How to Form a Company in the US from Kenya: An In-depth Guide

Napoleon

Jul 12, 2024 — 19 min read

As a Kenyan resident, you may wonder if expanding your business horizons to international horizons is viable. YES, it is. You can form a US company from Kenya and exploit the vast potential of the United States market.

Registering a company in the US from Kenya is highly beneficial. You can enjoy enhanced credibility, access to a vibrant market, favorable taxation, and an opportunity for global growth.

Depending on the business you want to venture into and the state in which you wish to register your business, the steps of registering a company in the US will vary. However, you don’t have to worry, since we’ll break down the entire process.

In this article, we’ll discuss how to form a company in the US from Kenya, the essential requirements, and the general steps involved. Thus, you’re in luck since you’ll have the necessary information on how to operate a business in the US as a non-resident and what to expect after that.

Let’s look into the in-depth guide.

How to Form a Company in the US from Kenya

If you’re wondering if you should go ahead and register a company in the US as a non-resident or avoid the entire process, there’s more for you to benefit from. Should you avoid the big step because it’s complicated, or go ahead? These are common questions non-residents have to deal with. The truth is, the process of forming a US company as a non-resident is similar to what US citizens follow, and it comes with a handful of benefits.

1. Understand US Business Requirements

To register a business in the US as Kenya, you must begin by understanding the registration requirements for non-residents. All US states have different compliance rules and requirements for non-residents, but some standard requirements cut through all states.

1.1) A Registered Agent

As a non-resident, a registered agent is your official business contact. A registered agent will receive all business communication; for instance, if there’s a lawsuit or legal troubles involving your company, all relevant communication will be delivered to them, not your office. Here are the primary roles of a registered agent:

Handling official communication (documents) on your company’s behalf
Receiving official state correspondence like tax notices, annual report filing, or any other regulatory document.

Registered agents can be individuals or a business vending these services. The registered agent you work with must be in the same jurisdiction (state) your business is incorporated. Additionally, you must ensure the registered agent you choose to work with is reachable during working hours to provide official documents delivered and received directly. So, what qualities ensure you select the right registered agent?

Availability during standard working hours to ensure delivered communication reaches the intended recipient.
A physical address where all communication is delivered by hand. A P.O. Box is not permitted here. Your business’s physical address must be in the state of incorporation.
Organization and promptness are essential for your business, as placing or paying attention to legal communication can lead to dire consequences.

1.2) Third-Party Registered Agents

You can choose to use an LLC third-party registered agent for the following reasons:

Professionalism is a crucial quality when looking for a third-party registered agent. They should be able to receive and forward important mail to the LLC owner.
Privacy from a third party is warranted as they receive your mail and then forward it to you.
Third-party registered agents are flexible enough to represent you anywhere your business operates.

1.3) Qualities of the Right Registered Agent

Now that you understand the value of a registered agent for your US company, here’s how to choose the right one for your business:

Someone who understands your business needs
Find someone with a reliable reputation
Choose someone who can offer a smooth transition into new places.
Ensure the agent you choose is transparent in fees. Some agents offer a flat rate, while others have additional charges for specific services.

2. Choose a Business Structure

Regardless of residency status, choosing the proper business structure is the initial step to creating a business. A business structure is the type of business your US company will operate under. The structure you choose will impact:

Taxation
Compliance to regulations
Paperwork requirements
Personal liability
Ability to raise funds for your business

While choosing a business structure as a non-resident, you should consider the following:

Protection of personal assets
Tax obligations
Recordkeeping requirements
Compliance standards
The need to raise capital
Long-term objectives for your business

2.1) Common Business Structures

There are many business structures to consider, but the most popular in the US includes:

2.1a) A Limited Liability Company (LLC) is the most preferred business structure, as it comes with liability protection for the owners. Incorporating your business as an LLC keeps your assets separate from company liabilities. Simply put, you’ll not be responsible if your business is sued, dissolved, bankrupted, or creditors come to collect. Here are the main reasons why LLCs are more popular with small businesses:

Taxation: LLCs don’t pay tax on profits but are considered pass-through entities. The business doesn’t pay taxes directly, but its profits and losses are passed on to the owner (s), who reports them as personal tax returns. As for non-residents, the tax landscape differs as they might be required to file specific forms or decide to have the LLC treated differently to meet tax obligations.
Non-resident consideration: An LLC is flexible, and the ability to protect the owner(s) makes it a famous business structure for non-residents. Anyone (residents or non-residents) can register an LLC.

