How to Register a Business in the US from Portugal

Step 1: Benefits of starting your US business from Portugal

Starting a US business from Portugal offers a unique blend of advantages that can lead to significant growth and success. One prominent benefit is the remarkable time zone difference, which allows for round-the-clock operations. When entrepreneurs in Portugal end their workday, the US is just starting theirs, ensuring continuous productivity and communication. This can be particularly advantageous for businesses that rely heavily on customer service, tech support, and other time-sensitive interactions. Additionally, Portugal's well-educated, multilingual workforce provides valuable assets to a US-based business, ensuring effective communication with a diverse range of clients and stakeholders.

Moreover, Portugal's relatively lower cost of living compared to many US cities means that operational expenses can be kept to a minimum. Entrepreneurs can benefit from cost-effective labor, office spaces, and amenities without compromising on quality. The favorable tax treaties between Portugal and the US also facilitate smoother financial transactions and reduce the overall tax burden. Furthermore, Portugal's status within the European Union offers additional opportunities for expanding business reach into other European markets, all while maintaining a strong presence in the US. Ultimately, setting up a US business from Portugal can provide the strategic advantage needed to thrive in a competitive global market.

Step 2: How to start your US business from Portugal

If you are in Portugal and considering starting a business in the United States, the process can be streamlined by following a few key steps. First, you will need to choose the right type of business entity, such as an LLC (Limited Liability Company) or a Corporation. Each type has its own advantages and requirements, so it's essential to research which one fits your needs best. Once you’ve made your decision, you will need to register your business with the appropriate state authorities. Typically, this involves selecting a state, registering your business name, and obtaining a registered agent within that state to handle legal documents on your behalf.

After registration, you must apply for an Employer Identification Number (EIN) from the Internal Revenue Service (IRS), which is essential for tax purposes and hiring employees. Additionally, you might need to secure necessary licenses and permits depending on your business activity and location. Lastly, ensure you set up a US business bank account to manage financial transactions effectively. Given the complexities involved, consulting with legal and financial experts who specialize in US business setups for international entrepreneurs can provide invaluable guidance and increase your chances of success.

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 Portugal

Compliance Requirements for Running a US Business in Portugal

Understanding the compliance requirements for operating a US-based business in Portugal is essential for ensuring legal and successful operations. Below are some key considerations to keep in mind:

1. Business Structure

Selecting the appropriate business structure is fundamental. The common types in Portugal include:

• Sociedade por Quotas (Lda): Similar to a limited liability company, suitable for small to medium enterprises.
• Sociedade Anónima (SA): Similar to a corporation, ideal for larger businesses.
• Filial: A branch office of the US parent company, not a separate legal entity.

2. Company Registration

Businesses must be registered with the Portuguese Commercial Registry:

1. Obtain a Legal Entity Identification Number (NIPC).
2. Submit the company’s articles of incorporation.
3. Register with the Portuguese Social Security system.

3. Taxation

Understanding the tax obligations is crucial:

• Corporate Income Tax (IRC) is generally 21%.
• Value-Added Tax (VAT) with standard rate at 23%.
• Withholding taxes on dividends, interest, and royalties.
• Annual accounting and tax filings must be submitted.

4. Employment Law

Compliance with Portuguese employment laws involves:

• Providing employment contracts in Portuguese.
• Aligning with minimum wage requirements.
• Adhering to working time regulations and mandatory benefits.
• Compliance with health and safety regulations.

5. Intellectual Property

Protecting intellectual property rights involves:

• Registering trademarks and patents with the Portuguese Institute of Industrial Property (INPI).
• Understanding copyright laws pertinent to your business operation.

6. Data Protection

Businesses must comply with the General Data Protection Regulation (GDPR):

• Ensure transparent data processing policies.
• Implement robust data protection measures.
• Facilitate data subject rights such as data access and erasure.

By paying attention to these factors, US businesses can navigate the regulatory landscape in Portugal, ensuring compliance and laying the groundwork for a successful operation.

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 Portugal

Understanding Tax Obligations for Running a US Business in Portugal

When managing a US business with operations in Portugal, it is essential to be aware of various tax obligations to ensure compliance and optimize financial performance. Here are some key considerations:

1. Corporate Income Tax (CIT)

Portuguese corporate income tax applies to profits generated within Portugal. While the standard CIT rate is 21%, small and medium-sized enterprises (SMEs) may benefit from reduced rates on the first €25,000 of taxable income.

2. Double Taxation Agreements (DTA)

Portugal has a DTA with the United States to avoid double taxation on income. This agreement helps ensure that income is not taxed twice in both countries, providing relief and clarity on tax responsibilities.

3. Value Added Tax (VAT)

Businesses operating in Portugal must adhere to VAT regulations. The standard VAT rate is 23%, but reduced rates may apply to certain goods and services. It is crucial to register for VAT and file returns regularly.

4. Withholding Taxes

Portugal imposes withholding taxes on certain payments, such as dividends, interest, and royalties, to non-residents. The DTA between the US and Portugal may reduce these rates for qualifying businesses.

5. Social Security Contributions

If hiring employees in Portugal, businesses must contribute to the Portuguese social security system. Employer contributions generally amount to 23.75% of an employee's gross salary, with additional employee contributions of 11%.

6. Transfer Pricing

Portugal follows OECD guidelines on transfer pricing, which applies to transactions between related entities. Businesses need to ensure that their transfer pricing policies are well-documented and comply with local requirements.

7. Permanent Establishment (PE)

Determining whether your business constitutes a permanent establishment in Portugal is vital. If so, profits attributable to the PE may be subject to Portuguese taxes. The DTA provides guidance on this classification.

8. Compliance and Reporting

Maintaining accurate financial records and meeting reporting deadlines is crucial for tax compliance. Portuguese tax authorities require regular filings, including annual tax returns and periodic VAT returns.

By understanding these considerations, US businesses operating in Portugal can navigate the complexities of the tax landscape and ensure compliance with local laws. Consulting with a tax professional or advisor familiar with both US and Portuguese tax systems can provide further guidance and help avoid potential pitfalls.

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