How to Register a Business in the US from Paraguay

Step 1: Benefits of starting your US business from Paraguay

Starting a US business from Paraguay offers a unique blend of advantages that can significantly boost your entrepreneurial ambitions. Leveraging Paraguay's favorable cost of living allows you to minimize overhead expenses while accessing the lucrative US market. The discrepancy in operational costs means that businesses can allocate more resources towards growth and innovation. Additionally, reduced living expenses in Paraguay can provide a buffer, offering a financial cushion that facilitates risk-taking and experimentation, essential components in business success.

Furthermore, Paraguay's strategic geographical location in South America enables seamless networking with other emerging markets, providing a diversified business reach. The country’s steady internet infrastructure and a growing community of tech-savvy professionals offer an ideal environment for remote work. This makes it easier to manage your US business operations efficiently. Immunity from the volatility of higher living expenses in the US, combined with the digital connectivity that Paraguay offers, makes it an excellent base for launching and growing a business targeted at the US market.

Step 2: How to start your US business from Paraguay

Starting a US business from Paraguay involves several key steps to ensure compliance with both US and Paraguayan laws. First, it's important to conduct thorough market research to understand the US market dynamics and identify the potential for your product or service. Once you have a business idea, choose the appropriate business structure in the US, such as a corporation, limited liability company (LLC), or partnership. Each has its own legal and tax implications, so it may be beneficial to consult with a business attorney or accountant.

Next, you'll need to register your business with the appropriate US state authorities. This process often includes selecting a unique business name, filing incorporation documents, and obtaining a registered agent in the state of incorporation. Additionally, you must apply for an Employer Identification Number (EIN) from the IRS, which is necessary for tax purposes. To ensure smooth operations, consider opening a US bank account and obtaining any required business licenses or permits relevant to your industry. Leveraging resources like the US Small Business Administration (SBA) can provide valuable guidance throughout this process. Finally, be prepared to navigate any regulatory requirements related to international transactions and cross-border operations between Paraguay and the US.

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 Paraguay

Understanding Compliance Requirements for Running a US Business in Paraguay

Operating a US business in Paraguay involves navigating several compliance requirements that can differ significantly from those in the United States. To ensure that your business adheres to local laws and regulations, consider the following key areas:

Legal Entity Formation

Before starting operations, you'll need to establish a legal entity recognized in Paraguay. Common forms include:

1. Sociedad Anónima (SA): A corporation which can be either publicly or privately held.
2. Sociedad de Responsabilidad Limitada (SRL): A limited liability company often used by smaller businesses.

Select the entity that best aligns with your business goals and regulatory comfort.

Taxation

Understanding Paraguay's tax regime is crucial for compliance. Important taxes to consider include:

• Corporate Income Tax: Typically set at a flat rate of 10% on net income.
• Value-Added Tax (VAT): Imposed on goods and services, generally at a rate of 10%.
• Withholding Taxes: Applicable on dividends, interest, and royalties paid to foreign entities.

Engage with a local tax advisor to navigate these complexities.

Employment Regulations

Complying with local labor laws is essential for maintaining a productive workforce:

• Employment Contracts: Must be in Spanish and comply with Paraguayan Labor Code.
• Minimum Wage: Ensure all workers are paid at least the legal minimum wage.
• Social Security Contributions: Both employer and employee must make contributions to the Social Security Institute (IPS).

Have a clear understanding of the labor laws to avoid any legal disputes.

Import and Export Regulations

For businesses involved in trade, understanding customs regulations is critical:

• Tariffs and Duties: Be aware of import duties and other taxes that apply to goods entering the country.
• Documentation: Ensure all required documentation is accurate and complete to avoid delays.

Consult with shipping and logistics experts familiar with Paraguayan regulations.

Environmental and Safety Regulations

Businesses must comply with various environmental and safety standards:

• Environmental Impact: Assess and minimize environmental impacts as per local laws.
• Workplace Safety: Follow regulations to ensure a safe working environment for all employees.

Implement robust policies to adhere to these regulations.

Adhering to compliance requirements in Paraguay requires thorough preparation and expert advice. By understanding legal entity formation, taxation, employment regulations, import/export rules, and environmental standards, your US business can operate successfully within Paraguayan legal frameworks.

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 Paraguay

Understanding Tax Obligations for Running a US Business in Paraguay

Operating a business in a foreign country involves navigating various tax obligations. If you're a US business owner considering running a business in Paraguay, it's crucial to understand the local tax landscape. The following sections outline important considerations to keep in mind.

Corporate Income Tax

Paraguay imposes a Corporate Income Tax (CIT) on the earnings of local and foreign businesses operating within its borders. The general CIT rate as of 2023 is 10%. Businesses should be aware of the specific regulations that determine taxable income and possible deductions to ensure compliance.

Value-Added Tax (VAT)

Value-Added Tax, or VAT, is levied on the sale of goods and services. In Paraguay, the standard VAT rate is also 10%. Some goods and services may be subject to reduced rates or exemptions. It's essential to keep detailed records of VAT to streamline filing and payment processes.

Withholding Tax

Paraguay applies a Withholding Tax on certain types of payments to non-residents, such as dividends, interest, and royalties. These rates vary, and understanding them is critical for both compliance and financial planning.

Transfer Pricing

Businesses engaged in transactions with related entities must adhere to Transfer Pricing regulations. Paraguay requires these transactions to be conducted at arm's length, ensuring that prices reflect fair market value. Proper documentation and reporting are necessary to comply with these rules.

Tax Treaties

Paraguay has tax treaties with several countries, which can affect the tax obligations of a US business. These treaties often aim to avoid double taxation and prevent tax evasion. It's advisable to consult these treaties to understand potential tax reliefs or exemptions.

Registration and Filing

Compliance requires proper Registration with Paraguayan tax authorities. Businesses must obtain necessary permits and tax identification numbers. Regular Filing of tax returns—typically on a monthly and yearly basis—is mandatory. Late filings or non-compliance may result in penalties.

Professional Assistance

Tax regulations can be complex, and staying updated with changes is crucial. Engaging with a local tax advisor or professional service can ensure that your business remains compliant with Paraguayan tax laws, helping to avoid any legal pitfalls and optimize your tax strategy.

• Corporate Income Tax (CIT): 10%
• Value-Added Tax (VAT): 10% standard rate
• Withholding Tax on non-residents
• Transfer Pricing regulations
• Tax Treaties to prevent double taxation
• Proper registration with tax authorities
• Monthly and annual tax filings
• Seek professional tax advice

Understanding these considerations will help you navigate the Paraguayan tax system more effectively, ensuring compliance and optimal tax management for your US business.

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