How to Register a Business in the US from iceland

Step 1: Benefits of starting your US business from iceland

Starting a US business from Iceland offers numerous advantages, primarily due to the strategic benefits both countries provide. Iceland, known for its robust education system, tech-savvy workforce, and advanced digital infrastructure, equips entrepreneurs with the essential skills and tools needed for success. Furthermore, the time zone overlap between Iceland and the east coast of the United States allows for seamless communication and collaboration, making it easier to manage operations and maintain real-time contact with clients and partners.

Another major benefit is the favorable business climate in both Iceland and the United States. Iceland's supportive government policies, coupled with the US's vast consumer market and diverse economy, can drive business growth and innovation. Additionally, Icelandic entrepreneurs can take advantage of the various tax treaties between the two nations, which are designed to prevent double taxation and encourage cross-border trade and investment. These factors, combined with Iceland's emphasis on sustainability and clean energy, make it an attractive launchpad for businesses aiming to enter the US market.

Step 2: How to start your US business from iceland

Starting a US business from Iceland involves several important steps designed to ensure compliance with both Icelandic and US regulations. First, it is essential to decide on the type of business entity you would like to form. Common options include a corporation, limited liability company (LLC), or sole proprietorship. Each entity has different implications for liability, taxation, and administrative responsibilities. Once you have made this decision, you will generally need to register your business with the state in which you plan to operate. This typically involves filing formation documents and paying a registration fee. It is advisable to seek consultations with legal and financial professionals who specialize in US business formation to ensure that you meet all legal requirements

In addition, obtaining an Employer Identification Number (EIN) from the Internal Revenue Service (IRS) is necessary for tax purposes. You can apply for an EIN online directly through the IRS website. Depending on the nature of your business, you may also need various licenses and permits, which could be required at the federal, state, or local level. Opening a US bank account is another crucial step, as it facilitates payments and transactions within the US. Many banks require a physical presence in the United States, so it may be advantageous to plan a visit during the setup process. Lastly, familiarize yourself with tax obligations, including the potential need for state and federal tax filings. It is often helpful to hire an accountant who understands both the US and Icelandic tax systems

Step 3: Opening a Business Bank Account

A business bank account is a separate account that is used exclusively for business transactions. But why is it important to open a business bank account?

Keeping your personal and business finances separate is crucial. A dedicated business bank account allows you to do just that, making it much easier to track your business’s income and expenses. This clear separation translates to simpler tax reporting come tax season.

But the benefits go beyond bookkeeping. Having a separate account can provide legal protection. It establishes your business as a distinct entity from yourself. In the unfortunate event of a lawsuit or bankruptcy, this separation can help shield your personal assets from business liabilities.

Furthermore, a business bank account can boost your credibility and project professionalism.

It demonstrates to clients and vendors that you take your business seriously and are committed to maintaining accurate financial records. This can be especially important in establishing trust with potential partners.

Finally, a business bank account is essential for accepting payments, even if you utilize a merchant account. Whether you use doola or another service, funneling those customer funds into a dedicated business account is necessary.

doola partners with banks that allow you to open a bank account remotely from anywhere in the world, like Mercury. Shop around and compare different banks’ fees and services.

Look for a bank that offers the features you need, such as online banking, mobile banking, or overdraft protection.

You may also want to consider working with a bank that specializes in small business banking.

Step 4: Understanding Your Compliance Requirements in iceland

Understanding Compliance Requirements for Running a US Business in Iceland

When considering expanding your US business to Iceland, it is critical to understand the various compliance requirements to ensure smooth operation and legal standing. Below are key considerations to guide you through this process.

1. Business Registration

All businesses operating in Iceland must be formally registered. You will need to register with the Business Register (Fyrirtækjaskrá) at the Directorate of Internal Revenue (Ríkisskattstjóri).

• Type of Entity: Choose the correct type of entity (corporation, branch, etc.) for your operations.
• Documentation: Prepare necessary documents such as Articles of Incorporation and proof of identity for the directors.
• Fees: Be aware of registration fees that may be applicable.

2. Tax Compliance

Iceland has its own set of tax laws and regulations, making it essential to understand these to ensure compliance:

• Corporate Tax: Iceland imposes a corporate income tax. Ensure you are aware of the current rates and relevant deductions.
• Value-Added Tax (VAT): Businesses must collect VAT on goods and services. Registration for VAT is mandatory if your turnover exceeds a certain threshold.
• Payroll Taxes: Understand employer obligations regarding social security and other payroll-related taxes.

3. Employment Law

Compliance with Icelandic employment laws is crucial for maintaining good employee relations and avoiding legal issues:

• Labor Contracts: All employees should have a written contract specifying terms of employment.
• Working Hours: Familiarize yourself with regulations surrounding working hours, overtime, and rest periods.
• Employee Rights: Ensure fair treatment regarding wages, vacation, sick leave, and termination procedures.

4. Data Protection

With the European Union’s General Data Protection Regulation (GDPR) being applicable in Iceland, data protection compliance is critical:

• Data Handling: Ensure all personal data is processed lawfully, transparently, and for a specific purpose.
• Consent: Obtain explicit consent from individuals before processing their personal data.
• Data Security: Implement adequate security measures to protect personal data from breaches.