However, LLCs have a main limitation when it comes to stock issuing. If you plan to open the business to the public, you may have to register for a different structure, like a C-Corp. An LLC can’t do the following:

Offer equity to investors.
Employees
Advisors, or
Stakeholders

2.1b) C Corporation

The C-Corp business structure is fashioned for larger companies. A board of directors manages them, and ownership is shared as equity (stock), differentiating them from LLCs.

Unlike LLCs, c-Corps ownership and management are separate, meaning it can enter into contracts, sue, or get sued. Hence, the LLC structure is well-matched for startups. However, a C-Corp is your ideal structure if you plan to branch out and issue stock to investors. With a C-Corp, you can raise capital through stocks, have a board of directors, and hold regular meetings.

Taxation: C-corporations pay corporate income tax, and profits are shared as dividends and taxed again at the shareholder’s level. As a result, there’s double taxation. However, double taxation might not be an issue if non-residents don’t distribute dividends among shareholders and reinvest them.
Non-resident consideration: Non-residents who intend to reinvest profits can own a C Corp and those seeking venture capital can own a C corporation.

Although you can switch business structures in the future, the process can be complex and time-consuming, not to mention you’ll pay for it. Thus, choosing the proper structure from the onset is a wise business decision.

The significant difference between an LLC and a corporation is ownership. An LLC can be owned by one or more individuals, while a corporation is owned by shareholders. Both entities offer a handful of benefits to your business, including limited liability protection, credibility, and professionalism.

2.1c) S Corporation

An S corporation business structure is similar to an LLC; both are pass-through entities with the exact requirements.

Taxation: profits are passed on to the owner (s) and are reported in their tax returns, meaning it’s not subject to double taxation.
Non-resident consideration: Non-residents can’t hold shares in an S corporation, making this structure unsuitable.

2.1d) Partnership

A partnership is a structure whereby two or more people own the business: general partnerships (GP) or Limited Partnerships (LP).

Taxation: Partnerships are a pass-through entity. Profits and losses flow to partners who report them through personal tax returns.
Non-resident consideration when making a partnership is viable, but the tax implications are complex. For instance, partners are personally responsible for company debts in a general partnership.

2.1e) Sole Proprietorships (Sole Traders)

A sole proprietorship is owned and managed by a single person. It’s the simplest structure to form and run. Before the law, both the business and owner are one entity.

Taxation: The owner reports profits as a personal tax return.
Non-resident consideration: Sole proprietorships require the owner to work in the business, disqualifying non-residents from establishing it. The requirement also conflicts with US visa and work permit regulations.

3. Select the State to Register Your Business

Business incorporations happen at the state level in the US, meaning you aren’t dealing with the US government. Note that different US states differ in tax, privacy, and compliance rules. Hence, choosing a state that favors your business objectives is crucial. Here are some factors to guide you when selecting a state to register your business:

Taxation - Some states like Delaware, Wyoming, South Dakota, and Nevada are known for their favorable tax policies. The policies include lower business taxes, no corporate taxes, or no state income tax.
Legal system - Choose a state with a business-friendly legal system. For instance, Delaware is well known for its business-friendly corporate law.
Filing fees - Different states will have varying costs for filing and annual reports.
Franchise taxes - Depending on the size of your business and earnings, some states might impose a franchise tax.
Physical presence or nexus - In whatever state you register a business in, physical presence can create nexus tax obligations. Assuming your business needs a physical presence in the US or you’ll have employees in the US, consider the exact logistics and costs of such operations in different states.
Privacy - Some states offer more privacy protection than others to business owners. For instance, Wyoming and Nevada don’t disclose the list of directors or shareholders to the public.
Market access - If the ideal market for your business is in a specific geographic market, you can register within that particular area or near the location. As a result, you’ll be able to better access your target market and networking opportunities.
Professional support - Choose a state with experienced legal and accounting services, especially one familiar with international business owners.

