Starting up a company in the United States is a powerful way to vastly expand a business that is going from strength to strength in other international locations.
But if you’re not a US resident, you may be left wondering how you even begin to go about the process of starting an LLC or other company.
In this guide, we’ll walk you through the process of opening a company in the USA as a non-resident. The process is a little longer for you than it is for US citizens, and mistakes can be time-consuming and costly.
You’ll need to learn how to navigate the US tax system, how to open a bank account, and how to obtain a US mailing address, to name but a few of the obstacles you have in front of you. Fortunately, we’ll cover all of this and more, below.
Can a foreigner open a company in the US?
The short answer is yes, opening a company in the USA is absolutely doable as a foreigner. You don’t need to be a US citizen, have dual citizenship that includes the US, or even have a green card to be eligible to set up a company in America.
You will, however, need to follow a number of steps that we’ve set out below. There are certain legal intricacies involved, and there are a number of common-sense tips that you should be aware of, such as how to choose a strong business name.
But first, let’s explore the types of companies you can create in the US. Choosing the wrong company can set you back and cost you money that you can’t afford to lose in the early stages of entrepreneurship.
The types of companies you can create
Broadly speaking, there are generally four main types of companies to choose from, which are LLC, C Corp, DAO LLC, and sole proprietorship. However, the latter option is an unincorporated business that is simply run by a lone individual. In the United Kingdom, it’s known as a sole trader, though the majority of European countries use these terms interchangeably.
Working as a sole proprietor has certain drawbacks, including limitations on raising capital and liability for debts should the business fail. So, let’s focus on the other three options. Each has certain benefits and drawbacks to be aware of.
Limited Liability Company (LLC)
Much as the name suggests, limited liability companies shield respective business owners from the liabilities typically associated with the company’s debts. In many ways, they’re a cross between a sole proprietorship and a corporation. In a sole proprietorship, you do not enjoy those same protections.
The regulation of LLCs is different from one state to the next, but these companies do not pay taxes on their profits in the same way as a sole proprietor would, for example. Instead, profit and loss flow through to the LLC members, who individually report them on their IRS returns.
Why open an LLC in the US?
Here are some of the benefits of choosing a decentralized autonomous organization liability company in the U.S.
Your personal assets are separated from those of the business you’ve started. What this means is that if the business faces litigation or defaults on its debts, your property, car, cash, or other assets won’t be at risk.
LLCs are one of the most cost-effective options when opening a US business, which can be invaluable to X non-citizens who want to open an LLC in the US. The process is relatively simple, paperwork isn’t too extensive or complicated, and the whole affair is quite inexpensive.
You may determine your own business structure, specifying how company profits are shared among members. In certain other entities, such as partnerships, this isn’t possible. This means that you can reward business founders with an increased share of profits, for example.
As mentioned, profits are passed through to members of an LLC (pass-through entity). Effectively, you avoid the double taxation trap faced by C-corporations.
C-Corporation (C Corp)
People often misuse the word “corporation” to refer to any company operating in the US, but in reality, this is just one type of company. What’s more there are others too, such as B-corporations and S-corporations.
This type of company formation has no significant rulings around who can or cannot own shares in the company. As a result, other people or businesses outside of the US can own shares, which makes it appropriate for foreign residents.
In C-corps, the owners of the business or its shareholders are individually taxed, much like with an LLC. Additionally, these companies must pay income taxes on their profits. And yes, this creates a situation in which tax is being paid twice (double taxation).
Why open a C Corp in the US?
Here are some of the benefits of choosing a limited liability company in the U.S.
Corporations are separate from their owners, which affords a great deal more flexibility. For example, a company can begin litigation, buy and own property, create legal agreements, invest profits, and create its own legal agreements.
Corporations ensure that a business has something known as “perpetual existence.” Should the business founder or owner no longer be capable of running the business, it won’t simply cease to function.
C-Corporations are more attractive to potential investors, which is often critical to young businesses. Most venture capitalists will feel more comfortable investing in a C-corporation compared to a sole proprietor, for example.
In a C-corporation, there are no limitations on whom can hold stock. At the same time, shareholders do not directly run the organization; instead, a board of directors is required to oversee day-to-day business operations.
Decentralized Autonomous Organization Limited Liability Company (DAO LLC)
The DAO LLC is a relatively new business entity, representing a company that isn’t governed by a single body. Instead, all of the members contribute toward the business’ strategic direction. This type of business has begun to gain traction alongside the rise in technologies such as blockchain and cryptocurrencies.
