Incorporate Online: Tips on How to Virtually Set Up your US registered Company
A close up view of the New York City skyline
In the modern world, we don’t have to travel internationally to engage in international business. Thankfully, the internet has enabled many people to access the global market from the comfort of their own home. For those who are slightly ahead of the curve, registering a legal presence in a foreign jurisdiction can be useful to open more doors for trade. For example, opening a foreign company could allow you to receive funds directly in a foreign bank account, give you access to foreign exchange, and grant you access to resources, knowledge and services usually reserved for “locally” registered businesses
The United States is one of the world’s largest economies, and thereby boasts an attractive market for all international business people. However, to receive payments via secure methods, such as through banks, merchant processors (i.e. Shopify, Stripe, PayPal and etc), oftentimes a local entity is required. What many people do not realize is that this business infrastructure can now be set up online. How so? You can contact us to hire one of our talented attorneys and consultants to find out more (email: info@borderlesscounsel.com). You can also read on, to get some tips on how to enter the US market from abroad.
Step 1: Understanding the Importance of a Local US Entity
Being a business owner in the United States provides you with an official legal presence in the country. The first benefit this can provide for an international business person is physical access to the US market. With a viable business, a bank account and actual transactions in the United States, a business person of any stature will have a strong case to make when approaching visa authorities and requesting a B-1 visitor visa for business. The business entity essentially establishes the legitimate basis for this visa, and could give the investor valuable physical access to the US economy.
In addition, the business owner will get access to payment processing services available only in the US. US based customers may not readily accept transferring funds abroad in exchange for goods or services. Therefore, it will almost always boost your business to rely on local and trusted payment processors. Stripe, PayPal, or Shopify are some famous examples. To get access to these services and pass financial due diligence, your corporate documents need to be in good order as well.
Step 2: Register your Entity and Choose your Home State
Different US States provide different costs and benefits associated with business registration. Delaware, Wyoming, New Mexico and Florida can be popular business locations for company setup, due to tax reasons, strong commercial laws and low cost business setup. In many States, you may also require a registered agent, who will act as your contact to be listed on your certificate and articles of incorporation. Many of these processes can be undertaken online, via the State’s online registration portal. However, a local agent may be useful when navigating hurdles in the process. For example, the Secretary of State’s website may block internet traffic from outside the United States. In addition, you will require a local address listing for your corporate documents. Through our service providers, we are able to link international companies with cost effective local agents, while navigating the incorporation process online, at very cost effective rates. For example, a registered agent may take as little as $100-$200 per annum in some States.
Step 3: Set up Your Corporate Documentation
You will need to set up the structure and governance rules for your company. These are the documents which define how your company is managed and who has the authority to make decisions for the company. These documents will also define who is entitled to the profits earned in your company. For Corporations, these documents are referred to as “By-Laws”, while for Limited Liability Companies, this document is referred to as the “Operating Agreement”. You will also need various board resolutions to be signed and made effective on behalf of the company, and finally, share certificates will also have to be issued for the shareholders in the company. Many lawyers offer these documents online in a template form, and we can offer them at prices ranging from only $75-$250.
Step 4: Obtain an EIN and Open the Bank Account
This is the trickiest part in the process. An Entity Identification Number (EIN/Tax Number) can be obtained by the business person themselves, or via an agent. We usually use an agent who applies to the US Internal Revenue Service to manage this process, as dealing with the IRS can be frustrating. However, after a few weeks, this number is almost always obtained. Thereafter, the business person must approach a bank to open their account. Traditionally, this would be done via a personal visit to the United States. However, there are now a number of digital banks which open a live US bank account with locally established banks, through an online application. As a part of our service, we guide clients to various digital banking service providers. However, success at this stage is contingent on completing the bank’s due diligence and verification process, which is subject to the bank’s sole discretion.
Final Considerations: Tax Implications, LLCs and Corporations.
Before going ahead, it is important to carefully consider any tax implications you may face as a result of having a US based company. Most of the time, US tax liabilities will not be high or exist at all, if a foreign business person manages their accounting correctly. This is because you will be able to establish transfer pricing contracts and transfer costs to the US entity, which will thereby reduce the tax bill. In addition, it is also important to understand the difference between a Limited Liability Company and a Corporation when setting up your business. An LLC is not taxed separately by the IRS, and all profits earned will be transferred to the business owner’s taxable income. However, a corporation is taxed separately on it’s income, and the owner of a company is then also taxed on his/her dividend income. There is also an S-Corp election available to some smaller corporations, whereby the corporation elects to be taxed in a similar manner to an LLC. Dividend taxation is quite high in the US, at 30% for non-residents. Therefore, it is very important to get thorough professional advice before going forward on your US incorporation journey. We have all of this advice and more available at your request.
Send us an email at info@borderlesscounsel.com to learn more!