3.1) Favorable States for Non-US Residents to Register their Company

Delaware is known for its business-friendly laws and is a popular choice with domestic and foreign businesses.
Nevada and Wyoming are attractive states for business because of their favorable tax and privacy policies.
California and New York aren’t tax-friendly. However, they’re excellent places to start a business due to their vast markets and easy access to business networks, mainly if your business activities are based there.
Texas provides a business-friendly environment and is home to numerous industries, such as advertising, technology, and media. Additionally, Texas has a thriving entrepreneurial community with a vast consumer market and low business operation costs.

4. Register Your Business

Now that you know the type of business you want to start and the preferred state to establish it, the next step is incorporating your new company. Follow these steps to complete the company registration process in the US from Kenya.

4.1) Choose a business name for your new company and ensure it complies with the state’s naming rules and regulations. These tips will guide you in choosing a business name for your new company:

Understand your business so that the name can reflect it.
Use descriptive words
Follow your state’s naming guidelines. Using a name search tool will help you find out if the name you have in mind is available.
Be literal to help customers understand what you’re offering by reading it.
The business name shouldn’t be similar to your competitor’s company name.
Choose a name style that keeps your business consistent.
- Use a prominent r, literal name to clarify what your business is all about
- Use familiar words and turn them into a brand instead of made-up words.
- You can use your name, primarily if you practice law, finance, or business consulting.
- Unrelated words may be hard to brand, and people need help remembering them.
Choose a name that’s easy to spell, pronounce, and remember.
Make your name web-friendly, as you’ll be active on the web and other media platforms. Conduct research to find out if you get a matching domain name for your business and social media accounts.
The name should be unique and memorable but resonate with your brand.
Don’t limit yourself by naming your business after a specific location or product name. For instance, Nevada Foods leaves room for expansion compared to Nevada Chicken House.

An LLC can’t use words that imply the business is linked to the United States, federal, treasury, bank, insurance, or trust. These words can only be used with authority from relevant government bodies.

As for C Corporations, the business names must include Incorporated, Corporations, limited, or abbreviations of the same: Incorp, Corp, or Ltd.

4.2) File the registration forms according to your state’s requirements. You can use their official website to find company registration requirements and ensure your business is compliant. You must provide detailed information about your business’s intended activities and owners. Ensure that all the information you provide on the registration forms is accurate and complete to avoid stalling the registration process.

4.3) Pay the required fees for incorporating your business, which may vary in different states. Once you know the fees, submit the forms alongside the fee.

4.4) Wait for approval from the state government. If there are any errors, the forms might be sent back to you for correction, and you can resubmit. If your forms are approved the first time, you become a Kenyan with a legal US business entity. Approval timelines may vary in different states: Wyoming takes 3 - 7 working days, and Delaware takes 25 days (15 for state processing and 10 to receive a certificate of incorporation via mail).

4.5) Obtain an Employer Identification Number (EIN)

The Employer Identification Number (EIN) is used to identify your business by the IRS. Since the number is only issued by the IRS, you must apply for it separately after registering your business as an LLC or C Corp.

Applying for EIN is expedited for applicants with a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN), then apply for EIN on the IRS page. Applying for EIN is accessible on the IRS website and takes about an hour. Besides using your EIN for tax purposes, it’s also necessary when opening a business bank account and hiring employees.

5. Stay Compliant

For US businesses to remain in good standing with the law and to continue trading, they must adhere to federal, state, and local regulations. Some of the requirements they must remain compliant with include:

Franchise taxes
Annual reports
Public disclosures, among others, depend on the state, industry, and entity type.