Why open a DAO LLC in the US?
DAO limited liability companies in the U.S. enjoy the same benefits as an LLC. However, there are additional benefits to this emerging type of company.
Rather than having a traditional board of directors or trustees, DAO LLCs delegate decision-making power to each member within the business. Those who hold tokens are usually permitted to vote on issues related to business strategy or otherwise, and voting normally takes place via blockchain technology.
Now that you’re aware of the different types of companies you can incorporate in America, it’s time to take your first steps on the road to opening a company in the USA. By now, we’ll assume that you’ve understood the information above and have chosen which type of company suits your business plans. Assuming that’s true, simply follow the steps below to get started.
1. Pick a name that’s available
Choosing a business name isn’t as simple as pulling it out of a hat. There are legal requirements to consider, and there are practical elements that we strongly advise taking into account. Here are a few tips for choosing a business name in the US:
Be aware of the naming guidelines for companies in your state. In whichever state you plan on opening your business, you’ll need to familiarize yourself with these regulations. These will be detailed on whatever website handles business filings for your chosen state.
Don’t hijack another company’s success. Be sure to do your research on similar brands, and avoid choosing a business name that’s too close to a competitor. This could put you at risk of a trademark infringement suit, and it could also drown any marketing efforts you make.
Choose a practical name that’s easy to remember. The more difficult to pronounce or remember your name is, the less likely you’ll be remembered by customers or users. There’s a reason that many of the biggest companies and apps now have such short names; stick with simple and memorable names that are difficult to forget.
Keep digital in mind. These days, it’s essentially for nearly every business to have an online presence. When you’re choosing a name, consult domain name companies to make sure that you have options available. The last thing you want is to discover that your preferred domain is unavailable once you’ve already registered your business. And again, remember that simple and memorable is king.
Don’t impose limitations on your fledgling business. Depending on the industry you’re wading into, you may have scope for expansion in the future if things go well. So, don’t limit your business by labelling it in a way that localizes it too much, such as by including the city name.
2. File your LLC through a Registered Agent
Now that you’re ready to create your LLC, you’ll need to designate a registered agent to help you; it’s the law in every state. A registered agent is the person who will receive, file, and generally process official and legal documentation on your company’s behalf, before ensuring that such documents make their way to you.
A registered agent needn’t cost you a fortune; this can be any person who is at least eighteen years old. That said, your registered agent needs a US mailing address that’s available during normal working hours. As a result, many foreigners who want to open a company in the US will use a company that provides these services.
3. Get a US mailing address
Your business will need a mailing address. Fortunately, there’s no need to be a US citizen to obtain a mailing address for a U.S. business. Why is a US mailing address required? Your customers or other companies that you do business with may need to send information or packages to you, and you’ll need a way to receive them.
Getting a mailing address for your business has a number of other benefits and can prevent obstacles down the road. What’s more, it’s a legal requirement in some states. Bear in mind that some states will let you use virtual mailboxes or P.O. Boxes, but others won’t.
Fortunately, there are services available that will help you to get a legitimate company mailing address. Some of the simplest solutions allow you to get a US mailing address via a physical lease with minimal effort so that you can verify your business address immediately.
4. Get your EIN
Your business is going to need a bank account to make and receive payments, and you must have an Employer Identification Number (EIN) to open a business bank account in the US as a foreigner (or as a US citizen). This process can be time consuming and complicated, but it’s critical, which is why we recommend using a professional service to do the legwork for you. This’ll remove any obstacles or delays you may face by trying to navigate the process yourself.
5. Open your US business bank account
Your business is going to need a bank account. However, not all financial institutions will allow foreigners to open a US bank account. Some may require physical attendance within a branch, too. Fortunately, services like doola can help you to set up your LLC remotely, including opening your US business bank account.
6. Set up your payment processors
Since the internet begun to expand rapidly, payment processors have become the go-to for many online businesses and customers. The two most popular choices that will service the majority of your customers are Stripe and PayPal.
PayPal: PayPal is one of the most recognized processors in the world. To get started as a business user, you’ll need to have first determined your business name and opened a US bank account to send and receive payments. Thankfully, PayPal’s Commerce Platform makes it straightforward to quickly begin accepting payments through physical or digital stores. New business users have a 180-day refund available, and the sign-up process is very simple and intuitive.
