Today I’m going to show you how to start a business in USA with 15 actionable steps…
As a business lawyer, I’ve assisted more than 3,000 entrepreneurs like you start their U.S. business without dealing with complicated legal forms, and I’m the only business lawyer whose service is backed by more than 1000 5.0 Star Google Reviews.
If you’re interested in starting your U.S. business book your Strategy Session to discuss your options.
With a U.S. company, you will be able to:
- Open a U.S bank account
- Open U.S. payment processing accounts (like Stripe, Paypal, Amazon FA, and other online accounts)
- Access the U.S. market and enhance the reputation of your company, both to U.S. customers and overseas
The good news is…
If you’re a non-US resident or non-US citizen, you CAN start a business in USA.
It’s not necessary to be a U.S. citizen or to be a U.S. resident or to have a green card to start an LLC or a Corporation in the US
Non-US citizens and non-US residents can legally start a business in the US. To make this possible, you just need to know how to register a company in USA.
Click a section below to be taken to one of any of these actionable steps to opening a business:
- Decide which business type is right for you
- Decide where to form your LLC
- Get a Registered Agent
- Register your LLC or S-Corporation
- Get EIN
- Get a US mailing address (if necessary)
- Open a US business bank account
- Open a business merchant account to accept payment from customers
- Get business insurance (if necessary)
- Get an ITIN (if you’re a non-US citizen without SSN)
- Understand your tax responsibilities and file your taxes
- Keep your business and personal bank accounts separate
- Maintain company and pay annual fees on time
- Make sure you’re complying with city or county requirements
- Consult with a Business Lawyer
Here are the 15 actionable steps you need to take to start your business in USA in 2019:
1. Decide which business type is right for you
What is required to start a business?
You first will need to decide on which business type is right for you…
The decision to choosing the correct business structure is important because the type of business you select influences everything from day-to-day operations to taxes, to how much of your assets are at risk.
It’s important to understand each business type and choose one that is best suited for your situation and business goal…
If you’re not sure which is the best business type for you personally or how to open a company in the USA, send me a short email at email@example.com and tell me where you’re located and what business you’re looking to start.
How to Open a Company in USA
LLC (best choice for U.S. or non-U.S. residents)
LLC is the most common (and typically most recommended) business type in the United States if you are looking how to start a business in USA for non citizens.
LLC protects your assets from business debts and lawsuits.
What this means is that if something happens to your business in the USA, then your assets such as personal bank account, car, and home will be protected.
Once you know how to start an LLC, you can benefit from this business type since LLCs are also simpler and offer cheaper structures for taxation purposes.
LLC has “pass-through” taxation which means your earnings just pass through to your income taxes. This means that accountants don’t have to file a separate tax form for the company, which saves on costs.
I recommend LLCs for most entrepreneurs if you’re trying to keep it simple and if you’re going to most likely be making less than $80,000 a year.
C-Corporation (usually not recommended)
If you’re a US resident, you should not do a C-Corporation (instead you should select S-Corporation — see below.
However, if you’re a non-US resident, you should consider forming a C-Corporation.
I recommend corporations for companies who want to have “shares” for their company and who expect to have investors invest in their business.
Corporations are better for investors because investors can passively hold shares without having to worry about tax consequences until they sell them again sometime down the road.
Why Corporations can be bad: The biggest negative is that Corporations are “double taxed.” When a Corporation earns income, the Corporation is taxed. Then anytime the Corporation issues a dividend, the shareholders are taxed on the amount they receive. As a result, the income is “taxed twice.”
In summary, if you’re a non-US resident and you’re looking to have shares in your company (where you can easily transfer shares to investors or employees of your company), then C-Corporation makes sense.
However, if you’re a US resident, I would NOT recommend forming a C-Corporation and instead should look to form an S-Corporation (see below…)
S-Corporation (most-recommended for U.S. residents)
What Is S-Corporation? An S-Corporation is an eligible domestic corporation (not available for non-US residents) that avoids double taxation (being taxed once to the shareholders and again to the corporation) by electing to be taxed as an S-Corporation.
If you’re a US-resident and want to start your business in the USA, I recommend S-Corporation.
If you’re going to be making more than $80,000 a year then S-Corporation is also a better choice since you will save more in taxes.
With an S-Corporation, you would be able to avoid self-employment tax which saves you usually around 15.3% of your income.
The biggest difference between an S-Corporation and LLC is pass-through taxation.
If you have an LLC and you don’t choose to be taxed as an S Corp, you’re either being taxed at the federal level as a sole proprietor or, if you have multiple members, as a partnership. This just means that the money made (or lost) and distributed by your LLC all passes through to your tax return and is only taxed there.
With an S-Corporation, you can pay yourself a “reasonable salary.” This allows you to keep money in your business and not distribute it directly to your income tax filing.
Depending on how much money your business makes, one or the other will save you more in taxes.
However, if you’re a non-US resident, you cannot be a shareholder for an S-Corporation.
