Posted by Stephanie L. Chapman, CPA
Starting a business in the U.S. can be a rewarding experience for many. However, there are a lot of items to consider and issues to be aware of before you open your doors. The good news is that foreign nationals are able to create and open a U.S. business as quickly and easily as Americans. The only difference is the planning that needs to be done beforehand to ensure you are in the best position possible. Below is a list of steps to consider before starting a business in the United States.
Steps to Starting Up a Foreign Business in the U.S.:
Business entities are formed at the state level in the U.S. The process will vary from state to state, but generally involves two steps: applying to register in that particular state, and establishing a registered agent with a valid address in that state (no PO Box numbers). A registered agent can be either the business owner or another person who is authorized to receive legal papers on behalf of the business, such as an attorney or secretary. The rest of the steps to starting up are similar to those that an American citizen would take:
- Establishing an online retail presence in the U.S. is a popular choice for many foreign business owners.
- Due to the Patriot Act, opening a U.S. Bank account is difficult for non-U.S. individuals. Often, a trip to the U.S. is necessary to open the account in person. However, depending on existing banking relationships in the home country, this obligation may be more conveniently met.
Importing Goods into the U.S.:
- The Department of Commerce’s Trade Information Center provides information and web links to importation procedures.
- Working with a licensed customs broker could be a valuable asset to your import plan. A customs broker prepares all the documentation required for importing goods. To learn about laws and regulations applying to custom brokers, including licensing requirements and importing procedures, visit the Transportation and Logistics Guide.
- Many imported and exported products are regulated by federal agencies and may require specific licenses and permits. Check here to see if you need to obtain additional paperwork.
U.S. Tax Information for Foreign Businesses:
- The U.S. tax code can be confusing even to life-long citizens. Violation of any tax—sales, payroll, income, etc.—can incur fees and penalties. The IRS offers a guide specifically on International Business, but if you are still left with questions, please contact one of our international tax experts.
- Opening a U.S. bank account will require an Employer Identification Number (EIN) to start up, a process that requires a U.S. person’s social security number (SSN). In the case of businesses with a foreign owner, an Individual Taxpayer Identification Number (ITIN) will suffice. The IRS issues these 9-digit tax processing numbers to individuals who are required to pay U.S. taxes, but are ineligible for a SSN, including resident and non-resident aliens and foreign nationals.
- You may be required to file IRS Form 5472, which applies to U.S. corporations with at least one foreign owner who owns 25% of shares, to account for the nature of monetary transactions.
- There are also special tax credits and incentives available to businesses, including foreign tax treaties. The IRS offers a tax treaty overview and resources here.