How to Register a Business in the US from Latvia

Step 1: Benefits of starting your US business from Latvia

One of the significant benefits of starting a US business from Latvia is the ability to access a vast and diverse market. The United States offers one of the largest consumer bases globally, providing ample opportunities for growth and expansion. Entrepreneurs from Latvia can take advantage of this expansive market to scale their businesses swiftly. Additionally, the US business environment is known for its innovation and entrepreneurship ecosystem, which can provide Latvian business owners with unparalleled networking opportunities, access to venture capital, and a plethora of resources to foster business development.

Another advantage is the strong legal and regulatory framework that the United States offers. By establishing a US business, entrepreneurs in Latvia can benefit from robust intellectual property protections, ensuring their innovations and business ideas are safeguarded. Moreover, the tax incentives and favorable economic policies present in various states can significantly reduce operational costs and increase profitability. The ease of doing business is also a notable feature, with well-defined processes for setting up and managing a company, enabling Latvian entrepreneurs to focus more on business growth and less on bureaucratic hurdles.

Step 2: How to start your US business from Latvia

Starting a US business from Latvia is a feasible venture but requires understanding certain specific steps and legalities. First, it is essential to decide on the type of business entity you want to form, such as a Limited Liability Company (LLC), Corporation, or a Sole Proprietorship. Each type has its own advantages and legal implications. An LLC is often preferred due to its flexibility and protection of personal assets. After chosen, you'll need to select the state in which you want to register your business; Delaware, Nevada, and Wyoming are popular choices due to their business-friendly regulations.

Next, you'll need to register your company with the appropriate state authorities. This typically involves choosing and reserving a business name, filing the necessary formation documents (such as Articles of Organization for LLCs), and paying the relevant fees. Additionally, obtaining an Employer Identification Number (EIN) from the Internal Revenue Service (IRS) is required for tax purposes, and this can be done online even if you're based in Latvia. Depending on the nature of your business, you might also need to apply for specific licenses and permits. Considering consulting with a legal expert experienced in US business law to help navigate these processes effectively would be advantageous.

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 Latvia

Understanding Compliance Requirements for Running a US Business in Latvia

Expanding your business operations to Latvia can be an exciting opportunity. However, it is crucial to understand the compliance requirements to ensure smooth and legal operations. Here are key considerations for US businesses entering the Latvian market:

Establishing a Legal Entity

Before starting operations in Latvia, you must choose an appropriate legal structure. Common options include:

• Limited Liability Company (SIA): The most popular form for small to medium-sized businesses. It offers limited liability protection to its shareholders.
• Branch Office: An extension of your US-based company, operating in Latvia. It allows you to conduct business without setting up a separate legal entity.
• Representative Office: Used for non-commercial activities like market research or promotional work. It cannot engage in commercial transactions.

Taxation

Understanding the tax obligations in Latvia is crucial for compliance. Key taxes include:

• Corporate Income Tax (CIT): Latvia has a 20% CIT rate on distributed profits. Undistributed profits are not subject to tax until they are distributed.
• Value Added Tax (VAT): The standard VAT rate is 21%. Registering for VAT is mandatory if your taxable turnover exceeds a specific threshold.
• Personal Income Tax (PIT): If you employ staff, you will need to manage PIT, which is progressive, ranging from 20% to 23%.

Employment Regulations

Hiring employees in Latvia involves complying with local labor laws. Key considerations include:

• Employment Contracts: Must be in writing and comply with Latvian labor law.
• Working Hours: Standard working time is 8 hours per day and 40 hours per week.
• Employee Benefits: Includes social security contributions, health insurance, and pension plans.

Data Protection

With the EU’s General Data Protection Regulation (GDPR) in force, US businesses must ensure they comply with data protection laws:

• Appoint a Data Protection Officer (DPO) if necessary.
• Ensure data transfer agreements are in place when transferring personal data between the US and Latvia.
• Implement robust data protection measures to safeguard personal information.

Business Licenses and Permits

Depending on your business activities, you may need to obtain specific licenses or permits:

• Construction: Requires building permits and compliance with safety regulations.
• Food and Beverage: Needs health and safety certifications, among others.
• Financial Services: Must comply with regulations from the Financial and Capital Market Commission (FCMC).

Conclusion

Adhering to compliance requirements is critical for the successful operation of your business in Latvia. Seek local legal and financial advice to navigate these regulations effectively and ensure your business thrives in the Latvian 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 Latvia

Understanding Tax Obligations for Running a US Business in Latvia

When considering running a US business in Latvia, understanding the tax obligations is crucial for ensuring compliance with local regulations and optimizing your financial strategy. Below are several key factors to consider.

Corporate Income Tax (CIT)

Latvia has a unique corporate income tax system where companies are only taxed on distributed profits. The standard CIT rate is 20%. However, undistributed profits are not subject to tax, which may be beneficial for businesses aiming to reinvest in their operations.

Personal Income Tax (PIT)

If you have employees in Latvia, it's important to be aware of the personal income tax rates. Latvia implements a progressive PIT system with rates as follows:

• 20% for annual income up to €20,004
• 23% for annual income between €20,004 and €62,800
• 31.4% for annual income above €62,800

Value Added Tax (VAT)

The standard VAT rate in Latvia is 21%. Certain goods and services may be subject to reduced rates of 12% or 5%, while others may be exempt. Understanding VAT registration requirements and compliance is essential if your business engages in sales within Latvia.

Double Taxation Agreement (DTA)

The US and Latvia have a tax treaty to avoid double taxation on income. This agreement can help US businesses avoid being taxed twice on the same income. It is advisable to explore the provisions of the treaty to optimize tax liabilities.

Social Security Contributions

Both employers and employees are required to make social security contributions in Latvia. Employers contribute 24.09% of the gross salary, while employees contribute 11%. These contributions cover pensions, unemployment benefits, and healthcare.

Transfer Pricing

Latvian tax law requires that transactions between related parties be conducted at arm's length. Ensuring compliance with transfer pricing regulations is important to avoid adjustments and penalties.

Tax Compliance and Reporting

Regular tax filings and reports are mandatory in Latvia. Corporate income tax returns must be submitted annually, while VAT returns are typically filed monthly or quarterly. Staying abreast of filing deadlines and keeping accurate records is vital to prevent issues with tax authorities.

Professional Advice

Given the complexities of international tax law, seeking professional advice from tax consultants or legal advisors who specialize in Latvian and US tax systems can provide valuable insights and ensure compliance.

By understanding these considerations, US businesses can better navigate the Latvian tax landscape and make informed decisions about their operations in Latvia.

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