By paying attention to these compliance areas, US businesses can successfully operate in Iceland, avoid legal pitfalls, and build a strong presence in the Icelandic market.

doola offers a Total Compliance package, including bookkeeping services, to help you stay on top of your compliance requirements. This ensures your business operates smoothly and adheres to all legal and regulatory standards.

Step 5: Understanding Your Tax Obligations in iceland

Understanding Tax Obligations for Running a US Business in Iceland

Operating a US business in Iceland involves navigating a unique set of tax obligations. Here are some crucial considerations to help you understand your responsibilities:

Corporate Tax Rate

Iceland imposes a corporate income tax on businesses. The standard corporate tax rate is 20%. This rate applies to both resident and non-resident companies on their income sourced within Iceland.

Value Added Tax (VAT)

Iceland has a Value Added Tax system, which is similar to sales tax in the US but is charged at each stage of production and on sales of goods and services. The standard VAT rate in Iceland is 24%, with reduced rates for certain goods and services.

Double Taxation Treaty

The US and Iceland have a double taxation treaty in place to prevent businesses from paying tax on the same income in both countries. This treaty provides mechanisms such as tax credits or exemptions to mitigate double taxation.

Permanent Establishment

If a US business has a "permanent establishment" (PE) in Iceland, such as a branch, office, or factory, the PE will be liable to pay Icelandic tax on its locally generated income. Determining the presence of a PE requires careful analysis of business activities.

Transfer Pricing

Transactions between a US business and its Icelandic subsidiary or branch must adhere to arm's length principles. Icelandic transfer pricing rules require that prices for intercompany transactions are comparable to those charged between independent entities.

Social Security Contributions

Employers in Iceland must contribute to social security for their employees. The standard contributions include a social security tax and pension fund payments. It's essential to register with the Icelandic authorities to comply with these requirements.

• Social Security Tax: Approximately 6.35% of salaries
• Pension Fund Contributions: Typically 12%, with the employer paying 8% and the employee paying 4%

Local Taxes and Fees

In addition to national taxes, businesses might be subject to local municipality fees. These fees can vary based on the municipality where the business operates.

Filing Requirements

Businesses must comply with Icelandic tax filing requirements, which may include periodic VAT returns, annual corporate tax returns, and payroll tax filings. Ensuring timely and accurate filings is crucial to avoid penalties and interest charges.

Understanding these tax considerations will help US businesses navigate the Icelandic tax landscape effectively. Consulting with a local tax advisor can provide tailored guidance and ensure full compliance with Icelandic tax laws.

It’s a good idea to consult with a tax professional or an accountant (or to hire these roles in-house) to make sure you’re not missing anything.

doola's Total Compliance package can handle your tax filings for you, ensuring you remain compliant with federal, state, and local tax requirements.

Step 6: How doola Can Assist

doola simplifies the incorporation and setup process for your company, ensuring you’re ready to charge customers, hire your team, and raise funds as quickly as possible.

Fill out your company details in the doola form in less than 10 minutes. Then, we’ll incorporate your company in any of the 50 US states, get your IRS tax ID (EIN) for you, and file your 83(b) tax election if needed. 

doola can also help you open a bank account and start accepting payments even before the IRS assigns your tax ID.

doola founders also gain access to exclusive discounts at leading software partners, one-click onboarding with select partners, and free CPA consultations.

The doola Application

It takes less than 10 minutes to fill out the details of your new company. You’ll choose your company structure (C corporation, limited liability company) and pick a company name.

Our instant company name checker will let you know if it’s available before you submit your application. You’ll add an address and phone number and review and sign your EIN SS4 letter in one click.

Forming the Company

doola will review your application and file your formation documents in the state within one business day. doola charges $297 for our Starter Plan and your first year of registered agent services (a state compliance requirement), and $297 each year thereafter to maintain your registered agent. 

You can also opt for our Total Compliance plan.

Getting Your IRS Tax ID (EIN)

After your formation in the state is complete, doola will file for your company’s IRS tax ID. Founders who provide a US Social Security number, US address, and US phone are eligible for expedited processing. All other users will receive standard processing. 

For standard orders, doola will fax your form SS4 to the IRS and then call the IRS to retrieve the EIN for you to expedite the process if we can, using real-time IRS data to determine when your filing is likely to be available.

Filing Your 83(b) Tax Election

Many startup founders choose to file an 83(b) tax election to potentially save on future personal taxes. doola can file and mail your 83(b) tax election in one click for both US and non-US founders — no trip to the post office required.

We’ll file it using USPS Certified Mail with tracking, and you’ll get a copy of your signed 83(b) election and proof of filing in your Dashboard.

Partner Perks and Discounts

doola partners with a range of third-party tools to offer special pricing or access to founders. We offer discounts on engineering, tax and finance, compliance, and operations tools, including Amazon Web Services.

doola also partners with Mercury to provide faster, automatic onboarding using your doola company information so you can get ready to bank and fundraise even faster.

Founders may also access discounts on other doola products, including up to one year of free credits toward payment processing.

Read our guides for startup founders, or learn more about doola and how we can help you set up your new business quickly and easily.

Turn your entrepreneurship dream into reality today!

We do our best to provide accurate and up to date information, however the information provided here are just guidelines. Please speak with a tax and compliance professional in your country