Can Foreign Nationals Start a Company in the United States?
Opening a U.S. company is easy for non-U.S. citizens. Here are the steps you need to follow to start a business entity in the United States as a non-U.S. resident.
How to Start A U.S. Business: 5 Steps
Step 1.) Choose a State to Incorporate In
- Select a U.S. state to form your business entity.
The first step to starting a U.S. business is to pick a U.S. state to form a business entity in. The U.S. state where you choose to register your business will be the company’s legal home.
Delaware is the top choice for both foreign and domestic businesses because of its business-friendly laws, ability to operate anywhere, and no residency requirements.
Step 2.) Choose a Registered Agent
- Pick a reliable Registered Agent with a physical address in your chosen state. For non-U.S. residents, consider hiring a Registered Agent service like IncNow to represent your business.
Once you’ve decided on a state, you’ll need to choose a Registered Agent. A Registered Agent is a person or company designated to receive official notices and legal documents on behalf of your business.
A Registered Agent needs to have a physical address in the state where the company is incorporated. You can either appoint a friend, attorney, or professional Registered Agent service to fulfill this role.
Most individuals and businesses operating outside of the U.S. hire a Registered Agent service to represent their U.S. business entity. IncNow’s complete Delaware LLC and corporation packages include one year of Delaware Registered Agent Services.
Make sure to choose a reliable and reputable Registered Agent. Your company’s Registered Agent is an important resource to help your company stay compliant with state laws and regulations.
Step. 3) File Incorporation Documents
- Submit the necessary documents to the state where you are forming your business.
- File a Certificate of Incorporation for corporations or Certificate of Formation/Articles of Organization for LLCs.
- Pay the required filing fees.
After finding a Registered Agent, you will need to file the necessary incorporation documents with the state to start the business entity.
For a corporation, this document is called the “Certificate of Incorporation.” For an LLC, this document has different names in different states. Some states, like Delaware, call an LLC’s public document the “Certificate of Formation”. Other states, like Florida, call this same document the “Articles of Organization.”
The information that is required on the incorporation documents is different from state to state. However, incorporation documents generally include basic information about the business, such as its name, Registered Agent, and purpose.
Filing incorporation documents typically requires paying a filing fee. Filing fees also vary by state and by the type of business entity you are registering. Delaware’s state filing fee is $110 for LLCs and $109 for corporations.
Step 4.) Prepare Internal Documents
- Draft stock certificates and Bylaws for corporations or create an Operating Agreement for LLCs to establish rules and structure.
After filing your incorporation documents, you’ll need to create internal documents to establish the rules and structure of your company. For a corporation, this involves drafting stock certificates and Bylaws. Stock certificates represent ownership in the company, while Bylaws outline the governance and management structure.
For an LLC, you’ll need to create an Operating Agreement. This document sets out the ownership and management structure of the LLC, as well as the distribution of profits and losses among its members. While Operating Agreements are not typically filed with the state, they are essential for ensuring smooth operation and protecting the owners’ interests.
Step 5.) Get an EIN Number
- Apply for an Employer Identification Number (EIN) from the IRS for tax and banking purposes.
An Employer Identification Number (EIN) is a type of tax ID number used for business entities. U.S. LLCs and corporations need to obtain an EIN number from the Internal Revenue Service (IRS) in order to pay taxes. A business also needs an EIN number to open a business bank account with a U.S. bank.
Getting an EIN number for a business requires completing and submitting the Form SS-4 application to the IRS. You can apply for an EIN number either online, by fax or by email.
An online service, like IncNow, can help complete the application and submit the Form SS-4 for you.
Non-U.S. citizens do not need a U.S. Social Security Number (SSN) to apply for an EIN. However, the IRS will only accept an EIN application by fax if you do not have an SSN.
Why Incorporate in Delaware?
You can choose to incorporate a business entity in any U.S. state. However, entrepreneurs and business owners around the world know Delaware as being the best and most popular option for foreign and domestic businesses.
Incorporate in Delaware: Top 3 Reasons for Non-U.S. Citizens
The top three reasons that make Delaware the most popular state to incorporate are:
Reason #1.) Delaware’s Business Friendly Laws –
Delaware provides the strongest legal protections for business owners and shareholders. Delaware has a dedicated business court that is known for resolving business disputes fairly and efficiently.
Reason #2.) Operate Anywhere –
Delaware LLCs and corporations can operate in any U.S. state or country. Whether you are doing business in California or India, you can take advantage of the protections of a Delaware business entity.
Reason#3.) No Residency Requirement –
Almost anyone (other than individuals from restricted countries) can form a Delaware LLC or corporation. You do not need a physical address, virtual office, or bank account in Delaware to open a Delaware business entity.
Entrepreneurs and business owners from all over the world incorporate their businesses in Delaware. Whether you are in California or India, you can take advantage of the legal and tax benefits that Delaware offers.
Who Cannot Form a U.S. Business Entity?
