a foreigner shaking hands with a US businessman

United States of America or the USA is world’s biggest economy at present and based on various reports it will continue to be so in times to come. With its free market and capitalist policies, USA has done extremely well when it comes to incorporating business and attracting investors. Foreign nationals can start business in the USA easily, read all the steps given below to know about the process.

The country has also focused on innovations which has cemented its legacy as the global super power. First in the Wall Street and later in the Silicon Valley, USA has boosted its economy from these two places by incorporating new startups especially based on tech innovation. USA’s liberal economy policies welcomed investors, innovators and immigrants with intellectual contribution in helping their business grow.

At present, United States is ranked among top nations when it comes to investment, GDP, investor confidence, stability in market, etc. United States ranks at 8th spot when it comes to ease of doing business. The high income category economy has achieved this rank because of various reasons. These reasons include various parameters on which ease of doing business factor is determined.

In getting credit and resolving insolvency, USA ranks at 3rd spot. In enforcing contracts, it ranks at 16th spot while in dealing with construction permit it ranks at 26th spot. USA ranks at 36th spot when it comes to trading across borders. While in in registering properties it ranks at 38th spot. Some other parameters and ranks:Paying Taxes: 37th spot

USA topped the foreign direct index confidence index because of its investor friendly policies which has remained constant with every coming government. USA ranks at 6th spot when it comes to global innovation index.

Silicon Valley has remained a hub for tech advances in the world and has continued to lead the world. USA also did well in global competitive index with 86 points put of 100 in 2018.

With such impressive ranks which determine success in business, USA has been a favourable country to invest for foreigners. If you are interested to invest in the USA then here is step by step guide on how to start a business as a non resident.

Guidelines on how to start a business in the USA as a foreigner:-

Preparing an outline for your business:

Firstly being a foreigner and secondly being an investor requires you to draw an outline of your investment and startup before you step into the business. It is necessary to consult advisors, do some research and then draw a business plan before you do any kind of formalities related to business.

Hire a firm that can carry out feasibility analysis for your proposed business and then layout an outline for the same. This will help you in not only getting an idea about how to start your business but will also help you in arranging the resources required.

Managing Funds

Capital investment is the most important part of your business venture. While applying for business visa and for incorporating business, a significant amount of capital is necessary in your bank account. For the rest you can go for loan from the bank of your choice.

USA banks grant loan at cheap interest rates and thus can be helpful in building your business. US administration also provides concession in case you are into business that deals with tech advancement, scientific research or innovation. You can do proper research on this and can claim concession and even government incentives.

Applying and Obtaining your Visa

There are nine types of business visas available for you to opt anyone of the following which suits your purpose. In order to execute your business in USA you definitely require to have your visa. Different visa plans offer different objectives.

There are B1, B2, E1, E2, EB-5, H1B, L1, O1 and TN types of visas who offer various programs for visit to USA. Each of them have different criteria and also offer specific advantages. Like there are specialised visas for labor workers, for special ability, NAFTA temporary work visa, permanent residence after probation period, stay of 3 years, restriction on signing contracts, minimum and maximum investment policy, etc. Based on your requirements you can opt any of the following.

Name Description of Visa Time Period Limitations
E1 Treaty Trader Visa. It is for those who want to trade with USA from their country given their country has treaty with USA Temporary in nature and can be renewed till the business is in operation Valid until the business is in progress. Children under 21 cannot work and after 21 they lose their status
E2 Treaty investor visa that allows a national from the country which has treaty with USA to start a business in USA Temporary in nature and can be renewed till the business is in operation Valid until the business is in progress. Children under 21 cannot work and after 21 they lose their status
B1 Is a short term business visa which restricts the holder from signing a contract or perform work for hire It is temporary and is valid till six months The holder can negotiate business but cannot sign any contract
B2 Short Term tourist visa It is temporary and is valid till six months The holder can negotiate business but cannot sign any contract
EB 5 Investor green card program that requires investors to invest $500k to $1 MM, hire 10 US residents within two years and survive for 5 year One can get permanent residence as they cross the probation period  
L1 Intercompany transfer that allows the holder to transfer from a foreign company to a US company with some restrictions One year stay with an extension of three years Employee must have worked for a foreign company for 1 years in the last three years
H1B Specialized labor Visa. Mostly for professionals in IT sector Valid for 3 years but extensible Cannot be used for self-employment. Definite number of visas available per year
O1 Extra ordinary ability visa Valid up to 3 years and is extendable One must be able to show the extra ordinary ability in documented form
TN NAFTA temporary visa for work Valid for 3 years and is extendable It cannot be used for self-employment

Incorporating your Business

After you have obtained visa it is time for you to do away with the formalities of starting your business. It is necessary that you work according to your business plan and the advice rendered by your advisor.

