The Foreign Citizen’s Guide to Starting a Business in the US

The United States doesn’t bar foreign citizens from establishing businesses in the US. In fact, at first glance, it may seem easy for a foreign citizen to do so – in general they need merely follow the same procedure as a US citizen.

However, there are a myriad of factors that can stymie a foreign business owner. There are issues of immigration visas, international tax issues, and the decision of where would be the best place to establish your enterprise. Once you have a handle on these three, you can begin the process of establishing your business in the United States.

Immigration Visa

When people hear the word “immigration” they frequently think of permanent residence or new citizenship. This is not the case. Immigration also refers to short to long term “passes” for foreign citizens, which may come with single to multiple entries.

Many foreign investors wish to retain the citizenship of their own country but still be permitted to regularly visit or stay for long periods of time in the United States while overseeing their business.

However, the United States has a complicated immigration process. In fact, many attorneys in the United States who practice immigration law only practice immigration because of how deeply specialized and nuanced it can be. Because of this, it is wise to seek consultation from a US immigration attorney to who can establish what visa will work best for you and guide you through the process.

As a foreign business owner you will likely apply for a B-1 visa (short term business visa).

Taxation

Even though you may not be a citizen of the US if you’re involved in a business you’ll still be taxed like one.

The Internal Revenue Service is the US government entity that oversees taxation. The IRS has stated that a nonresident alien who is engaged in a trade or business in the US during the year must file a tax return. Beyond this, you may still owe taxes under international tax regulations or to your country of citizenship.

Location

In the United States, location matters. The US is governed by two sets of law, federal and state. And State law significantly influences business incorporation and management. Beyond this, the statistics of a city should be carefully analyzed for potential growth and opportunities as well as obstacles. It can be difficult for new business owners to find the ideal location for their business or branch because of just how varied states are from one another, and the problem becomes even more complex when cities are taken into consideration.

Below are three examples of cities in three different states, all of which are great candidates to start a new business or branch, but vary in desirability based on industry.

Seattle, Washington, for example, has become a hub for tech-based businesses (including Microsoft) and it has no shortage of educated, skilled, and innovative potential-employees. However, Seattle is approximately 25% more expensive than the average US city and minimum employee salaries are $13 per hour, with a rise to $15 expected in 2021.

For those seeking to create a business that is rooted in education, arts, tourism, or financial services then Sarasota, Florida may be the ideal city. The cultural industry drew revenue of $2.6 billion USD in 2015 and the cost of living is a little lower than average. The city is also anticipated to become a growing hub for e-commerce.

Charlotte, North Carolina, however, is perhaps the ideal state for those seeking to get involved in health-care, banking, or retailing. The city is also notable for having a nonprofit called Business Innovation and Growth Council, which seeks to support entrepreneurship by helping small businesses connect with resources in order to foster growth.

Because of the nuance involved it is key to carefully research the location of your new enterprise.

Establish your business

With these three major obstacles out of the way, the next matter is how can you actually create your business?

The process is not dissimilar from a US citizens and, in fact, it’s a process that shares many similarities with establishing a business in China.

The first question to ask is what type of corporate entity you want to establish. The two major types are corporations and limited liability companies.

What type of business entity?

A corporation is an independent legal entity owned by shareholders and is generally suggested for established, larger companies with multiple employees. If you are seeking to establish a branch of your firm, for example, a corporation may be ideal. The corporation model shields it shareholders from business debts and the actions of the corporation, as corporations may be sued. However, the tradeoff is that the corporation is an entity that is double taxed. First at the entity level and then at the shareholder level. In terms of tax, the IRS considers global income, not just US revenue.

The second entity discussed here is the limited liability company. An LLC, as it’s known, is a hybrid entity that provides certain features of a corporation and a partnership, another form of business entity. An LLC can be preferable because investors may only lose as much as they invested (and no more), but the business entity doesn’t receive the double taxation that a corporation does.

 

What state will you incorporate in?

As discussed above, your location matters. Not only because of opportunities and obstacles but because you will need to incorporate in that state and follow that state’s process. To incorporate in the state of California, for example, you will need to mail all relevant paperwork to the Secretary of State.

What industry will you you be working in?

Your industry can influence the type of licenses and permits the state you incorporate in requires. For example, a law firm would need a license to practice law, among a myriad of other permits and licesnes which are required by nearly all businesses. Such as a land use permit and a business license.

Other considerations

It is important to note that in order to open a bank account, secure a business license, obtain loans, hire employees, and pay taxes you will need an Employer Identification Number. An EIN must be applied for through the IRS.

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