The list below includes the most common compliance concerns to help you understand your obligations as a business owner in the US.

5.1) Get Necessary Business Permits and Licenses

Check with your state licensing board to determine which permits and licenses you need for your business. Obtaining a license or permit for your business is a show of compliance with legal regulations in your state.

5.2) Register for State Taxes

As a US non-resident, you must comply with federal tax laws. Federal taxes include income tax, sales tax, payroll tax, and any other taxes depending on the type of business you’re venturing into.

If you have employees, payroll taxes will be deducted from their paychecks. Hence, you must set up payroll-compliant accounts to deduct the right amount. The tax obligations you have to meet might also be affected by the tax treaty between Kenya and the US.

If your business has a notable presence in a state, you may have to pay state taxes even when you aren’t registered there. The definition of notable presence can vary in different states. Please familiarize yourself with your state’s tax requirements, as each has its requirements. Registering for state taxes means you comply with the law and avoid penalties or fines.

5.3) Comply with Employment Laws

Finally, to meet your obligations under the US and state employment law by adhering to the following:

Worker's compensation insurance
Pay unemployment insurance taxes
Comply with minimum wage and
Overtime laws

When your full-time employees get 50, you must offer them healthcare coverage under the Affordable Care Act. Familiarize yourself with federal and state employment laws to ensure you treat your employees fairly within legal rights.

Due diligence helps you comply with state regulations while setting yourself up for success. Adhering to your obligations proactively makes it easy for you instead of responding to a situation when something goes wrong.

5.4) Banking

Opening a US business bank account as a non-resident can be challenging because it requires a local physical presence. While some banks might allow you to open a bank account remotely, it may require additional documentation and verification. They include:

Foreign Account Tax Compliance Act (FATCA) and
Anti-Money Laundering (AML) laws

6. Setting Up Financial Infrastructure

There are critical components to setting up the financial infrastructure for a US-based business. It ensures your business complies with US regulations and smooth financial operations. They include:

Open a US-based Business Account. You need your passport, proof of business registration like articles of incorporation, an EIN, and sometimes you may be asked to provide a US address. Some banks might ask for additional documentation, but be sure to work with a bank with experience dealing with international clients. Such banks provide support to help you set up a US business bank account from Kenya.
Accounting and bookkeeping. Good record keeping is essential for tax compliance and financial management in any company. You can use accounting software to help manage your finances, prepare for the tax season, and track income and expenses. The software ensures all financial records and transactions are accurate like invoices, receipts, and bank statements, are accurate and available.
Add payment processing services. As you choose a payment processor, consider their fee, ease of integration to your website or sales platform, and the ability to handle international transactions.
Financial planning and management. Your Budget should outline expected income and expenses to ensure your business is in good financial health. Assess your business's financial performance by reviewing financial statements regularly and making informed decisions. Always set aside some money to cover emergencies or cash flow fluctuations.
Compliance and reporting. All your financial practices are subject to US laws and regulations, including AML laws and FATCA. Some economic activities in your business must be reported to US authorities, especially when significant sums of money are moving across borders.

6.1) Requirements to Open a US Bank Account Remotely

Director’s identification - valid photo, passport
Director’s proof of address - proof of residential address like a utility bill or a bank statement
Incorporation papers - Company articles
EIN confirmation - A verification letter from the IRS for taxation purposes
Verification of business location - Evidence that the business address is within the US
Company documents - Certificate of incorporation, organization articles, or any other relevant company documents

6.2) Open a Merchant Account to Receive Credit Card Payments

Today, most shoppers use card payment as it is convenient and easy to use. So, as a business owner, you need to enable your business to allow customers to pay using cards.

