Why should foreigners start business in the United States?

Both residents and non-residents of the US are allowed to register a company in the country. The process lasts 5—6 weeks and includes submitting an online application, obtaining a tax number and opening a business bank account.

Relocating to the US is not necessary to register a company. If the business is not tied to a specific location, the entrepreneur can run it remotely. However, remote entrepreneurs may want to relocate for other benefits, for example networking.

Moving to the US allows entrepreneurs to enter the business environment and meet potential investors in person. One way to relocate to the US is with an EB‑5 visa for entrepreneurs and investors.

EB‑5 Visa to the US for entrepreneurs

The first step in setting up a company is to choose a form of management. It can be sole proprietorship, partnership, LLC, or C-corporate.

Sole proprietorship is the simplest form of business structure — the business is owned by one financially liable person who can hire others to help run the company.

Partnership is operated by two or more financially liable people who risk their money or assets. There are two types of partnerships: general and limited.

Limited company (LLC) is suitable for small businesses such as commodities or selling online services with one or few owners. Such a company has simplified taxation and document management.

C-corporate is a company with a board of shareholders and a complex management structure. This form of management allows founders to sell company shares on the stock market, which makes it easier for investors to contribute to a corporation. That is why most startups choose this form of management.

After choosing the form of management and the state to operate in, an entrepreneur can register a company online on the state’s website.

The list of documents depends on a business formation: LLC or Corporation. LLC has less strict requirements since it has a simpler taxation and management structure. However, the list of documents is similar for both formations.

• Certificate of Incorporation or Articles of Formation. These documents prove that a company is officially registered by showing the company’s formation type, name, and authorised share capital.

• By-Laws or Operating Agreement. The company owners should agree in advance on how often they hold meetings and how they select candidates for management positions. All is documented in by-laws.

• Share Certificate for each shareholder indicates that person’s share in the company.

• IRS Form SS4 for getting an Employer Identification Number (EIN). The EIN is required to track a business’s tax obligations.

• Specific licences and permits for doing business legally.

• Passport copies of all co-founders.

Companies in the US are required to pay two types of taxes: federal and state. The two add up to the total corporate tax.

Federal tax does not depend on the state and is fixed at 21% of the company’s net profit.

State taxes vary from state to state. For example, the corporate tax in California is 8,8%, and it is 5,5% in Florida. There are also states like Texas with no corporate tax at all. Low tax rates usually affect the quality of social programs, education, and healthcare.

Usually, when an entrepreneur withdraws money from a business, they will also have to pay income tax. This format of taxation is called a C-corp. However, if the company has less than 100 employees, the company may be converted to the S-corp format to avoid double taxation.

Lower corporate tax. The United States has a lower corporate tax rate than many other countries, and the authorities constantly work on tax reforms. The latest reform in 2017 set a flat tax of 21% instead of a progressive tax of up to 35%.

Easier access to capital. The US features diverse financial markets, including venture capital, private equity, and public funding through stock markets. Due to the well-established investment ecosystem, entrepreneurs often find it easier to raise money and secure investments in the US.

Business-friendly laws and regulations. The US has well-defined property rights and contract enforcement mechanisms. In addition, entrepreneurs can choose the most suitable form of management and state to operate in.

International Reputation. Investors and potential partners trust companies registered in the US. They also quickly receive and send payments overseas and have no logistical problems.

Managing a business in the United States requires understanding the specifics of the environment. For example, owners of online services may be surprised to learn that American companies often spend far more on the first contact with a customer than the sale itself will bring.

To understand the subtleties of doing business in the US, small businesses and startups can take advantage of venture capital funds, business incubators, and accelerators. These are organisations that help companies to grow in different ways.

Venture capital funds invest in promising companies. They get a share in the company and claim a profit if it grows. Such funds are often easier to negotiate with, as they represent a group of investors rather than a single investor.

Incubators share their knowledge and experience of how to do business in the United States. They don’t tend to provide funding but give companies a platform to make connections through mentorship.

Accelerators help businesses and startups to scale. Like business incubators, accelerators help with knowledge but focus on mature startups and help them scale further after their first success.

One way to move to the US to set up a company is an EB‑5 visa for entrepreneurs and investors. The visa allows the applicant and the family members to relocate to the US and get a Green Card within 5 years.

All about EB‑5 visa for entrepreneurs

To get an EB‑5 visa, an entrepreneur must invest in business independently or through Regional Centers. Most investors prefer Regional Centers because they take care of everything — just put the money on the table. The investment can be recouped after 5‑7 years if the business thrives.

The minimal investment amount is $870,000, which include actual investment and administrative fee. Applications for EB‑5 visas are reviewed for around 3—4 years. If approved, the investor and family get Green Cards with the prospect of obtaining citizenship.

1. Simple company registration procedure: entrepreneurs can apply online without coming to the US to wait for a decision. There is also no need to rent an office to get a business address since renting the legal mailbox is suitable for paperwork.

2. The business account can be registered in a reliable bank. Many banks are in the "too big to fail" category, backed by the government in the case of a crisis.

3. Startups have many opportunities for funding and assistance from venture capital funds and accelerators. Getting into a business environment is one of the reasons why entrepreneurs move to the US to start a business.

4. Low tax rates on corporate income: 21% federal tax plus state tax, which varies in different states. Some states have no state tax.

5. The large US domestic market allows a company to scale working with local customers and then go international.