A helpful guide on how to understand business competitors in a new international market from Wise Business
Starting a new business is an exciting venture, but it can also be a scary one. The complexity of opening a shop in a foreign country can be overwhelming. With changes constantly happening in the political and economic climate in the US, you may even be unsure if now is the right time to get your business going. However, the United States has welcomed foreign businesses for quite some time and will likely continue to do so.
The good news is that the steps for setting up a business in the USA from the UK are fairly simple, and there are plenty of resources available to help you along the way. This guide will help break down the complexities of registering a company in the USA. We'll also present you Wise Business, a multi-currency account that can come in handy for you to manage international finances.
At the moment, there are two types of entities that non-residents can open in the US:¹
- Limited Liability Company (LLC)
- Corporation (C-Corp)
While foreigners are often recommended to form a C-Corp, there are some distinct advantages to open a LLC in the USA for non-resident. The most obvious of these is limited liability - meaning members are protected from personal liability for business decisions or actions, and personal assets are safe if the company incurs debt or is sued. LLCs are also free from the strict recordkeeping necessary for C and S-Corps, and have almost no restrictions on profit sharing between members.
|Read more about how to open a US bank account for LLC as non-resident
That being said, many new businesses choose the C-Corp business structure. The advantages of forming as such are significant, with the most often-cited reason being the ability to expand by offering unlimited stock: a feature that is often attractive to investors.
Foreign owners also find solace in the C-Corporation structure for its ability to protect them from close I.R.S. involvement. That shield, of course, comes with the price of double tax- but that financial damage is often avoided through careful tax planning, which can be structured to cancel out most of the double taxation.
If your plan is to move to the US and start or expand your business there, the type of visa you’ll need will depend on your business’ current state.
If you have an existing business outside of the US that is trading for at least twelve months and have four or more employees, you’ll need to get a L-1A visa otherwise you’ll need an E-2 visa (for business operating for less than 12 months and have fewer than 4 employees).
E-2 visa is also suggested if you don’t have a business outside of the US and want to move there to start one. It is also the most popular for entrepreneurs (and the closest thing the US offers to a “start-up visa”). You can also check the Investor Visa EB-5 as an option.
Here are the key requirements to get a E-2 visa:
- You should be national of a country with which the United States maintains a treaty of commerce and navigation
- A detailed business plan
- A successful visa applicant must be acting under a supervisory or executive capacity whilst undertaking their business in the USA
- An applicant must have invested, or be in the process of investing a significant amount of capital into an existing and operating US enterprise, and be entering the US based on these terms.
The E-2 visa is valid for an initial 2 years. The activities of the business will be reviewed after this period and if the conditions of the visa are being continually met, status can be extended in additional two-year stages.
The best state to register in is the one in which you will be conducting business. However, if you’re an online company or do business across a range of regions, you may want to consider registering in a state with lower tax burdens. Two states that are notoriously inexpensive for entrepreneurs are Nevada and Delaware.
Delaware is particularly popular, thanks to corporate law that provides significant protections to shareholders and directors. Incorporating in Delaware also doesn’t require a physical address or bank account. In fact, the state is so welcoming to foreign entrepreneurs that Delaware’s corporate law website is available in quite a few different languages.
The process for registration varies slightly from state to state, and is somewhat dependent on whether you’re forming an LLC or a C-Corp. Here are some of the basic steps and requirements³:
You will need to choose a unique name that has not been previously registered in the United States. The US Patent and Trademark Office has a trademark database you can search.
You’ll likely need to register with any state where you will conduct business activities. This involves;
- Having a physical presence in the state
- Frequent in-person client meetings in the state
- A significant amount of your company’s revenue comes from that state
- If any of your employees work in the state
A registered agent is a business or individual who receives official papers and legal documents on behalf of your company.
You’ll need to file for a foreign qualification in other states where you also conduct business activities.
The documents you’ll need will vary according to your business structure and the where you register the business. You’ll typically need the following information:
- Business name
- Business location
- Ownership, management structure, or directors
- Registered agent information
- Number and value of shares (for corporations)
The total cost to register your business in the US is usually less than $300 but this can vary from state-to-state and your business structure.
You might need to file for licences and permits from the county or city for LLC, corporation, partnership, or nonprofit corporation business types. If you’re using a trade name or a fictitious name, you might also have to register them in the local county or city.
If you don’t have an existing business account, you’re required to get one to carry out business financial transactions in the US especially for LLC and corporation types.
There are a lot of options to choose from but it's worth putting some effort into research as some banks/providers can be a lot cheaper than the other for the same types of services.
If you’re looking for a more flexible and quick to open business account, check out Wise Business - it's specially designed to cut the cost on international payments, and you can earn a return on the money you hold into your multi-currency account.
The US Small Business Administration is a great resource for more comprehensive information about opening a business. You’ll also want to give yourself a crash course on corporate law in the state in which you plan to register. While you may have to find these individually,
Cornell University has a table of various state laws regarding corporations.
If you’re still looking for a deeper dive, check out the United State Government’s Business USA; it’s a central, governmental platform for businesses to access information and services designed to help them get started and grow.
While you’re getting started, if you’re looking to fund your new venture from abroad at the least possible cost, consider using Wise Business. Wise always uses the real mid-market exchange rate, which generally beats the banks, but since your money is received and sent locally in both your home country and in the United States, all those nasty international fees magically disappear. Give it a try.
Sources used in this article:
Last checked on September 14, 2023
This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise Payments Limited or its subsidiaries and its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional.
We make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date.
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