But if you are a US resident, then you should highly consider forming an S-Corporation.
Still not sure about which business type is right for you but want to be know how to start a business in USA for foreigners? Email me at firstname.lastname@example.org
Why not sole proprietorship as a business in USA?
A sole proprietorship is the simplest business type and it does not require any formal filings.
You’re automatically considered to be a sole proprietorship if you do business activities but don’t register as any other kind of business.
The huge disadvantage of a Sole Proprietorship and the reason why you should NOT start your business as a sole proprietorship is that you will take personal liability for all business matters if you’re a sole proprietorship.
This means your business assets and liabilities are not separate from your assets and liabilities. You can be held personally liable for the debts and obligations of the business.
What this means is that if your business gets sued or if something happens to your business, then you will be personally responsible for your business (which you don’t want to do).
So you should 100% look to form an LLC, C-Corporation, or S-Corporation if you’re starting a business in the USA. Once you are sure about how to start a business in the USA, you can expect realistic returns.
What if I still don’t know which business type is right for me?
Check out the complete guide to business types HERE
If you still can’t decide which business type is right for you, email me at email@example.com, tell me a little bit about your business, and I will tell you which business type is right for you!
2. Decide where to form your LLC
If you’re a U.S. resident, you should form your LLC or Corporation in the state where you are located (the state where you are physically located).
For example, if you will be operating your business in California, then you should form your LLC in California.
However, if you’re a non-US resident and you do NOT plan to have a physical presence in the US (meaning that it will operate solely from outside of the US), then you should form your LLC in Wyoming, the best and most business-friendly state for non-US residents.
Here’s a video where I clearly explain where you should form your LLC:
Here’s my answer in more detail below …
If you’re a US resident, you should form your business in your home state.
If you’re a US resident, you should form your LLC or Corporation in the state where you conduct business activities.
Typically, you’re considered to be conducting business activities in a state when:
- Your business has a physical presence in the state
- You often have in-person meetings with clients in the state
- A significant portion of your company’s revenue comes from the state
- Any of your employees work in the state
If you’re a US resident, you should ignore all of the Nevada, Wyoming, and Delaware advice and only form your company in the state where you will be doing business.
For example, if you’ll be operating your business in California, then you SHOULD form your LLC in California.
If you choose to form your business in any other state outside of the state where you have an actual presence or are physically doing business, you would have to also register your business in your home state as well.
This is because you need to let your home state know that are you operating a “foreign” LLC in their state, and as a consequence, you would be responsible to pay filing fees and annual fees in BOTH states — which you do NOT what to do.
So the answer is:
If you’re a US resident, you should form your LLC or S-Corporation in the state where you’re physically conducting business — this also doesn’t matter if you’re operating an online business.
If you’re a non-US resident, you should form your business in Wyoming.
If you’re a non-US resident, you should form your LLC in Wyoming.
The top 5 reasons why Wyoming is the best for non-US residents are:
- No US citizenship requirements (you can be a non-US citizen and form your LLC in Wyoming)
- Cheaper annual report fee ($50/year in Wyoming vs $300 in Delaware)
- More privacy (members nor managers are not listed with the state)
- No state, personal, corporate, or capital gains taxes
- More foreigner-friendly laws
Wyoming LLC’s annual fees and other expenses are less than most other states.
If you have a Wyoming LLC, you can operate your business and live anywhere in the world; you also do not have to be a US citizen to incorporate in Wyoming.
Also, Wyoming does not require the manager nor the members of a Wyoming LLC to be listed on a public database.
In the past 5 years, all of my non-US clients have been really happy with forming their LLC in Wyoming and I’ve never had any issues with Wyoming.
That’s why I always recommend Wyoming for my non-US clients.
If you are looking for detailed information on how to start an LLC, you should know where to start your business in USA.
I definitely recommend Wyoming for non-US residents.
Here’s a great side-to-side comparison between Delaware, Wyoming, and Nevada:
Overall, forming your company in Wyoming is generally the best decision if you’re a non-US resident.
Do you still need more information on how to start a business in USA for non-citizens or non-Residents? Email me at firstname.lastname@example.org
What if my company operates in more than one state?
If your non-US company operates in more than one US state, you may incorporate it in any of these states, but you must also register to do business in the other states through a process called Foreign Qualification.
An LLC or Corporation conducting business in one state when incorporated in another is considered a foreign corporation and must qualify as a foreign corporation to legally do business in that state.
For example, a business incorporated in Nevada that wants to do business in California would be considered a foreign corporation in California, and as a result, the Nevada corporation must qualify (or register) as a foreign corporation to do business in California.
If you need Foreign Qualification to conduct business in another state, email me at email@example.com to register your Foreign Qualification.
3. Get a Registered Agent
Cost: $50 to $150/year
LLCs and Corporations are required to have a Registered Agent with a physical address (not a P.O. Box) during normal business hours to receive important documents on behalf of the business.