Hence, you need to open a merchant account from Kenya when registering a company in the US. A merchant account will accept credit card payments and process credit card transactions. You need these requirements to open a merchant account:

Apply for the merchant account and provide relevant business documents like EIN, proof of business bank account, and business license.
Personal and business credit history
Incorporation certificate
Articles of association
Shareholder registry

Besides providing business documentation, you also have to provide personal details like:

Your full names
Residential address
ITIN (optional)

6.3) Transfer Money to Kenya or a Lower Tax Jurisdiction

As you establish your business in the US from Kenya, you must consider regulations on bringing the profits home. Alternatively, you can transfer the money to a low-tax jurisdiction. These are the key points to keep in mind when transferring money from the US to Kenya:

Kenyan Money Regulations include compliance with anti-money laundering (AML) and know your customer (KYC). It involves adhering to specific procedures as the Central Bank of Kenya (CBK) provides. Plus, depending on where the money is coming from and the amount, reporting to relevant regulatory authorities ensures transactions are legal and transparent.
There are many methods to Transfer money to Kenya: bank transfer, money transfer operators (MTOs) like Western Union, mobile phone transfer (Mpesa), or digital payment. Platforms.
When receiving money in Kenya from abroad, Tax implications will depend on factors like the source of the income and the recipient’s tax status back home.

6.4) Moving Profits to a Lower Tax Jurisdiction

Tax Considerations. Evaluate the tax consequences of where the money comes from and where you’re transferring it. Some locations, such as the Bahamas, Cayman, and Bermuda, charge a 0% corporate tax for offshore investments.
Understand US Taxation. Ensure you understand how the US tax system interacts with international tax laws and agreements, particularly when transferring offshore profits to low-tax zones.

6.5) Limitations and regulations of Transferring money money

Repatriation Limits. There’s no limit concerning how much money you can send or receive internationally. However, financial institutions have a limit for daily transactions.
Tax Implications apply when sending money internationally, and the tax implications will mainly depend on the parties involved and the nature of the transaction. Some aspects to consider are applicable withholding taxes, especially when transferred money involves business revenue, remittances, or investments subject to taxation.

7. Complying with Legal Regulations

All US-operated US businesses must comply with federal, state, and local laws and regulations. They include:

Tax obligations
Labor laws, and
Standards governing corporate responsibility
Environmental protection
Intellectual property

Conduct periodic self-audits or hire consultants to review your business operations for compliance. Below is a list of legal and regulatory obligations for all US businesses:

7.1) Federal compliance

Stay compliant with all federal taxes like income employment taxes and file annual tax returns. You can also make estimated tax payments where necessary.
If your business trades or issues securities, you’re subject to compliance with the Securities and Exchange Commission (SEC).
Industry-specific regulations affect some business sectors like healthcare, food and beverage, and finance. Manufacturing businesses that deal with hazardous materials must comply with Environmental Protection Agency (EPA) standards.

7.2) State and local compliance

File annual reports and pay a filing fee once a year to ensure your business is up to date with the state.
Comply with state tax filing (state income, payroll taxes, sales tax) quarterly or annually.
Ensure you renew licenses and permits promptly to keep your business legal and authorized to operate in the US.
Beware of state-specific regulations like employment, consumer protection, and environmental regulations.

7.3) Corporate compliance

Proper corporate governance practices include holding annual meetings, staying compliant with business bylaws, sticking to an operating agreement, or keeping minutes.
Keep detailed records of all business activities, decisions made by the business’s leaders, financial transactions, and compliance efforts.

7.4) US labor law compliance

Employment laws apply across all US businesses with employees. A Business owner must comply with federal and state labor laws concerning working conditions, wages, nondiscrimination, and benefits.
If your business employs foreigners, ensure they have appropriate visas and work permits to comply with Immigration laws.

7.5) Intellectual Property (IP) compliance

IP registration protects your US trademarks, patents, and copyrights from infringement. Frequent monitoring will enforce your intellectual property rights.

7.6) Data privacy and security compliance

Data protection involves compliance with US data protection laws and spending on the state where your business is located.
Implement stringent cybersecurity measures to protect your business and customer data.

