Starting a Business in U.S. by a Foreign National

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Entering into the U.S. market is a great venture for many foreign businesses as U.S. citizenship or residency is not mandatory to start a business in US, foreign nationals are able to start or expand the U.S. business without experiencing much more official procedure than a born U.S business would do.

Steps to Starting Up a Foreign Business in the U.S.:

Foreign business entities are incorporated at the state level in the U.S. The process will vary from state-to-state but generally involves the following steps:

  • Applying to register in that particular state and establishing a registered agent with a valid address in that state. A registered agent can be either the business owner or another person who is authorized to receive legal papers on behalf of the business, such as an attorney or secretary.
  • Incorporate / Register a Business
  • Get a Tax Identification number
  • Register for State and Local Taxes
  • Obtain Business licenses and permits
  • Business permits from the city – Establishing an online retail presence in the U.S. is a popular choice for many foreign business owners. 

U.S. Tax information for Foreign Businesses:

  • Misuse of any tax – sales, payroll, and income incur fees and penalties. The IRS offers a guide specifically on International Business but still it is best to clarify with the CPA’S/
  • U.S. Businesses need an Employer Identification Number commonly called as EIN to start up, a process that requires their social security number. In the case of foreign businesses, an Individual Taxpayer Identification Number (ITIN) is sufficient.  The IRS issues these 9-digit tax processing numbers to individuals who are required to pay US taxes but who are ineligible for a SSN, including resident and non-resident aliens and foreign nationals. EIN is very much needed to open a Bank Account for your business in U.S. 
  • One may be required to file IRS Form 5472, which applies to US corporations with at least one foreign owner who owns 25% of shares, to account for the nature of monetary transactions.

FOREIGN NATIONALS STARTING U.S. BUSINESSES GENERALLY SHOULD BE AWARE OF THESE COSTLY MISTAKES:

Time after time, beginning inventors fall commit the same mistake, not fully understanding the risks and resources required to bring their idea into reality, believing new products are easier to bring to market than they  really are  and living in denial.

  • Failure to understand tax treaties between countries.
  • Non-compliance with tax reporting, compliance and regulations
  • Failure to plan in prior to becoming a U.S. resident.
  • Failure to set up the proper business structure.
  • Inadequate understanding of business tax categories.
  • Foreign National can incorporate either LLC or C Corporation but not S Corporation.

It looks very easy if we read above five points but it covers a vast rules and regulations which cannot be explained in one or two lines, but finally depends upon the organization persons.

Checklist for Starting a Business
This checklist is designed to help you get started. It has seven key components:

  • Identify Your Reasons
  • Self Analysis, Personal Skills and Experience
  • Finding a Niche
  • Market Analysis
  • Planning Your Startup
  • Plan Finances
  • Formation of Entity, Accounting and Compliance setup
  • Choose a Business Location
  • Hiring employees
  • Training
  • Earn clients and start delivering!

Contact sales@globalvalueadd.com OR Call 210-248-3397, India +91-80-41633973, if you are looking for professional advisory services. Unless we expressly state otherwise in this post any tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or other matter addressed herein.

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  • Celeste In previous years, W-4 s that climead 10 or more allowances were to be sent to the IRS but that has since been eliminated. W-4 s are still subject for review and employers can be directed to submit certain W-4 s to the IRS.Your W-2 can be used instead. to see if you’re in compliance with withholding regulations. If you’re found in non-compliance, the IRS will issue a lock-in’ letter to notify the employer to withold at a certain rate and maximum allowances.April 10, 2011 | 4:25 am