Registered Agent receives official papers and legal documents on behalf of your company. The registered agent must be located in the state where you register.
Think of the Registered Agent as a service to ensure you don’t miss any important documents related to lawsuits or state taxes.
These documents include documents related to lawsuits and renewal notices from the state.
Many business owners prefer to use a registered agent service rather than do this role themselves.
There are 2 reasons to use a Registered Agent service:
- In order to not miss any important documents or deadlines for the company, and
- In order to stay anonymous (since most states make the company’s Registered Agent information public)
Note that a P.O. box is not accepted for a Registered Agent’s address.
Keep in mind that a Registered Agent is not a mail forwarding service and you cannot use the Registered Agent address as your business’ legal address, or even the mailing address of your company.
Registered Agent requirements:
- Registered Agent must be physically located in your state of formation
- Registered Agent must be present at that address continuously during business hours
- Registered Agent’s name and address must always be kept current with the state, and
- Registered Agent’s information will become public and can easily be searchable.
To reiterate, you do not need a U.S. address to incorporate a business in the United States. Having a Registered Agent is the only requirement related to a physical address.
Having a Registered Agent will allow you to form an LLC or Corporation in the U.S.
However, to obtain an Employer Identification Number (more on this later) or open up a bank account, you are going to need a U.S. mailing address (not necessarily in the state of formation). In this case, we recommend you to look for a “mail forwarding” service provider (more on that below)
You can always shop around online for the best and cheapest Registered Agent service in your desired state of formation — prices will vary from $50 to $100 per year. Please note that this is a recurring fee which you’ll have to pay for every year.
4. Register your LLC or S-Corporation
After you’ve decided which business type is right for you (if you still don’t know, you can email me at firstname.lastname@example.org), and after you’ve decided in which state you should form your business in (if you’re not sure about this either, you can email me), then you should look to register your LLC or S-Corporation by filing the necessary filings.
As a business lawyer, I help entrepreneurs, just like you, form their LLC or S-Corporation (depending on which type is right for you).
Forming your LLC or Corporation yourself and making sure you’re doing everything correctly is complicated and unless you have a lot of time and patience, I would not recommend it.
Email me at email@example.com to know more about how to start a company LLC or S-Corporation
How long does the incorporation process take?
How long it takes to register your LLC or Corporation depends on which state you form your business in but it typically can take anywhere from 1 business days to 4 weeks, depending on which state you form your business entity in and how long the Secretary of State takes.
Do I need to submit any documents to start my business in USA?
No, you do not need to submit any documents to start your business in the United States.
5. Get an EIN
Every business in the USA needs an Employer Identification Number (EIN) (also known as a Tax ID number) to start a business.
EIN is a Tax ID number issued by the U.S. Internal Revenue Service (IRS) to identify a business.
Think of an EIN as the social security number for your business.
Just as a social security number is important for U.S. citizens to have, an EIN is necessary for an LLC or corporation to lawfully conduct business activities in the United States.
You need an EIN to:
- Open a U.S. business bank account
- Start a business
- Apply for business permits and licenses
- Hire employees
- File taxes
If you are a US citizen and you have a Social Security Number (SSN), you may apply for your EIN using IRS’s online website here.
However, if you’re a non-US citizen, you most likely don’t have a Social Security Number (SSN) or Individual Tax Identification Number (ITIN).
If you’re not a U.S. citizen and you don’t have an SSN or ITIN, learn how apply for your EIN here.
If you have questions about applying for your EIN without SSN or ITIN, email me at firstname.lastname@example.org
To guarantee completion of the EIN application process, I HIGHLY recommended having a business lawyer act as your third-party designee apply for your EIN on your behalf.
If you’re not a US citizen, email me at email@example.com to apply for your EIN
6. Get a US mailing address
Most U.S. banks also require a mailing address or residential address for opening a bank account.
You can provide your business address if you have a business address in the United States.
However, if you don’t have a U.S. address, you can use one of the following companies to get a U.S. address:
- Sasquatchmail.com (from $29/month)
- iPostal1.com (from $10/month)
- USAMail1.com (from $10/month)
- PhysicalAddress.com (from $8/month)
- TravelingMailBox.com (from $15/month)
- EarthClassMail.com (from $69/month) (expensive)
These services provide a U.S. mailing address for your business.
They scan your mail and send you an email. You can either view your mail online or forward the mail to any other international address no matter where you live.
Please note that before you can use their service or forward mail in your mailbox, you may need to submit Form 1583 from the United States Postal Service (USPS) to authorize these services to open your mail on your behalf.
Form 1583 only authorizes these services to receive mail on your behalf. It does not forward any of your current mail to them.
To forward all your mail to your mailbox, you need to submit a Change of Address request to USPS.
For instructions on how to do this, you can read this article.
If you do not want to forward all your mail to the mailbox, do not file the Change of Address with USPS.
