How to Register a Business in the US from Micronesia

Step 1: Benefits of starting your US business from Micronesia

Starting a US business from Micronesia presents a unique confluence of strategic advantages and growth opportunities. One of the primary benefits is the favorable tax environment. The Federated States of Micronesia (FSM) enjoys a special financial relationship with the United States through the Compact of Free Association, allowing for certain exemptions and benefits that can significantly reduce the tax burden for entrepreneurs. This can result in considerable savings and increased profitability, which can be reinvested into the business for expansion and development.

Moreover, the geographical positioning of Micronesia, coupled with its strong ties to the US, offers a strategic foothold in the Asia-Pacific region. This makes it easier for businesses to navigate and access both US and Asian markets, creating a bridge that facilitates international trade and partnerships. Furthermore, the relatively low cost of living and operational expenses in Micronesia means that businesses can afford to allocate more resources towards innovation, talent acquisition, and market penetration without compromising on quality. This unique blend of economic benefits and strategic geographic advantages makes Micronesia an ideal location for starting and growing a US business.

Step 2: How to start your US business from Micronesia

Starting a US business from Micronesia requires understanding both US business laws and the logistics of international business operations. First, it's important to choose the right business structure, such as an LLC or a corporation, which will dictate your tax obligations and reporting requirements. You will need to register your business with the relevant state agency in the US. Different states have different requirements, so research and choose the state that best aligns with your business goals and offers favorable conditions for foreign owners.

After registering your company, you need to apply for an Employer Identification Number (EIN) from the IRS. This number is essential for tax purposes and to open a US bank account, which is crucial for managing transactions and receiving payments. Setting up a US bank account can be challenging from Micronesia, but several banks offer international services. Additionally, consider working with a legal advisor or accountant who is familiar with both US and Micronesian regulations to ensure compliance and smooth business operations.

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 Micronesia

Understanding Compliance Requirements for Running a US Business in Micronesia

Setting up and operating a US business in Micronesia involves navigating a unique landscape of legal, cultural, and logistical challenges. To ensure seamless operations and compliance, consider the following key areas:

Legal and Regulatory Compliance

• Business Registration: Businesses must register with the FSM Department of Resources and Development. Ensure that your business structure, be it a sole proprietorship, partnership, or corporation, is appropriately registered.
• Licensing Requirements: Different types of businesses may require specific licenses. Verify the necessary licenses with local authorities to avoid penalties.
• Environmental Regulations: Micronesia emphasizes environmental conservation. Compliance with local environmental laws and regulations is critical, especially for businesses in sectors like tourism, fishing, and agriculture.

Financial Regulations

• Taxation: Understand the tax obligations, including corporate taxes, payroll taxes, and potential tax treaties between the US and Micronesia. Consulting with a local tax advisor can provide clarity.
• Banking and Currency: While the US dollar is Micronesia's official currency, familiarize yourself with the local banking system for smoother financial transactions.

Employment and Labor Laws

• Work Permits and Visas: For US citizens and other foreign nationals, securing the appropriate work permits and visas is essential. Ensure compliance with FSM's immigration laws.
• Labor Regulations: Be well-versed with local labor laws, including employee rights, minimum wage, working hours, and termination procedures.
• Local Workforce: Hiring local employees can facilitate smoother operations. Be mindful of cultural considerations and local employment practices.

Cultural and Business Etiquette

• Cultural Sensitivity: Respecting local customs and traditions is vital. Engage with local communities and understand their cultural values to build strong business relationships.
• Language: While English is commonly spoken, learning basic phrases in local languages can be beneficial and appreciated.

Micronesia offers a unique and promising environment for US businesses. By adhering to these compliance requirements and respecting local customs, businesses can successfully flourish in this diverse and vibrant region.

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 Micronesia

Understanding Tax Obligations for a US Business in Micronesia

Running a US business in Micronesia requires navigating a unique set of tax obligations. For entrepreneurs and companies looking to establish operations in this region, it is crucial to familiarize yourself with local tax laws to ensure compliance and optimize your tax strategy.

US Federal Tax Considerations

• Worldwide Income: The United States taxes its citizens and resident aliens on worldwide income. Therefore, even if your business operations are in Micronesia, income generated globally must be reported on your US tax return.
• Foreign Tax Credit: To alleviate double taxation, the US provides a foreign tax credit which allows businesses to deduct taxes paid to Micronesia from their US tax liability.
• Reporting Requirements: Additional forms such as the Foreign Bank Account Report (FBAR) and Form 8938 (Statement of Specified Foreign Financial Assets) might be required if your business holds significant financial assets in Micronesia.

Micronesia Tax Obligations

• Corporate Income Tax: Businesses operating in Micronesia may be subject to corporate income tax. The rates and regulations can vary, so it’s advisable to consult local tax authorities or a tax professional familiar with Micronesian tax laws.
• Gross Revenue Tax: Instead of a traditional sales tax, Micronesia imposes a gross revenue tax on businesses. This tax is calculated based on the total revenue earned by the business in Micronesia.
• Employee Taxes: Employers in Micronesia are responsible for withholding and submitting taxes on behalf of their employees. This includes social security contributions and other payroll-related taxes.

Tax Treaties and Agreements

Micronesia and the United States have a Compact of Free Association which provides a framework for economic relations, including taxation. Understanding how this compact impacts tax obligations can provide benefits and ease in tax compliance.

Professional Guidance

Given the complexities involved in international taxation, seeking professional guidance from tax advisors experienced in both US and Micronesian tax laws is highly recommended. They can help ensure that you are compliant with all applicable laws and take advantage of any tax benefits or credits available.

By understanding and addressing these considerations, US businesses can effectively manage their tax obligations while operating in Micronesia.

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