Benefits of Forming a US Company as a Non-US Resident

Napoleon

Aug 6, 2024 — 8 min read

Most foreigners know about the US but don't know how easy it is to start a business there, with numerous benefits, such as forming a tax-free US company. Since incorporating a business in the US is advantageous, at Foundeck, we advocate that you consider making the US your first choice to incorporate your business.

It's a misconception that only American citizens can register a company in the US. Forming and maintaining a company is easy and affordable.

This blog walks you through the benefits of creating a company as a non-US resident, and you can participate in this world economy.

What Non-US Residents need to Consider when Forming a Company in the US

You may expect to be subjected to the same procedures as a non-resident when forming a business. However, there are conditions and limiting factors that apply to foreigners. For instance, opening an account with a bank, applying for a Visa, and dealing with international taxation issues are daunting to non-residents.

Here are points you should consider when forming a business in the US.

1. Business registration

Organizations in the US are incorporated at the state level, not the federal level. Some states could be more favorable for your company if you're a non-resident. For instance, Delaware and Nevada are considered low-burden states that attract most foreign investors.

Here are some reasons to consider incorporating in Delaware:

You don't require a Delaware bank account or an address within Delaware.
Delaware corporations that do not conduct business within the state are exempted from state income tax.
Delaware has relatively balanced and non-disclosure corporate laws.
Investors prefer forming companies in Delaware because no regulations block mergers like in California.
Delaware's laws shield directors to a great extent, for instance, including indemnification of losses incurred from lawsuits.
You can register your US company online through Foundeck. You must hire formation specialists as your registered agent to form an online business.

2. Company structure

The US provides different ways to structure a business for non-residents:

Limited liability company (LLC): An LLC is a legal business entity that protects the company from the owner's liability. The significant advantage of incorporating it is that it shields business owners from legal claims during their businesses' defense. Business owners do not use their personal assets since they're protected from the company's liabilities under an LLC. Usually, small businesses prefer LLCs for this and many other motives.
Limited liability partnership (LLP) or partnership: An LLP is a legal business entity with a partnership agreement defining the roles and liabilities. One of the main disparities between an LLP and an LLC is the requirement of a managing partner who becomes responsible for everything the partnership does. Entrepreneurs generally prefer LLPs when they have more than two business partners.
C-Corporation (C-corp): A C-corporation is a legal entity with well-defined rules on taxation, governance, and legal compliance. C-corps are usually adopted by big companies that want to obtain venture capital financing.

3. Citizenship by investment

Using the EB-5 Immigrant Investor Program, you can obtain US citizenship through a sizable investment in the country's economy. To qualify, you must meet these requirements as a non-resident intending to invest.

You must invest at least $1,050,000 in a new business enterprise the non-resident wants to establish, creating at least 10 full-time jobs. The investment requirement is lowered to $800,000 if invested in a public infrastructural project or targeted employment area.

Investing in a green card is not easy, but it can yield a great deal in return. This route eliminates specific education requirements, queues, and quota restrictions. Finally, you don't need skills or sponsors. Spouses and children under 21 can immigrate to the US with their green card-sponsored spouse program.

4. Bank account

EIN is not required during business registration, though it is essential in opening a business account, applying for a business license, applying for loans, employing workers, and paying taxes. You can get an EIN free of charge from the IRS, or if you are unsure, you can hire a business formation service.

When setting up a business in the United States, ensure you can open a US bank account, which may be problematic due to the Patriot Act. This act requires every bank to verify the identity of anyone opening an account and meet the anti-money laundering and anti-terrorism checks. You can meet these requirements by:

Having a customer visit the US. Using a visitor visa and physically opening an account in the company.
If allowed, go to your country's local US bank branch for identification purposes.
Use third-party services to open a business bank account.

Benefits of forming a US company as a Non-Resident

Registering a company in the US as a non-resident provides you with the following benefits:

1. Reputation

The US has the largest economy in the world; therefore, companies in that country are considered more reliable. However, suppose you operate an offshore company registered in jurisdictions such as Seychelles or Bermuda. In that case, you may encounter questions from European clients who refuse to accept invoices or other financial operations, as European tax services are attentive to such offshore companies.

You won't face such issues when your US company issues invoices. The US is not flagged as a tax haven, and thus, clients are not very resistant to invoices from US companies.

2. Tax benefits

Taxes are one of the determinants that you should consider when registering a US. company. Luckily, forming a US company is possible using an LLC formation, which exempts tax on the newly formed company. To avoid getting tangled in the US tax laws, open a company in the form of a US. LLC online, avoid the physical presence, and hire employees if you are not US-based.

It applies to services such as copywriting, software development, dropshipping, consulting, or any SaaS company. However, there are certain conditions; therefore, research on how to start a tax-free US company with an LLC is necessary to know all the requirements.

3. Availability or market entry to the US market

The US has the world's largest and richest consumer market, with a GDP of $20 trillion and a population of 325 million customers. The world's biggest spenders account for over a quarter of the world's household consumption.

Due to having a US company, you are privileged to have direct market access, meaning you can sell directly without the help of intermediaries. Also, consumer purchases in the United States are typically made by American companies rather than companies in other countries.