Instead, you will need to manually update mailing addresses with those who you want to have mail sent to your new mailbox. Then they will send you automatic email notifications when you receive new postal mail in your mailbox.
Sasquatch Mail LLC offers mail forwarding service and a U.S. Mailing address for businesses from a professional location. The location is perfect for listing a required business address on entity registrations, websites, online directories and stationary. The prices are upfront and honest and without nickel and dime fees. The building is owned, allowing for a long term business address rental. Mail is not just re-wrapped and shipped. We open and scan your mail for instant viewing of the contents!
- Allotted Monthly Scans
- Street Address with Suite Number
- Online Mailbox
- Unlimited Scanned Storage
- USPS & FedEx Physical Forwarding
- 30 Day Physical Storage
- New Mail Notifications
- Phone Option for Virtual Office
- Secure Destruction
Cost: $9.99/month for 30 mail items per month
- Real U.S. street address
- Personal Digital Mailbox – access online or with an app to manage mail
- Flexible shipment scheduling (on request, weekly, bi-weekly, monthly)
- Your choice of carriers, ship dates and service level
- Free App for Android and iPhone
- Shipping to unlimited addresses, $100 insurance (UPS, FedEx, DHL)
- 24/7 digital access to all your mail items
- 30-day storage: all mail & letter packs
- See a picture of the outside of every mail item
- Automatic email alert for new items received Discard mail items service
- Up to five Mailbox recipients, if names added within 30 days of signup
- 2 GB secure cloud storage
- Consolidation of letters into one package for forwarding
- Real U.S. address for banking, credit card, personal purchasing or business purposes
- Purchase from any website without worrying about whether they ship internationally, or what their rates are for overseas shipping.
- View your mail online at any time.
- Consolidate packages and save on international shipping rates.
7. Open a U.S. business bank account
Most non-U.S. residents find this step the most challenging when it starting their business in the U.S.
You can open a business bank account once you’ve gotten your EIN. If you need an EIN, email me at firstname.lastname@example.org
Here’s a video where I clearly explain how to open a US Bank account as a non-US resident.
Until recently you could open a business account remotely with certain banks, but lately, that has not been possible.
You have to come to the United States and visit the bank in person to open a bank account.
I recommend contacting the bank you will be visiting in advance to confirm their requirements.
While I can’t help you open a business bank account remotely, I will prepare and provide you all of the documents you need to open your bank account when you go there.
Be careful! nobody should open a bank account for you and if you find someone or a company offering this service, be aware that you could be the victim of fraud.
If you’re looking to open a U.S. business bank account as a non-U.S. resident, you have 4 solutions:
Solution #1: Open a U.S. business bank account with your existing bank
If you already have a personal bank account with a US bank you can try calling them to open a U.S. business checking account.
This is the best option if you already have a personal bank account.
Your best option is to find a U.S. bank (such as Well Fargo, Citibank, or Bank of America) that also has a location locally in your country that will allow you to open up a U.S. bank account.
It’s always a good idea to have your bank close to you.
You can open up a business bank account in dollars in your home country, if possible, in a bank where they already know you.
First, talk to the bank in the U.S. They will tell you that they need to identify you in person to open your bank account. You can tell them that their local branch in your home country could do that identification on their behalf — then ask if that would work for them. If this is the case, ask for their contact information and ask them to call the local branch you are going to visit.
Then go to that local branch in your country. Tell them you are opening a bank account in the U.S. and that you just need them to identify you with your driver’s license or passport, and tell them that they’ll get a phone call from their headquarters in the U.S. asking for your identification.
The point here is to make the U.S. bank branch in your country provide the identification check in-person procedure required by the Patriot Act by meeting them in person with the proper identification.
Solution #2: Fly to the U.S. and open a U.S. bank account in person
Your most sure-fire way to open a bank account as a non-US resident is to fly to the USA and open a bank account in person.
You don’t necessarily need to travel to the same state in which you are going to set up your company, so it’s best to talk to the bank you will be visiting before you book your ticket.
Since New York is a major international hub, a lovely place to visit, and a State that doesn’t consider having a bank account there to be doing business there, it’s a great place to get a bank account for your company.
You can contact any number of banks there. Or, if you want to fly into Philadelphia and drive over to Wilmington, Delaware you can walk into Chase or Bank of America and get an account there. Florida is also a great state.
The only State I don’t recommend opening your US bank account is in California. Most states don’t consider a bank account to be doing business in that State, but California does. So unless you’re doing business in California, you’ll probably want to avoid opening a bank account in California.
You should contact the bank you’d like to visit to see what their requirements are before flying out.
Documents you need to take to the bank to open a U.S. bank account:
- EIN letter from the IRS (I will provide you)
- Copy of Articles of Organization (I will provide you)
- Ownership Agreements (Operating Agreement if it’s an LLC) (I will provide you)
Some banks require an Individual Tax Identification Number (ITIN) as well if you don’t have a Social Security Number (SSN). However, you’ll need to double-check with the bank first.
