A record-breaking 5.5 million new business applications were filed in the US in 2023 – and this entrepreneurial growth can benefit non-residents as well as Americans. People who are not residents or citizens of the United States may establish a formal business entity, such as a corporation or limited liability company (LLC), within the US by following the process outlined in this guide. The specifics of this process vary based on the state where the business is registered, and the business is required to comply with all federal and state regulations, including tax obligations and proper business documentation. Registering a business as a non-resident involves additional complexity, but it's an achievable goal.
Below, we'll cover the steps of registering a US business as a non-resident, including deciding on the right corporate structure and dealing with immigration and visa requirements.
What's in this article?
- Choosing the right business structure
- Selecting a state for business registration
- Registration and compliance process
- Setting up financial infrastructure
- Maintaining legal and regulatory compliance
- Immigration and visa considerations
Choosing the right business structure
Selecting the appropriate business structure is the first step in creating any business in the US, regardless of your residency status. Your choice will influence your taxes, paperwork requirements, personal liability and ability to raise funds. When looking at different business structures, non-residents should consider the importance of personal asset protection, tax obligations, recordkeeping requirements and compliance standards. Other factors that could help to determine the right structure for you include whether you'll need to raise capital and your long-term objectives for the business.
Here's an overview of the primary corporate structures in the US, along with key considerations for non-residents.
LLC
An LLC offers personal liability protection, meaning that personal assets are typically protected in the event of business debts or lawsuits. LLCs have fewer reporting requirements compared with corporations.
Taxation: Typically, an LLC is a "pass-through" entity for tax purposes, which means that the business doesn't pay taxes, but profits and losses pass through to the owners' personal tax returns. Non-residents face a complex tax landscape, however, and may need to file specific forms or elect to have the LLC treated differently for tax purposes.
Non-resident consideration: The flexibility and protection offered by an LLC makes it a popular choice for non-residents. There's no requirement for members to be US citizens or residents.
C corporation
A C corporation is a separate legal entity from its owners and provides the highest level of personal liability protection. It can raise capital by issuing stock, and is required to have a board of directors and hold regular meetings.
Taxation: C corporations are subject to corporate income tax. Profits distributed as dividends are taxed again at the shareholder's level, leading to double taxation. For non-residents, however, this may be less of an issue if they don't take dividends and reinvest profits into the business.
Non-resident consideration: Non-residents can own a C corporation, and there are no residency requirements for directors or officers. This is a good option if you're planning to reinvest profits or seek venture capital.
S corporation
Like an LLC, an S corporation is a pass-through entity, but it has similar structure requirements to a C corporation.
Taxation: Income is passed through to shareholders' personal tax returns. It is not subject to double taxation.
Non-resident consideration: Non-residents cannot be shareholders of an S corporation, so this option is not generally available for non-resident business owners.
Partnership
In a partnership, two or more people share ownership. There are several types of partnerships, including general partnerships (GP) and limited partnerships (LP).
Taxation: A partnership is a pass-through entity and profits and losses flow through to partners' personal tax returns.
Non-resident consideration: Although non-residents can be partners, the tax implications can be complex, especially in a general partnership in which partners are personally liable for business debts.
Sole proprietorship
This is the simplest form of business, owned and operated by one person without any distinction between the owner and the business.
Taxation: Income is reported on the owner's personal tax return.
Non-resident consideration: Typically, non-residents can't establish a sole proprietorship in the US because it requires the owner to work in the business, which conflicts with visa and work permit regulations.
Selecting a US state for business registration
Choosing where to register your business is another key step. Laws, taxes and business requirements vary considerably from one state to another. Here are various factors that non-residents should consider when choosing a state for their business registration:
Taxation: Some states, such as Wyoming, Nevada and South Dakota, are known for their favourable tax policies, which can include lower business taxes or no state income tax.
Legal system: Consider how business-friendly the state's legal system is. Delaware, for example, is known for being business-friendly and for its established body of corporate law.
Filing fees: Initial filing fees and annual report fees vary by state.
Franchise taxes: Some US states impose a franchise tax on businesses, which can be an important consideration depending on the size and earnings of your business.
Physical presence or nexus: Regardless of which US state your business is registered in, having a physical presence in any state can create nexus tax obligations. If your business requires a physical location or if you plan to have employees in the US, consider the logistics and costs of those operations in different states.