4. Types of payment processors, credit facility

Currently, payment processing for the US is vast, and you can choose from options like Stripe, PayPal, Shopify Payments, and High-Risk Payment Processors for the US LLC.

Stripe is preferred by non-US-based businesses, perhaps because it is an international company. Moreover, you can always start an online business with a US LLC and Stripe, even if Stripe doesn't operate in your country.

If Stripe is available in your country, creating a US-based Stripe account would be more beneficial since the payout time is two business days, including the possibility of instant payouts at a 1% fee. This can be significantly better than Stripe accounts in some countries like Brazil, where the average time is 30 days, or in Singapore, which is 7 days.

Furthermore, having an account with Stripe based in the United States gives access to Stripe Capital, which conducts credit sales based on monthly performance. You can receive loans with no credit check if you have a registered US business and constant income over the last few months.

5. Making access to the US capital

The professional level of venture capitalists in the USA is the highest, and the number of VC deals is the largest worldwide. If you have a promising start-up idea, starting a company in the US and looking for funds from US sources is beneficial.

For this, it is advisable to form a Delaware C-Corp. Most angel investors and Venture Capitalists prefer investing in Delaware Corporations because they are comfortable with Delaware's laws concerning corporations. However, structuring as a C-Corp eliminates the advantage of getting the tax status of a US LLC. Therefore, one must evaluate the circumstances to consider a corporation or register an LLC.

6. Easy annual compliance

In most countries, compliance business annual compliance is complicated and expensive for organizations. Some require a certified public accountant's audit at least once a year, irrespective of the company's scale, whereas some, such as Singapore, require a resident director.

If you do not have a local director experienced in the country's laws, you may have to spend thousands of dollars annually to compensate for a nominee director. This is even more daunting if one cannot communicate in the local language of the people one is dealing with.

Fortunately, some of these matters are eased when registering a US company. A US company can be 100% foreign-owned because foreigners and companies can invest in the United States economy. Registering a US LLC also eases compliance.

You must only pay the annual reporting fee, keep the yearly Registered Agent Service, and file form 5472 if you do not have federal taxes.

7. Great banking system

Although the American banking system is far from perfect, it has perks. Banking fees are low, the US dollar is quite acceptable globally, and US bank accounts are protected by the government by up to $250,000, which is comparatively higher than most of the European and other developed countries.

US banks also offer more privileges and offers to credit card holders than other nations worldwide. You can purchase and sell cryptocurrencies directly using dollars with a US bank account.

8. No VAT's or GSTs

If you own an online business, you must opt for paid advertising to get your products or services out to the public at some point or another. Fortunately, if your company is registered in Delaware or Wyoming, you don't have to pay sales tax, VAT, or GST on your advertising expenses with Facebook, TikTok or Google.

This contrasts with other countries where you would incur significant taxes: 18% GST forever in India, 6% in China, 7% in Singapore, and 23% if you are not VAT registered. There is no option of reverse charging, and thus, Ireland's 23% VAT rate.

9. Low formation and maintenance fee

The US has comparatively low registration and renewal fees, thus becoming one of the countries where business registration and renewal are cheap. The process is fast and doesn't require an actual presence in the US. There's no requirement for a lawyer, a corporate secretary, or a local director, which could be expensive in other nations.

For instance, registering an LLC in Wyoming costs $100; in Italy, the amount can reach 2000 Euros and more. Also, dissolving a company in the US is easy and cheap, costing less than $100.

What's the Process of Forming a Business in the US as a Foreigner?

The registration process for a foreign company in the US differs if you register as an LLC or C-Corp based on your state. Let's explore Delaware's formation process using basic steps and requirements.

Choose a Unique Name: Check whether the company name has not already been taken in the US or, if so, it is trademarked. The US Patent and Trademark Office provides records that one can search through.
Designate a Registered Agent: You can use a company formation agency or someone else to deliver the company's legal papers.
Prepare a Certificate of Incorporation: This document should contain the company's name, your or your agent's address, the amount of the authorized capital, and the name and legal address of the incorporator. There is a minimum of $89 for filing fees, which will increase depending on issued stock or raised capital.
File an Incorporation Report and Pay Franchise Tax: You should complete all these steps as and when necessary.
Obtain the Employer Identification Number (EIN): With an EIN, hiring employees, opening a bank account, paying taxes, and getting permits are possible. Applying for your EIN for your business online is easy on the IRS official website. However, the application must be accompanied by a TIN indicating that either you or the company's principal officer possesses one. If you do not have an EIN, an application via mail or fax is possible.

Form Your LLC with Foundeck Today

Foundeck offers a range of fast and efficient online company formation services, allowing you to register a business structure of your choice quickly from anywhere around the world and keep it compliant. To get started, kindly contact us here.

Winding Up

The US is a great country to form your business as a non-resident due to its many benefits and minimal disadvantages. You will also enjoy low fees, tax benefits, a great reputation, an easy formation process and many payment alternatives. The country provides many resources to foreign investors and a business-friendly environment to help you fulfill your American dream.