There are few important points that should be remembered and followed while incorporating your business and they are:

Choosing the Legal Entity:

Basically, there is Limited Liability Company or LLC, Sole Proprietorship, Sole Limited Liability Partnership, etc. Each of these legal entities offer various advantages in their own ways and the person incorporating his business should know what entity will suit his business progress.

There are various factors that come into play as your choose your entity. This includes methods of paying taxes, tax rebates, complexion or simplicity in business, tax accounting, raising capital, managing liability, etc. Such factors should be considered before choosing your legal entity.

US businesses mostly prefer corporations and LLCs as they offer much advantage over any other types of business entities. Separating your business from your personal assets is important in case your business suffers any liability.

Thus corporations have been the ideal choice but incorporation of such become expensive and complex. Whereas, LLC offers both protection from liability as well as greater control over the business with cheap incorporation and management cost. Your choice should entirely be on your business requirements.

Documental Formalities:

This requires you to get all the required documents for your business incorporation. From your business visa to bank account to your business plan, you have to furnish all such important documents to the relevant authority.

  • Choosing the name of the company
  • Legal entity of your business
  • Trade mark and Intellectual property rights
  • License if needed for your business
  • Permissions from relevant authorities
  • Choosing place of incorporation
  • Office space, hiring of employees,
  • Opening bank account, filling of form, etc.

After submission of all the relevant documents your business will be registered and you will get a federal employer identification number which will be the identity of your business. You can register your business with the relevant tax authority and create a transparent accounts. You need to prepare a BE-13 survey and file it with the US authorities.

Documents required for starting your business in the USA as a foreigner

For Business Corporations:

For the formation of corporation you require certification of incorporation or articles of incorporation. For governance you require organisation minutes and bylaws optional: shareholder agreement. Ownership documents include share certificate for each shareholder.

For Limited Liability Company:

For the formation of LLC, articles of formation or articles of organisation are required. For governance, operating agreement is necessary. Member certificate is necessary for each member in order to prove ownership.

Taxation documents are same for both legal entities. You need to furnish IRS form SS4 – application for Employer Identification Number.

Lastly, Due diligence requires restriction on several nationals to own up assets in United States. These countries include North Korea, Cuba and Iran.

Choosing the Right Place of Business:

It is quite necessary to choose the right place for business in order to ensure that your business succeeds and doesn’t face any trouble mainly due to geographical locations.

According to latest CNBC report, here are America’s top 10 states for doing business:-

  • Texas
  • Washington
  • Utah
  • Virginia
  • Colorado
  • Minnesota
  • Georgia
  • Massachusetts
  • North Carolina
  • Florida

Geographical location of your business will firstly depend upon the type of business you are going to start. For example, if you have chosen to start a business that requires lots of space and employees then the location should be such that owning or renting such space is cheaper.

Also, the wages of employees is also cheaper which implies that the living cost of the place should be low. You can’t open a factory with 100 employees acquiring 5 acres of land in Wall Street given it will cost too much.

Some points to ponder while choosing location:

  • Cost of acquiring the space
  • Cost of labor and employee
  • Cost of utilities, resources and transport
  • Taxation policy of that particular state,
  • Efficient management system of the administration
  • Connect with the market
  • Connectivity to the mainstream places
  • Infrastructure, basic facilities
  • Efficiency of labor and employees, etc.

Lastly, all depends upon your capital investment. If your capital restrains you then you must manage in the capital assigned for acquiring place of business.

Grant of Permission and License

Nearly each business requires some permission and licenses from the concerned authority. There are several rules that need to be followed, several documents needed to be furnished, and several criteria that is needed to be fulfilled. Only after that permissions are granted.

But there are also some businesses that require special permission and licenses which cannot be obtained with ease. Work that is sensitive in nature requires permissions from higher authorities with lots of clearance. This requires you to visit the concerned authorities and make them understand about your business and why they should grant you permission. This may not be an easy task for you given you are a foreigner and is completely alien to the workings of US administration.

For this you need to hire a firm that will help you in this job. A firm that can negotiate on your behalf, arrange documents, get permissions and much more.

Hiring Professionals

Your business definitely requires people apart from you. They can be advisors, professionals, employees, trainers, accountants, attorneys, etc. Get them through a proper screening and hire them ensuring they are efficient in their work.

Managing Accounts and Paying Taxes

As you start your business, ensure that you have an accountant who does all the job related to financial management and accounts. US administration is quite serious when it comes to financial management and taxation. Ensure that your balance sheet remains transparent and your taxes are paid on time or it can lead you into serious trouble.

Also, register into societies and become member of organisations that deal in your business field. Always maintain the professional ethics in your business especially while dealing with employees. Follow standard rules of conduct when it comes to maintenance of your office space, organisation or factory.