationals.

Foreign businesses often have a great deal to gain by expanding into the US. Incorporating in the US can have a dramatic impact on your credibility and perception among US consumers, as well as with potential investors. Foreign business entities are eligible for a number of special tax breaks and grants, which are unavailable to nationals.

Determine your resident status

For tax purposes, resident status is not just determined by having a green card. Currently, the IRS is able to consider you a resident citizen for tax reasons if you have resided in the US for 31 consecutive days. Residents are taxed on their global income, while non-citizens are taxed only on the income that they accrue in the US.

The process

Which state? The first step towards incorporation, for both foreign nationals and US citizens, is to determine which state in which you will be forming your new business. Each state has its own set of taxation policies and ongoing compliance requirements, which makes your choice of where to incorporate an important one. For foreign-based business, there are typically only three states that make for a logical choice.

If your business already has a physical presence in the US, such as an office or retail location, it is typically advisable to incorporate in that state. The main reasons for this are typically the logistical benefits that operating in a small geographical area can provide.

If you do not already have a strong business presence in the US, it is recommended that you form in either Delaware or Nevada. These two states are considered the most business friendly and typically offer the most beneficial tax implications and lax operational requirements.  However, keep in mind that to conduct business in states other than the one in which you formed, you may need to go through a process called “foreign qualification”.

Appoint registered agent Once you have determined the state, you will need to delegate an individual who has a physical address in that state, to act as your registered agent. This individual will be responsible for receiving any and all communications between your business and the government.  

Finalize your structural choice The next step is to choose which business structure will be ideal for your business. Along with your company’s location, this will have serious operational and tax implications for your new company. The most common business types in the United States are sole proprietorships, partnerships, corporations, and LLCs. While the official names may be slightly different in each place, many countries have similar structures.

Foreign-based organizations typically form as LLCs and C corporations (sometimes referred to as “C corps”), as they are the most common of all business types and available to foreign nationals. LLCs offer flexible ownership and management structures, as well as the ability to avoid double taxation. This is typically the ideal choice of structure for smaller entities.

Larger foreign-based businesses typically form as C corps. C corps have the greatest ability to raise capital, through the distribution of stock, and allow for simple ownership transfers. However, they are subject to double taxation and an often-restrictive level of formal compliance requirements. However, their highly formal nature, and ability to sell stock publicly, makes them ideal for many large operations.

Officially file After all of these steps have been taken, you will then need to undergo the official filing and registration process. This involves filing a set of documents with your chosen state (as business registration is always handled at the state level in the US), and paying all fees associated with the process.  

Post-filing requirements

Taxpayer identification Once you have received verification that your formation documents have been accepted, you will then be required to obtain an individual taxpayer identification number (ITIN) from the IRS, which will be used to expedite the tax paying process for you and your new company.

In your native country Some countries require their citizens to disclose certain levels of income or file certain paperwork if they have formed a business in a foreign country.  It is advised that you contact your country’s taxation and business regulatory agencies to determine if this is the case for you and your organization.

Apostillization

An apostille is a certificate used to legalize a document, and verify it for use in foreign countries. By having an apostillized copy of your company’s incorporation documents, you will be able to verify that your business is a legal entity in the United States, anywhere in the world. This can be useful for a variety of purposes, most notably in opening bank accounts for your new business outside of the US.

When incorporation isn’t necessary 

Formal incorporation may not be necessary if you are simply looking to import your company’s products into the US. If you are purely looking to begin shipping your offerings into the US, it is advisable to contact the US Customs and Border Protection Agency before exploring the idea of incorporation.

Swyft can help!

Our incorporation service for foreign businesses can help make the US incorporation process as simple and efficient as possible and ensure that your business starts its operations legally having met all of the laws and regulations placed on it.  Contact us today!