If you need an ITIN to open a bank account without a Social Security Number (SSN), learn more about getting an ITIN here or you can contact Sina Bonabi.
Sina Bonabi is an IRS Certifying Acceptance Agent, who specializes in filing ITIN applications for my clients. Sina is exceptional at what he does, very friendly and can answer any questions or doubts you have about getting an ITIN. You can email Sina at email@example.com
If you’re a non-US citizen, learn more about getting an ITIN here.
I always recommend contacting the bank you will be visiting in advance to confirm their requirements.
Solution #3: Open a virtual bank account with Payoneer.com
Alternatively, you can use Payoneer.com, which is an online payment system that allows you to open a US virtual bank account to accept payments from U.S. companies.
If the other options don’t work for you, you can use Payoneer which is a payment system that provides you with a prepaid MasterCard and can accept ACH transfers from US Companies.
If you’re trying to open use Stripe as a non-US resident, this is EXACTLY what you need.
Registration for Payoneer is very straightforward…
You can use this link to get $50 in your account for FREE (in full transparency, this is a referral link).
My past clients have been really happy with Payoneer in the past so that’s why I don’t mind referring them. Plus, you get a $50 rebate for signing up for their service.
Once you sign up, Payoneer will send you a MasterCard. However, you don’t need to wait to receive it and can start accepting payments from Stripe right away.
Try out this option if you can’t fly to the U.S. to open a U.S. bank account!
How I Can Help You
While I can’t help you open a business bank account remotely, I will prepare and provide you all of the documents you need to open your bank account.
I will provide you all of the documents you need, including EIN, Articles of Organization, Operating Agreement Agreement, Banking Resolution, and any other document you need to open your bank account.
Email me at firstname.lastname@example.org if you have any questions.
8. Open a business merchant account to accept payment from customers
Merchant services accounts allow you to accept credit and debit card transactions from your customers.
You can open a merchant account once you’ve gotten your EIN (if you need an EIN, email me at email@example.com)
The most popular options for opening up a merchant account are:
- Stripe.com (does not require an SSN, all you need is an EIN which I can get you)
- Payoneer.com (great for non-US residents)
- Paypal.com (requires SSN which most non-US citizens do not have)
You can also find other alternatives to Paypal here since Paypal requires a Social Security Number (SSN) which most non-U.S. citizens do not have. If you’re a high-risk merchant, you can check out emerchantbroker.com
9. Get business insurance (if necessary)
Business insurance protects you from the unexpected costs of running a business.
Accidents, natural disasters, and lawsuits could run you out of business if you’re not protected with the right insurance.
The protections you get from choosing a business structure like an LLC or an S-Corporation typically only protect your personal property from lawsuits, and even that protection is limited.
Business insurance can fill in the gaps to make sure both your assets and your business assets are fully protected from unexpected catastrophes.
In some instances, you might be legally required to purchase certain types of business insurance.
The federal government requires every business with employees to have workers’ compensation, unemployment, and disability insurance. Some states also require additional insurance.
Laws requiring insurance vary by state, so visit your state’s website to find out the requirements for your business.
6 most common types of business insurance you may need for your business
After you purchase insurance that’s required by law, you can find insurance to cover any other business risk.
As a general rule, you should insure against things you wouldn’t be able to pay for on your own.
Speak to insurance agents to find out what kinds of coverage makes sense for your business, and compare terms and prices to find the best deal for you.
Here are 6 most common kinds of business insurance to look for:
4 steps to take to buy business insurance
- Assess your risks. First, think about what kind of accidents, natural disasters, or lawsuits could damage your business. If you need help, the National Federation of Independent Businesses (NFIB) provides information for choosing insurance to help you assess your risks and to make sure you’ve insured every aspect of your business.
- Find and use a reputable licensed agent. Commercial insurance agents can help you find policies that match your business needs. Keep in mind that they receive commissions from insurance companies when they sell policies, so it’s important to find a licensed agent that has your best interest in mind. One reputable online business insurance service you should check out is CoverWallet (in full transparency, I’m an affiliate).
- Always shop around! Prices and benefits can vary significantly. You should compare rates, terms, and benefits for insurance offers from several different companies and agents.
- Re-assess your business insurance needs every year. As your business grows, so do your liabilities. If you have purchased or replaced equipment or expanded operations, you should contact your insurance agent to discuss changes in your business and how they affect your coverage.
One option you can check out is CoverWallet. CoverWallet is an online business insurance platform that provides the easiest way to understand, buy and manage insurance for your business.
They provide free assessment tools to find out exactly what insurance your business needs, an abbreviated online application, and the ability to purchase and manage your insurance, all in one place.
10. Get ITIN (if you’re a non-US citizen without SSN)
If you’re a non-US citizen and you don’t have a Social Security Number (SSN), you will also need an Individual Tax Identification Number (ITIN).
