Business
May 18, 2024
Reading Time: 6 min

Why should foreigners start business in the United States?

In 2022, the United States was named the country with the largest number of successful unicorn startups founded. A total of 121 startups, each worth at least $1 million have successfully evolved in the US ecosystem.

In this article, we tell you why the US attracts entrepreneurs and what challenges await foreigners coming to the US to do business.

Albert Ioffe
Albert Ioffe

Told why foreign businessmen move to the United States

Business in the US for foreigners

Why should foreigners start business in the United States?

Registering a company in the US

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.

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.

Documents required to set up a company

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.

8 steps to register a company in the US

Entrepreneurs in the US need to strictly follow the order of registration of a company. That’s important because you won’t be able to take some steps simultaneously: for example, open a business bank account before getting your tax number. There’s no need to plan the bank visit date before you get a letter from the tax office.

1

3 days

Check the company name and register the trademark

This name must not duplicate another company’s name or be similar. You can check availability on the state’s or US Trademark Database websites.

2

3 days

Choose a type of business structure

Pick one of sole proprietorship, partnership, LLC, or C-corporate, depending on the company scale. The last one takes more time since the owner needs to indicate the number and value of shares during the registration.

3

1 day

Create the charter of the company

If there’s more than one owner, they should state each member’s share, duties and profit-sharing scheme. In most states, it is an internal document not required during registration. Exceptions are California, New York, and Missouri.

4

up to 7 days

Choose a legal address for the company

If the company doesn’t rent an office, there is an option to rent a legal address — a mailbox where official letters are received.

5

up to 1 month

Register a company online on the state's website

The procedure costs around $100 and usually takes up to 1 month. Some states though may have a fast-track procedure for an additional fee. In this case, the company may be registered on the same day or within one week.

6

7 days

Obtain an EIN federal tax number

Apply for an EIN for free on the tax service website after registering a company. The tax number is required to pay taxes, open bank accounts, and hire new workers.

7

7 days

Open a business account in the bank

It is only possible to open a business bank account from within the US, so the entrepreneur must come to the country. A tax number and company registration certificate are required to open a bank account.

8

from 1 week

Get required licences or permits

Any business requires a licence, whether a law firm or a cafe. For example, the entrepreneur needs a retail food establishment permit from the local health department to open a grocery shop.

How do businesses pay taxes in the United States?

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.

Best states for doing business

According to the CNBC survey of July 11, 2023, the best states for doing business are North Carolina, Virginia and Tennessee. They were chosen based on state workforce, business cost, and capital access.

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.

4 benefits of starting business in the US

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.

How do businesses in the US get advice and funding?

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.

How can a businessman move to the US to do business?

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.

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.

Advantages of doing business in the US

  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.

Immigrant Invest is a licensed agent for citizenship and residence by investment programs in the EU, the Caribbean, Asia, and the Middle East. Take advantage of our global 15-year expertise — schedule a meeting with our investment programs experts.

Will you obtain a EB-5 visa to the USA?

Practical Guide

Will you obtain a EB-5 visa to the USA?

Frequently asked questions

  • Can I get a Green Card if I start a business in the US?

    Businessmen can get a visa and a Green Card under the EB‑5 visa program. Unlike other entrepreneurial immigration programs like E‑2, which only offer temporary stay, EB‑5 allows one to obtain permanent resident status and a Green Card for the whole family.

  • Can I do business in the US without citizenship?

    Both residents and non-residents of the US are allowed to register a company in the country; thus, citizenship is not required to do business in the United States. Many foreign businessmen live in the country either on a visa or a Green Card.

  • Where is the best place to register a company in the USA?

    According to a Forbes rating from November 30th 2022, Indiana is the best state to start a business in. The business survival rate is 83,6%, and the income tax is only 3,23%. The rating compilers also note a low cost of living that is 15% lower than the national average.

    Top 5 also features Colorado, North Dakota, Pennsylvania and South Dakota.

  • What visa do I need to start a company in the USA?

    Three visas are suitable for entrepreneurs moving to the US: L‑1, E‑2 and EB5.

    L‑1 works in case you already have a company in another country and want to create a branch in the US. If you start a new company, consider E‑2 or EB5 visas.

  • How can a foreigner set up a company in the US?

    To set up a company, a foreigner must choose a unique business name and a type of business structure, create a legal address in the US and register the company online. After that, they must come to the US in person to open a bank account.

  • Why is the US a good place to start a business?

    The US is an excellent place to start a business mainly for its stable economy and opportunities for funding and assistance.

    Venture capital funds, business incubators, and accelerators help small businesses and startups better understand the subtleties of doing business in the US.