Privacy: Some US states have more privacy protections for business owners than others. For instance, Wyoming and Nevada do not require the disclosure of shareholders or directors.
Market access: If your business is targeting a specific geographic market, consider registering in or near that location for better access and networking opportunities.
Professional support: Availability of professional services, such as legal and accounting services, especially those that are familiar with international business owners, can be an important factor.
Popular US states for registration
Delaware: Known for its business-friendly laws, Delaware is a popular choice with domestic and foreign businesses. Delaware's Court of Chancery specialises in business law, providing clarity and predictability for corporate litigation.
Nevada and Wyoming: These states are attractive because of their favourable tax policies and privacy considerations.
California and New York: Although these states are not the most advantageous in terms of taxes, they may be a good choice because of their substantial markets and easy access to business networks, especially if your business activities are centred there.
Registration and compliance process
For non-residents, registering a business in the US involves several steps to achieve legal and regulatory compliance. Here's an outline of the process.
Choose a registered agent
Businesses in the US are required to have a registered agent. This agent receives legal documents and government correspondence on behalf of your business, and must have a physical address in the US state where your business is registered.
Register your business entity
Depending on the business structure, you'll need to file different documents to register your business with the state's business filing office. These documents include articles of incorporation for a corporation or articles of organisation for an LLC.
Obtain an EIN
An employer identification number (EIN) is necessary for tax purposes, for recruiting employees and to open a business bank account. Non-residents can obtain an EIN by completing an IRS Form SS-4 and may need to phone the IRS to complete the process.
Business licences and permits
Depending on the type of business and its location, you may need to obtain specific licences and permits to operate legally in the US.
Annual reports and franchise taxes
Most US states require businesses to file annual reports and pay franchise taxes. The requirements vary by state and business structure.
Federal tax obligations
Non-resident business owners must comply with US federal tax laws. Your tax obligations are determined by the nature of your business activities in the US and may also be affected by the tax treaty between your home country and the US.
State tax obligations
Depending on the state where your business is registered and the nature of your business, you may be subject to state income tax, sales tax and other state-specific taxes. If your business has a substantial presence in a state, you may need to pay state taxes even if you aren't registered there. The definition of a substantial presence can vary by state.
Banking and financial transactions
Opening a US business bank account can be challenging for non-residents because many require a local physical presence. Some banks may let you open an account remotely, but this often requires additional documentation and verification. Consider the banking and financial regulations that apply to your business, including the US Foreign Account Tax Compliance Act (FATCA) and Anti-Money Laundering (AML) laws.
Setting up financial infrastructure
Setting up the financial infrastructure for a US-based business involves several key components for smooth financial operations and compliance with US regulations.
Opening a US business bank account
To open a business account, you'll typically need your passport, proof of business registration (such as articles of incorporation or organisation), an EIN and sometimes a US address. Some banks may require additional documentation. When choosing a bank, look for one that has experience in working with international clients and can provide support with setting up your account remotely if you are unable to travel to the US.
Accounting and bookkeeping
Good recordkeeping is important for tax compliance and financial management. Use accounting software to manage your finances, track income and expenses, and prepare for tax season. Options such as QuickBooks, Xero or FreshBooks are popular among small businesses. Keep careful records of all financial transactions including invoices, receipts and bank statements.
Tax obligations
You'll need to pay federal taxes on income earned by your US business. The specific obligations depend on your business structure and operations. Make sure that you're aware of state and local tax requirements, which can include income tax, sales tax and other applicable taxes, depending on your business's location and activities. The tax treaty between the US and your home country may also affect your tax obligations. Consider consulting a tax professional with expertise in international business.
Payment processing services
When choosing a payment processor, consider the processor's fees, ease of integration with your website or sales platform, and their ability to handle international transactions. With Stripe, for example, businesses can process online and in-person transactions. Stripe is an intelligent choice for non-residents because it allows businesses to accept payments from customers worldwide and doesn't require businesses to obtain their own merchant account.
Financial planning and management
Develop a budget that outlines expected income and expenses to keep your business financially healthy. Review financial statements regularly to assess your business's financial performance and make informed decisions. Consider setting aside funds to cover unexpected expenses or fluctuations in cash flow.
Compliance and reporting
Your financial practices will be subject to US laws and regulations, including AML laws and FATCA. You may need to report certain financial activities to US authorities, especially if you're moving large sums of money across borders.