ITIN is a personal tax ID number issued by the IRS to individuals who are required to have a U.S. taxpayer identification number but who do not have a Social Security number (SSN).
You need an ITIN to:
- Open a U.S. bank account (Personal and Business) (all U.S. banks require SSN or ITIN to open a bank account)
- File tax return if you owe taxes
- Comply with any U.S. federal tax withholding requirements if you’ve earned income in the U.S.
- Provide it to an employer to help get a job
- Apply for a mortgage loan and finance a car
- Apply for an apartment rental
- Open a Paypal or Stripe account which requires an ITIN to accept payments
The good news is that I offer an ITIN service!
We’ve assisted 1,468 clients just like you successfully get their ITIN and we can help you get yours.
As IRS Certifying Acceptance Agents, we’re trained and authorized by the IRS to assist foreign individuals who don’t have an SSN get their ITIN.
You can find our certification as IRS Certifying Acceptance Agents under “Mollaei Inc DBA EIN Express” here.
Here’s how we work…
- We file ITIN applications by first determining how you qualify to apply for an ITIN.
- Then we work with you to get the appropriate supporting documentation based on your case.
- Then we authenticate your identification documents and create certified copies so you don’t have to send your originals to the IRS.
With an ITIN you will be able to open a U.S. bank account, file tax returns, and comply with the IRS if you don’t have an SSN.
Here’s why you should work with an IRS Certifying Acceptance Agent to get your ITIN:
- If you apply for an ITIN on your own, you MUST submit your ORIGINAL identification documents (such as your passport) to the IRS — this takes the IRS 3 to 4 months to return your passport with the risk of your passport getting lost in transit. However, when you apply for your ITIN with an IRS Certifying Acceptance Agent (like us), I can create an official certified copy of your passport so you do not have to submit your original passport with your ITIN application (and keep your passport to travel with).
- By applying for an ITIN on your own, the expected IRS processing time is 6 to 8 weeks. However, when you apply for your ITIN with an IRS Certifying Acceptance Agent (like us), it will take a much shorter time of 3 to 4 weeks.
- Lastly, 2 out of 3 ITIN applicants end up getting REJECTED by the IRS. By working with an IRS Certifying Acceptance Agent (like us), we have a 95% chance of getting your ITIN application accepted and we work closely with the IRS to ensure there are no issues with getting your ITIN application accepted.
If you have any questions about applying for your ITIN, contact Sina Bonabi, who is an IRS Certifying Acceptance Agent trained and authorized by the IRS to file ITIN applications, directly at 818-335-1488 or you can email him at firstname.lastname@example.org
11. Understand your tax responsibilities and file your taxes
I’m not an accountant and I don’t offer any tax advice.
I strongly advise that you consult with an accountant to ensure that you file your taxes on time and to set up payroll if needed.
A great accountant can help you reduce taxes and maximize deductions.
For any business tax questions or to file a tax return for your business, I recommend Greenback Business Services. They have expert accountants on staff year-round to help with your tax filing and bookkeeping needs.
Greenback Business Services helps entrepreneurs navigate the ridiculously complex US tax system in a way that makes sense for their individual situation and business goals. While it may sound impossible, Greenback makes the process of filing your US business taxes as simple as possible. You can learn more about the service here.
LLC Tax Implications for Foreigners
An LLC can have great tax advantages, especially for foreign entrepreneurs abroad.
An LLC is a pass-through tax entity. What this means is that the LLC is not taxed directly. Instead… the profits and losses of the business pass through to its owners, who report them on their tax returns.
A little known fact is that the US can be one of the biggest tax havens in the world. An LLC opened by a non-US citizen or nonresident can allow for earnings that are not taxed in the US.
Of course, certain rules apply to avoid LLC taxes (and you should always consult an accountant or tax expert).
Effectively, as a foreigner, you must have no US presence. You are only subject to US tax if you are “engaged in a trade or business in the United States”, which only applies if two things are true:
- You have at least one “dependent agent” in the US, which are employees or companies that work for you almost exclusively, and
- This dependent agent does something substantial to further your business in the US, as opposed to something purely administrative.
If you don’t have a dependent agent that substantially furthers your business in the US and don’t have an office in the US, you are not subject to US tax. Even if the LLC generates income in the US, the income is not taxed in the US.
Furthermore, if you reside in a country with an applicable tax treaty with the US, then you would not be subject to US tax. Since you reside in your tax home, you can claim you operate a “permanent establishment” (e.g., an office or another fixed place of business) in your home country.
In other words, when you work and pay tax in your home country, the tax treaty will circumvent any of the US rights to tax you since you are working and living in your respective country.
US Tax Issues for Amazon FBA Sellers
When it comes to Amazon FBA, if you’re a non-US human or a non-US legal entity and your only activity in the U.S. is selling products on Amazon FBA, you are NOT subject to U.S. Federal Income Tax.
A non-US person is subject to U.S. tax on business income ONLY if they’re engaging in a trade or business in the United States.
