Open a Business in the USA

open a business in the USA

Starting a U.S.-based business as a foreigner can be a long road, but the country makes it easy to register your company and open your business. Learning English is a basic requirement if you plan on doing business with Americans, but other aspects such as filing for your Employer Identification Number (EIN), and choosing which type of company you want to be, can make matters more confusing.

How to open a business in the USA for foreigners  

Most foreign nationals say Schwartz International tax advisor and lawyer Richard Hartnig, choose to establish a C corporation, which can expand by offering unlimited stock and is typically more attractive to outside investors, even though its profits are taxed twice, first at the corporate level, and then as dividends to shareholders.

For corporate shareholders, the advantages are usually clear: Corporate shareholders typically qualify for a lower dividend rate. And so long as the U.S. company doesn’t primarily hold real estate, the corporate parent won’t pay capital gains when it sells the U.S. affiliate. Even individual foreign owners are probably best off with a C corporation, says Hartnig, since the structure will shield them from direct IRS scrutiny. “Foreign individuals are very, very hesitant to put their names on the U.S. tax rolls,” he says. 

Of course, C corporation owners pay more for that shield as a result of the double tax. But in many cases, tax planners can use salaries, pension costs, and other expenses to reduce corporate income and eliminate much of the double taxation.

All that said, in some cases–usually depending on the particulars of one’s native tax laws–a limited partnership may be the best business structure. In a limited partnership, partners without management control have limited liability, and profits are passed through to the members, who pay income tax on their individual tax returns.

Choose a State to Register Your Company In

The company’s business should determine where it locates. If one state dominates its market, it’s best off incorporating there–there’s no way to avoid obligations of doing business in, say, California, a famously high-cost jurisdiction, by registering in Nevada or Delaware, two famously low-burden states. On the other hand, if the business will not be concentrated in any particular state, most advisors will probably recommend Delaware incorporation, followed by Nevada.