Certain individuals are not able to form U.S. business entities for one of the following reasons:
- They are nationals or residents of countries sanctioned by the United States government; or,
- They are on OFAC’s Specially Designated National and Blocked Persons List (“SDN List”).
The US Department of Treasury’s Office of Foreign Asset Controls (OFAC) is tasked with enforcing restrictions that prevent US persons from doing business with specific countries.
Examples of restricted countries include:
- North Korea
OFAC also maintains the Specially Designated National and Blocked Persons List (“SDN List”). The SDN List includes the names of approximately 6,300 companies, organizations, and individuals who are restricted from doing business with US entities.
OFAC typically places individuals on the SDN List due to having ties to groups or organizations identified as posing a threat to US national security. Companies providing incorporation or registered agent services are not allowed to do business with individuals or business entities included on the SDN List.
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Frequently Asked Questions: Start A U.S. Company
Find answers to your questions about opening a U.S. business entity while living outside the United States
- Can non-U.S. citizens start a company in the United States?
Yes, non-U.S. citizens are able to form business entities in the United States. This includes:
- Foreign nationals;
- Permanent residents of the United States;
- U.S. resident aliens;. and more.
- What is the process for a non-U.S. citizen to start a U.S. company?
The process to set up a U.S. company is no different for a foreign national than for a U.S. citizen. The steps include:
- Choosing a state to incorporate in (Delaware is most popular),
- Choosing a Registered Agent,
- Filing public incorporation documents,
- Preparing internal documents, and
- Applying for an EIN number.
- Are there any restrictions for non-U.S. citizens starting a U.S. company?
Individuals from restricted countries that are sanctioned by the United States government are not able to form U.S. business entities. In addition, anyone included on the U.S. Department of Treasury’s Office of Foreign Asset Control’s Specially Designated National and Blocked Persons List.
- Can a foreign company be an owner of a U.S. corporation or LLC?
LLCs formed in the United States are able to have foreign members. This includes non-U.S. citizens, and even foreign corporations. Many multinational corporations operate U.S. based subsidiaries that are formed as LLCs.
Foreign business entities and non-U.S. citizens are able to be shareholders in the U.S. corporations. However, there are restrictions in some cases. For example, only U.S. citizens are allowed to be shareholders in an S-Corporation.
- Are there any special reporting requirements for U.S. companies owned by non-U.S. citizens?
U.S. companies with foreign owners may need to comply with other federal laws and local regulations depending on the nature of the business. For example, if you may be required to file an FBAR report with the IRS.
Generally, an FBAR report is required if you have any accounts located outside of the United States that are in the name of a U.S. company. The FBAR report typically needs to be filed even if the company does not have an U.S. sourced income.
- Can a non-U.S. citizen owned company hire employees in the United States?
Yes, a U.S. business entity with foreign owners can hire employees in the United States. U.S. LLCs and corporations must obtain an Employer Identification Number (EIN) from the IRS in order to hire employees in the United States and pay federal payroll taxes.
- Do non-U.S. citizens need a U.S. partner to start a company in the United States?
No, non-U.S. citizens are able to form U.S. companies without the help of a U.S. business partner. An online incorporation service, like IncNow can help complete the necessary forms to form a U.S. LLC or corporation and file them with the Secretary of State’s office.
- What are the annual fees and compliance requirements for non-U.S. citizen owned companies formed in Delaware?
Delaware corporations owned by non-U.S. citizens are required to hold an Annual Meeting and submit an Annual Report to the Delaware Division of Corporations. In addition, Delaware corporations must pay the Delaware Annual Franchise Tax to comply with state laws and maintain Good Standing.
Delaware LLCs are required to pay an annual fee of $300 to keep their Good Standing and avoid being noncompliant.
- Can non-U.S. citizens be directors, officers, or managers of a U.S. company?
Yes, non-U.S. citizens can be directors, officers, or shareholders in U.S corporations. Non-U.S. citizens can also be members or managers in a U.S. limited liability company (LLC).
- What are the tax implications for non-U.S. citizens forming a company in Delaware?
A foreign owned company will not owe income tax in Delaware if it does not have any business operations in the state. Delaware also does not have a state income tax.
- Do non-U.S. citizens need a visa or work permit to form a United States company?
No, non-U.S. citizens are not required to have a visa or work permit to form a U.S. LLC or corporation.
- Do I need a U.S. bank account to form an LLC in the United States?
No, you do not need to open a bank account in the U.S. to form an LLC or a corporation in the United States. The only requirement is that you appoint a Registered Agent in the U.S. state where your company is registered.
- Can you register a Delaware LLC without living in Delaware?
Yes, you can start a Delaware LLC from any U.S. state and almost every country in the world. There is no residency requirement to form a Delaware LLC.
You do not need to have a physical or virtual office address in Delaware to register a Delaware company. You do not even need to visit the state of Delaware to open a Delaware business entity.