This means that you have to have some people on the ground in the U.S. who operate your business (these have to be your people and not just someone else’s people).
A non-US person is engaged in a trade or business in the U.S. only if they have:
- At least one dependent agent on the ground in the U.S. and
- That dependent agent does something substantial to further the business.
An acronym for this is ETBUS (Engaged in Trade or Business in the U.S.)
Third-party fulfillment centers are NOT considered to be “engaged in trade or business in the US” — so that that means is that just by having your products sent to third-party fulfillment centers in the US, you would typically NOT be subject to US taxes.
In other words, if you engage with an independent distributor then that would NOT be considered in “engaged in trade or business” in the U.S.
Third-party fulfillment centers, distributors or wholesalers who you ship your inventory to who then ship out your orders to customers do NOT constitute you to be doing business in the U.S.
I’m not an accountant, and I strongly advise that you consult with an accountant about how to deal with business taxes as a non-US resident.
Tax Implications for Foreign “Fulfillment by Amazon” Service Providers
For example, a foreign entrepreneur sells products into the US market using Amazon’s “Fulfillment by Amazon” service. All marketing and procurement are managed online by the non-US citizen, who lives in Colombia. Products are ordered and shipped to Amazon’s warehouses, where Amazon employees package the products and ship to customers in the US.
In this case, Amazon is not a dependent agent but an independent agent that has its own business with millions of other clients. Amazon is not uniquely working for this foreign entrepreneur. Therefore the foreign entrepreneur is not “engaged in a trade or business in the US,” so he or she is not subject to US tax on income from selling products into the US.
LLC Tax Filing Requirements for Foreigners
Previously, foreign-owned single-member LLCs enjoyed an exemption from US tax reporting requirements. However, starting with the 2017 tax year, LLCs that are wholly owned by foreign persons and did not elect to be treated as corporations for tax purposes, are subject to new IRS reporting requirements.
All foreigners who own a US LLC must file a 5472 US tax return with the IRS for disclosure purposes even if they do not owe tax in the US. The deadline is April 15 for LLCs that use the calendar year.
While this new reporting requirement presents a major hassle for foreign owners, it does not create a new tax obligation.
This new filing requirement applies to all single-member LLCs owned by a non-US person with “reportable transactions”.
Furthermore, each disregarded LLC has to comply separately with these new requirements, even when they have the same owner.
The IRS defines a “Reportable Transaction” very broadly as any type of activity between a foreign owner and the LLC. For example:
- The use of LLC property, such as real estate, by a foreign owner or related party
- The exchange of money, including payments, capital contributions, and capital reductions
Note that the IRS does not give a monetary requirement. So even a transaction of a small amount would trigger the new reporting requirement.
If you are unsure if you have reportable transactions and need to file Form 5472, contact a tax specialist. Failure to file carries a stiff penalty of $10,000. The penalty also applies to the failure of maintaining the required records.
For any business tax questions or to file a tax return for your business, I recommend Greenback Business Services. They have expert accountants on staff year-round to help with your tax filing and bookkeeping needs.
LLC Tax Filing Requirements for US Citizens and US Residents
As mentioned earlier, the IRS does not treat an LLC as a separate tax entity. Instead, all its income is passed through to the members of the LLC, who must declare it and pay personal income tax.
A single owner of an LLC would include the profit and loss from the LLC on Schedule C of his or her Form 1040. With two or more partners, each owner reports the allocated portion of the profits on their tax return.
However, some US states tax LLCs directly. Also, note that an LLC may elect to be taxed as a corporation. In many cases, American taxpayers will also be required to pay self-employment tax in addition to income tax.
12. Keep your business and personal bank accounts separate
If you do form an LLC or S-Corporation, make sure to keep your business and personal accounts separate.
Keeping your business assets separate from your assets can help ensure that your LLC or Corporation is solely liable for its debts and liabilities and that you and other members are protected.
This is very important.
If you don’t maintain this financial separation, you risk losing the liability protection that your LLC or Corporation provides.
To get started separating your assets, follow these steps:
- Consider opening a bank account and credit card account that is entirely in the LLC’s name that will be used only for business expenses
- Consider moving personal property that will be used by the LLC, such as real estate or a vehicle, out of your name and into the name of the LLC
13. Maintain company and pay annual fees on time
Keeping your LLC or Corporation compliant is essential and continues long after you’ve formed your business.
If you do not maintain your LLC or Corporation according to U.S. law, your liability protection will be pierced, putting your assets at risk.
For non-U.S. residents trying to find out how to start a business in the USA for non-citizens, compliance with the law is essential to avoid visa, immigration, and tax problems.
Most states have some form of an ongoing cost for having an LLC or Corporation.
In Delaware, the ongoing cost of a Delaware LLC is an annual fee of $300 due by June 1st, beginning the year following formation.