Maintaining legal and regulatory compliance
All businesses operating in the US must do so in compliance with laws and regulations at the federal, state and local levels. This includes tax obligations, labour laws and standards governing corporate responsibility, environmental protection and intellectual property. It's a good idea to review your business operations periodically for compliance with all relevant requirements, and this can involve self-audits or hiring consultants. The legal and regulatory obligations for US businesses are outlined below.
Federal compliance
Tax compliance: Stay up to date with federal tax obligations, including income tax and employment taxes. File annual tax returns and make estimated tax payments, if necessary.
Securities and Exchange Commission (SEC) compliance: If your business involves trading or issuing securities, you will be subject to SEC regulations.
Industry-specific regulations: Depending on your business sector, you may need to adhere to industry-specific federal regulations (e.g. regulations governing healthcare, finance or the food and beverage industry). If your business involves manufacturing or dealing with hazardous materials, you will need to comply with Environmental Protection Agency (EPA) standards.
State and local compliance
Annual reports: Most US states require businesses to file annual reports and pay a filing fee. These reports keep your business information up to date with the state.
State taxes: Comply with state income, sales and payroll tax requirements. This may include quarterly or annual filings and payments.
Licences and permits: Renew any state or local licences and permits to keep your business authorised to operate legally.
State-specific regulations: Be aware of any state-specific laws that may affect your business, such as consumer protection laws, employment laws and environmental regulations.
Corporate compliance
Corporate governance: Maintain proper corporate governance practices, which may include holding annual meetings, keeping minutes and adhering to your business's bylaws or operating agreement.
Recordkeeping: Keep detailed records of all business activities, financial transactions, compliance efforts and decisions made by the business's leadership.
US labour law compliance
Employment laws: If you have employees in the US, ensure that you comply with federal and state labour laws regarding wages, working conditions, non-discrimination and benefits.
Immigration compliance for employees: Ensure that any foreign workers have the appropriate visas and work permits.
Intellectual property compliance
- IP registration: Register your trademarks, copyrights and patents in the US to protect your intellectual property. Monitor and enforce your intellectual property rights on a regular basis to prevent infringement.
Data privacy and security compliance
Data protection: Comply with US data protection laws, such as the California Consumer Privacy Act (CCPA) and the Health Insurance Portability and Accountability Act (HIPAA), depending on your business type and location.
Cybersecurity: Implement strong cybersecurity measures to protect business and customer data.
Immigration and visa considerations
Non-residents who want to take an active approach to managing or working at their US-based business must go through the US immigration system. Here are some important considerations related to immigration and visas:
Visa application process: The application process can be complex and varies by visa type. It typically involves filing a petition, attending an interview at a US embassy or consulate, and providing extensive documentation about your business and investment.
Tax implications: Visa-holders are subject to US tax laws and may be considered to be tax residents depending on the time that they have spent in the US. Understand your tax obligations as a visa holder to avoid legal issues.
Maintaining visa status: Different visa classifications permit different activities. Violating the terms of your visa could lead to loss of status or removal.
Path to permanent residency: Some visas, such as the EB-5, provide a direct path to permanent residency. Others, including the E-2 visa, do not lead to a green card automatically, but may offer potential pathways through other means, such as a change of status or employer sponsorship.
Dependents: Consider the visa options for your dependents (i.e. spouse and children). Some visas let dependents accompany you to the US and in some cases, your spouse may obtain work authorisation.
Types of visas and green cards
B-1 temporary business visitor visa: The B-1 visa is primarily for business visitors who are attending meetings or conferences, or who are in the US to negotiate contracts. It does not permit actively running a business or being employed in the US, but it is suitable for short visits related to your business.
E-2 treaty investor visa: The E-2 visa allows individuals to work in the US for a business in which they have invested a substantial amount of capital. No minimum investment is specified, but the amount should be substantial relative to the total cost of purchasing or establishing the business. This type of visa is available to individuals from countries with which the US maintains a treaty of commerce and navigation.
L-1 intracompany transferee visa: The L-1 visa allows the transfer of managers, executives or specialised-knowledge employees to the US branch of a business that operates in the US and abroad. The L-1A visa is specifically for executives and managers, while the L-1B visa is for employees with specialised knowledge.
EB-5 investor visa: The EB-5 visa allows investors to become permanent residents if they invest US$1.8 million (or US$900,000 in a targeted employment area) in a new commercial enterprise that creates at least 10 full-time jobs for US workers.