Benefits of Setting Up a US Company in Kenya

Forming a US company from Kenya is highly beneficial as you’re exposed to a vast international market. Here’s an extensive list of benefits you’ll exploit:

1. Access to the US Market

The United States is undoubtedly one of the world’s largest and most prosperous markets. By establishing a US company from Kenya, you can easily access this extensive market characterized by high demand and a diverse customer base. Becoming part of this market presents a fantastic business growth and expansion opportunity. As a result, you reach a wider audience and increase your market share from millions of miles away.

2. Credibility and Trust

Operating a US-registered company can significantly boost your business credibility and reputation. WHY? The United States is famous for its robust legal framework, reliable consumer protection laws, and business environment.

Registering a business in the US means you must align it with these standards, which instill trust and confidence in potential partners, investors, and clients. Hence, you attract valuable opportunities while fostering long-term relationships.

3. Global Business Opportunities

Operating a US-based company opens doors to global business opportunities and collaborations. The United States has expansive trade relationships with countries worldwide, offering a platform for startups to flourish internationally. Registering your company in the US allows you to leverage international connections and access to new markets, partnerships, and potential investors.

4. Access to Funding and Investors

In the United States, businesses are exposed to a thriving community of funding and investors. You have access to venture capitalists, financial lending institutions, and angel investors actively seeking potential investment opportunities.

By registering a US company, you’re better placed to attract funding and secure vital investments to fuel business growth. The US presence makes your business credible and more appealing to prospective investors, which grants you access to more funding opportunities.

5. Tax Benefits and Efficiency

Incorporating a company in the US comes with potential tax advantages. The US tax system offers different incentives, credits, and deductions that help optimize your tax liabilities. Leveraging these benefits saves you significant amounts, which increases profitability. However, you better consult with an international tax advisor to ensure you comply with tax laws while maximizing these opportunities.

6. Business-Friendly Environment

Generally, the US is renowned for its business-friendly environment, offering numerous advantages like advanced infrastructure, access to skilled labor, and advanced technology.

The culmination of these factors creates a prolific ground for innovation, growth, and success. By establishing a company in the US, you position yourself in a dynamic ecosystem and gain access to resources and networks that can expedite your business development.

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Frequently Asked Questions

How much money do I need to form a company in the US from Kenya?

Although the cost of forming a company in the US from Kenya may vary from state to state, the prices range from $500 to $1,500. The cost will cover filing for incorporation, getting a US registered agent, setting up a US business account, and obtaining a physical US mailing address.

Do I need a visa to start a business in the US as a non-resident?

As a US non-resident, you need a US Startup Visa to set up and operate a business in the US. Startups can choose to use one of the two types of investment visas: EB-5 and the E-2 visa.

How long can it take to start a US company from Kenya?

Starting a US company from Kenya is quick. Depending on the state you choose to incorporate your business, it can take a few working days or weeks. You must select a business structure, register the company in your state of choice, and get the necessary permits and licenses for your business online. Since you’re miles away, you can hire a US-registered US agent or legal service to streamline the process.

In Summary

As a Kenyan business owner, expanding your business to the international market, specifically the US, is highly beneficial. Establishing a business in the US opens your doors to a diverse and vast customer base, not forgetting favorable tax implications for your business.

How do you form a company in the US from Kenya? Your idea of owning a US company from Kenya can become a reality. Within a short time, you’ll sell to US customers, connect with international investors, or get funding for your business.

Once you start forming a US company from Kenya, you must register the business, obtain a registered agent, incorporate the industry, and open a US bank account. Although forming a US company for non-residents may differ from state to state, some of these basics are cut across the board. There are several business-friendly states for foreigners to invest in, such as Nevada, New York City, California, Delaware, Wyoming, and Texas.

Kenyan entrepreneurs can navigate the process of forming a US company with careful planning and the support of a knowledgeable registered agent. Before incorporation, conduct due diligence to ensure you find a state that favors your business goals.