In California, all California LLCs, regardless of income or activity, must pay an $800 Franchise Tax fee every year. $800 payment for the LLC Franchise Tax is due by the 15th day of the 4th month after your LLC is filed.
So make sure you understand what your annual fees are and make sure you pay it on time.
14. Make sure you’re complying with city, county, and federal requirements
Even though you have complied with state laws to form your LLC or Corporation, you need to also contact the city or county where your LLC is located to determine if you need any business license or permit.
These requirements vary, depending on where your business is located, and what industry you’re in.
Typically, you don’t need to register with county or city governments to form your business in USA.
If your business is an LLC or Corporation, you might need to file for licenses and permits from the county or city.
Some counties and cities also require you to register your DBA — a trade name or a fictitious name — if you use one.
Local governments determine registration, licensing, and permitting requirements, so visit local government websites to find out what you need to do.
Also, you may need to get a federal license or permit if your business activities are regulated by a federal agency.
The safest thing you can do is to check the Federal licenses and permits list and the State licenses and permits list see if any of your business activities are listed here, and then check with the right federal agency to see how to apply and how to open a company in USA.
Requirements and fees depend on your business activity and the agency issuing the license or permit.
It’s best to check with the issuing agency for details.
15. Talk to a Business Lawyer
It’s very complicated and challenging to start a business in the USA.
The biggest mistake entrepreneurs make is never consulting with a business lawyer before starting their business.
This puts important personal assets (such as a personal bank account, home, car, property, etc.) at risk.
Also, for some reason, entrepreneurs have come to believe that using an online company formation service is an acceptable option even when they are getting started with their first business venture.
This couldn’t be further from the truth…
Starting your business correctly will save you thousands of dollars in taxes, administration costs and wasted time.
Consulting a business lawyer is a valuable investment if you’re serious about starting your business.
Make the wrong choices, however, and you could find yourself losing control of your company, unable to raise finance or even find yourself in lawsuit trouble.
There’s no simple answer to every entrepreneurs’ needs when it comes to starting a business in the U.S.
The steps to take depend on a careful assessment of the business plans, legal rules in the United States and abroad, financing issues and more.
You should consult a business lawyer to make sure you’re complying with all federal, state, and county regulations. That way, you can also get the basic idea of how to start a business in the USA for foreigners.
Talking to a business lawyer is a valuable investment if you’re serious about starting your business.
What to Do Next
As a Business Lawyer for Entrepreneurs, I’ve assisted hundreds of non-US clients just like you start their U.S. business and I can definitely help you start yours.
The first step is to book your Strategy Session here to discuss your options for you.
In most cases, LLC is the best business type for you.
- LLC gives you access to open a US bank account
- LLC makes it easier to accept payments from US clients
- LLC provides personal liability for your business so your personal assets will be protected
If you’re a US resident, I definitely recommend forming your LLC in the state where you’re physically located.
If you’re a non-US resident and you will be operating your business OUTSIDE the U.S., then I definitely recommend forming your LLC in Wyoming.
I strongly recommend Wyoming if you’re a non-US resident because of its lower annual fees, more privacy, and foreigner-friendly laws.
The Comprehensive U.S. Business Package Service includes everything you need to start your business in the US:
- Registered Agent Service – Protect your privacy and maintain good legal standing by providing reliable Registered Agent service that accepts legal documents on behalf of your business with instant notifications of all documents received. Service comes with a secure online dashboard to keep your LLC organized and compliant.
- LLC Company Registration – LLC protects you personally from potential business lawsuits, protects valuable assets that you own, and separates your business expenses from your expenses to minimize taxes. If you don’t form an LLC, your assets (such as your home, cars, personal bank accounts, investments, etc) are at risk if your business is sued.
- Getting an EIN – EIN is a tax ID number issued by the IRS necessary for opening a business bank account, filing taxes, hiring employees, getting a business credit card, applying for business licenses, and complying with the IRS. All US banks require an EIN to open a business bank account.
- Drafting Personalized Operating Agreement – Necessary legal agreement you need for your LLC to get personal liability protection. You need an Operating Agreement to prove that you have a legitimate LLC and that you are running your business properly. Your Personalized Operating Agreement will be customized based on your specific business.
- Drafting Banking Resolution and Advising on How to Open a U.S. Bank Account – the Custom document that authorizes you to open a US bank account on behalf of your LLC. I will also advise you on how you can open your US bank account to accept payments from your US clients.
- BONUS: LLC Next Step Guide – Important and necessary information you need to know to make sure you’re taking the correct steps after your LLC is registered. Every year, thousands of LLCs are fined or suspended for missing important state filings. When this happens, LLC owners risk losing limited liability protection. To avoid getting fined or suspended, I will inform you of important forms and deadlines to keep your LLC compliant.
- BONUS: The Peace of Mind that comes with knowing your business is set up correctly and in compliance with US federal and state requirements and having a business lawyer on your side to support you and answer your questions (so you can spend more time growing your business).
Interested in starting your business in USA?