How to Register a Business in the US from Sri Lanka

Step 1: Benefits of starting your US business from Sri Lanka

Starting a US business from Sri Lanka offers a range of unique benefits that can provide entrepreneurs with a significant competitive edge. One of the primary advantages is the lower cost of operations. Compared to the United States, Sri Lanka has a more affordable cost of living and labor, which means that you can hire skilled professionals without the steep expenses associated with the US market. This cost efficiency can enable your business to allocate more resources towards innovation, marketing, and scaling, thereby accelerating your growth trajectory.

Another substantial benefit is the time zone advantage. Sri Lanka's time zone allows for extended business hours that can significantly enhance productivity and customer service. By leveraging this time difference, businesses can offer round-the-clock support to their US customers, ensuring that customer issues are addressed promptly and efficiently. Moreover, Sri Lanka's growing tech ecosystem and its emphasis on education produce a highly skilled workforce, particularly in IT and business services. This talent pool can be pivotal in offering high-quality service that meets the standards of the US market.

Step 2: How to start your US business from Sri Lanka

Starting a US business from Sri Lanka involves a series of structured steps to ensure compliance with both US and Sri Lankan regulations. Initially, you need to decide on the type of business structure you want to establish in the US, such as a Limited Liability Company (LLC) or a corporation. This decision impacts your registration process, tax obligations, and legal requirements. Once you've decided, you'll need to choose a unique business name and check its availability in the state where you plan to register your business. You can perform this search through the Secretary of State’s website of the particular US state.

After finalizing your business name, the next step is to register your business with the state, which typically involves filing the Articles of Incorporation or Organization and paying the required fee. Additionally, you need to designate a registered agent in the US who can accept legal documents on your behalf. Acquiring an Employer Identification Number (EIN) from the Internal Revenue Service (IRS) is crucial as it acts as your business's social security number for tax purposes. Finally, ensure you have a well-organized plan for managing operations from Sri Lanka, including setting up a US bank account, understanding relevant tax treaties, and possibly hiring local employees or contractors. This careful planning will facilitate a smoother entry into the US market.

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 Sri Lanka

Understanding Compliance Requirements for Running a US Business in Sri Lanka

When expanding your US business to Sri Lanka, it is crucial to understand and adhere to various compliance requirements to ensure smooth operations. The following considerations will help you navigate the compliance landscape effectively:

1. Business Registration

Before commencing operations, you must register your business with the Department of Registrar of Companies in Sri Lanka. The process includes:

• Choosing an appropriate business structure (e.g., branch office, subsidiary, joint venture)
• Submitting required documents such as Articles of Association and Form 1
• Obtaining a Business Registration Certificate

2. Employment Laws

Adhere to local employment laws to maintain a lawful and productive workplace. Key considerations include:

• Complying with minimum wage regulations
• Ensuring fair work hours and overtime compensation
• Providing mandatory benefits such as annual leave and public holidays
• Understanding termination procedures and severance pay

3. Taxation

Understanding Sri Lanka’s tax regulations is essential for compliance. Key taxes to consider are:

• Corporate Income Tax: Applicable to both local and foreign businesses
• Value Added Tax (VAT): Imposed on the supply of goods and services
• Pay-As-You-Earn (PAYE): Tax on employees' income collected by the employer
• Withholding Tax: Applied on specific payments to non-residents and certain resident payments

4. Financial Reporting

Accurate financial reporting ensures transparency and compliance with Sri Lankan regulations. Businesses must:

• Maintain proper accounting records
• Comply with Sri Lanka Accounting Standards (SLFRS)
• Submit annual financial statements to the Registrar of Companies
• Undergo regular audits by certified auditors

5. Import and Export Regulations

Expanding your business to Sri Lanka may involve importing or exporting goods. Key compliance areas include:

• Obtaining necessary import/export licenses
• Adhering to customs regulations and tariffs
• Complying with product standards and safety regulations

6. Intellectual Property Protection

Protecting your intellectual property (IP) is crucial when operating in a foreign market. In Sri Lanka, ensure you:

• Register trademarks, patents, and copyrights
• Monitor and enforce IP rights
• Seek legal assistance for IP disputes

Understanding and adhering to these compliance requirements is vital for running a successful and lawful US business in Sri Lanka. Consulting with local experts and legal advisors can further ensure that your business remains compliant with all local regulations.

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 Sri Lanka

Understanding Tax Obligations for Running a US Business in Sri Lanka

Running a US business in Sri Lanka involves navigating a complex landscape of tax obligations. It's essential to understand the requirements and responsibilities to ensure compliance and optimize financial efficiency. Below are some key considerations:

Corporate Income Tax

Sri Lanka imposes a corporate income tax on businesses operating within its borders. As a US business, you will be subject to Sri Lankan corporate tax rates, which can vary depending on the industry and size of your business. It's crucial to consult with a local tax advisor to understand the specific rates and any applicable exemptions or incentives.

Double Taxation Agreements (DTAs)

Sri Lanka has entered into DTAs with several countries, including the United States. These agreements aim to prevent double taxation on the same income. The US-Sri Lanka DTA can provide relief from paying taxes twice on the same profits. Ensure to review the terms of the DTA and claim any benefits you are entitled to.

Withholding Taxes

Sri Lanka imposes withholding taxes on certain payments to non-residents, such as dividends, interest, and royalties. If your US business earns income from these sources, understanding the applicable withholding tax rates and ensuring proper compliance is critical. The DTA may also provide reduced withholding tax rates.

Value Added Tax (VAT)

If your US business is involved in the supply of goods and services in Sri Lanka, VAT registration might be required. Sri Lanka's VAT system necessitates the collection and remittance of VAT on taxable supplies. Ensure that your business is properly registered and compliant with VAT obligations.

Transfer Pricing Regulations

US businesses must adhere to Sri Lanka's transfer pricing regulations, which govern transactions between related entities to ensure arms-length pricing. Proper documentation and transfer pricing policies are vital to avoid penalties and ensure tax compliance.

Permanent Establishment Concerns

Determining whether your US business constitutes a permanent establishment in Sri Lanka is essential, as it affects your tax obligations. Factors such as the presence of a fixed place of business and the duration of activities in Sri Lanka will influence this determination.

Professional Advice

Given the complexities of tax obligations for US businesses operating in Sri Lanka, seeking professional advice from tax consultants or legal experts with local knowledge is highly recommended. They can provide tailored guidance and ensure full compliance with both US and Sri Lankan tax laws.

In conclusion, understanding and managing tax obligations for a US business in Sri Lanka requires thorough knowledge of local tax laws, international agreements, and compliance requirements. Proactively addressing these considerations will help your business operate smoothly and efficiently.

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