Stripe: Started by Irish developers in 2010, Stripe has partnered with big-name credit providers including Visas. Today, it has become one of the most popular and secure online payment systems with intelligent fraud prevention features that’ll help keep your business safe. Stripe’s powerful payment APIs are easy to integrate, and this payment processor already works with some of the biggest brands in the world, such as Monzo, H&M, Booking.com, and Deliveroo.
7. Keep up with annual tax filings
Understanding taxation and filing your IRS return can be one of the most confusing parts of opening and operating a US business. There are distinct rules for residents and non-residents; as a foreigner, you’ll only be expected to pay taxes if you have FDAP income, though there are other caveats. For a full understanding of this subject, we recommend checking out our full and detailed guide to US taxation as a non-resident alien.
Hopefully, you’ve found the steps outlined above useful. Now, you understand the end-to-end process of setting up a company in the US as a foreign resident. If you’re looking for more detailed information on the process, you can check out the US Small Business Administration, which provides a lot of useful advice for people looking to start a business.
For more specialized and tailored help, you can also get in touch with doola. Our mission is to break down barriers to entrepreneurship and help people across the world realize their business ideas on American soil. We understand the importance of time management as a budding entrepreneur, which is why we can take care of everything, from getting your EIN and mailing address, to starting your company and receiving payments.
FAQs (using doola to form your company)
For more information on using doola to form your company, or opening a company in the US as a foreigner in general, check out our frequently asked questions below.
Should I choose an LLC or a C Corp?
Ultimately, the decision on which company to open in the US comes down to you, and potentially your co-owners. Here are a few pieces of advice that may help:
If protecting your own, personal liabilities is important to you, then an LLC is a good choice. They’re also considered to be simpler to start and to operate.
If you think there’s any possibility that you will need to raise US venture capital and make your company public in future, then C Corp could be more appropriate. Operating a C Corp is mandatory to secure venture capital funding.
Does my C Corp require a board of directors?
If your corporation is located in Washington or Delaware, then you are required to instate a board of directors. While there’s no timeframe around this, your business will be unable to take any official actions until this is done. This includes issuing stock, making payments, and hiring staff, so you should endeavor to do it sooner rather than later.
How is a DAO LLC different to an LLC?
Whereas one or more parties manages an LLC, a DAO LLC is typically overseen by an algorithm. Token holders may also have input into the company’s strategic direction and operation.
Can an LLC be converted into a DAO LLC?
If you’re already managing an LLC in the US, you can indeed convert it to a DAO LLC. This requires filing of an amendment to your business articles. We recommend reviewing the full list of requirements needed to satisfy this.
Can I get an EIN in the US with a friend or family member’s SSN?
According to the IRS (Internal Revenue Services), you cannot use a third party to get your EIN. When applying for your EIN, you must list the name of the owner or individual, who will be considered the responsible party for the corporation or business and its funds and assets.
Does having a US company help you get a visa?
The immigration requirements for the US are strict, and simply owning a US-based company will have no sway in any decision to grant you a visa. However, subscribers to doola’s services can get a free consultation with our visa partner.
Can doola help to set up payment services for a US company?
doola can help you to set up your Stripe account so that your business is ready to make and receive transactions. For a new Stripe account, you’ll need:
Your EIN number
A physical mailing address
A US phone number
Government ID belonging to any country
doola can help you to get your EIN number, secure a lease with a mailing address, and help you to access a phone number. Since you’ll likely already have a personal identification, you’ve got everything you need. For PayPal, the list is similar, though you’ll also need to have an ITIN — doola can provide this, too.
Do I need a US bank account to use PayPal or Stripe?
Yes, you’ll need to have a US bank account to operate a Stripe or PayPal business account in the US. doola’s services include helping you to secure a US bank account, which your business will need anyway.
Can doola help to set up Wise?
Wise (formerly TransferWise) requires an EIN. doola can provide you with an EIN, and the remaining process to set up a Wise account for business is simple. Unfortunately, we are not permitted to set an account up for you, but you can access discounted services as a doola customer.
If doola helps set up my company, who will be listed as the business owner?
Regardless of how you choose to set up your company, whether individually or with doola’s help, you’ll be the legally registered owner and manager. We prepare and file documentation on your behalf, but the company isn’t set up in a way that will cause any obstacles or trouble to you.
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