Most foreign nationals choose to establish a C Corporation as their chosen business structure
Each year, thousands of entrepreneurs worldwide start businesses in the U.S. as the country has so far, been the most popular destination for start-ups. The most simple answer, if that’s what you’re looking for, is yes. In fact, most foreign nationals choose to establish a C Corporation as their chosen business structure.
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In Michigan, US, Nagabhushanam “Bobby” Peddi, TRUiC CEO says that they have helped more than 250K entrepreneurs to start a new business, but that foreigners often have a few questions before they get started.
Do I need a visa?
While a lot of the rules for making a corporation are the same as for everybody else, there are some key differences. You do NOT need a visa to start off a business - literally anybody can. But, if you want to work for your own company, that is when you would need a visa - you are NOT allowed to work without a valid visa, unfortunately, so make sure you have one - you will need to look into this.
What can I actually form?
Foreigners have a more limited choice when it comes to business structures. They can only form an LLC or a C corporation.
Why should I form a C corp?
Miguel de Vega Rodrigo, a serial entrepreneur who successfully formed multiple businesses in the U.S. while being a non-resident, recommends choosing C corps because they are more scalable, can be made public, and investors prefer C corps, if you would like to be funded. The only downside is the double taxation you get with C corps.
Corporate shareholders prefer C corps because they qualify for a lower dividend rate - so as long as the company doesn’t hold real estate, corporate parents won’t have to pay capital gains when it sells the U.S. affiliate.
As well as this, foreigners are saved from I.R.S Internal Revenue Service scrutiny by having a C corp, which is good because most foreigners are very hesitant to put their names on U.S. tax rolls.
The reason why many people do not go for a C corp is because of its well-known double taxation - but, in many cases tax planners can use salaries, pension costs, and other expenses to reduce corporate income and get rid of a lot of the double taxation.
What about LLCs?
In some cases, that depend on particulars of a person’s native tax laws, a limited partnership may be the most ideal business structure. LLCs have attractive tax and legal benefits, as well as providing personal liability protection. The process for foreigners is very similar to the process for U.S residents - everyone is welcome. In an LLC, specific details include the fact that partners without management control have limited liability, and profits are passed through to the members, who are the ones who pay income tax based on their individual tax return.
Choose a state to register in
U.S. companies are incorporated at a state level, rather than federal. Your company’s business should, ideally, determine where it locates itself. You would choose the state in which the service or products you are marketing are popular.
The most popular states chosen by foreigners are Delaware and Nevada. This is because both states are known as low-burden states. It is important to note, says Richard Hartnig, Schwartz International tax adviser and lawyer, that being in these states does not in any way exempt you from business obligations in high-cost states like California. So, you are best off finding a state in which you plan to dominate the market. Delaware and Nevada should be second choices.
Delaware is highly recommended before Nevada. Some of the reasons it is so highly recommended include the fact that you do not need a bank account, nor a physical address in Delaware, the laws are fair and consistent, offering generous protection to you, and investors also prefer it because, for instance in contrast to California, common stockholders cannot block a merger.
Yes, it is possible to run a U.S. company while not even being in the U.S. Your company can be registered online and business formation specialists, online, can function as registered agents to facilitate the process.
Register and obtain an EIN
Registering your company is a fairly easy process. An EIN is necessary for things like opening a bank account, securing a business license, obtaining loans etc. Opening a U.S. bank account can be tricky because of the Patriot Act, but when this is done your business is relatively sorted.
Conclusion
Michael Stemley, a top U.S. accountant and author says that foreign business owners have a very positive impact on innovation and the economy overall. Another reliable source, the spokesperson for one nations’ leading property experts also said: “You only have to look at how many successful foreign business owners buy property in the U.S. to appreciate their level of success and impact on our economy. That is precisely why the U.S. government created tax incentives to attract them here”. So, while forming a business being a foreigner is not the easiest thing ever, it is very possible, as long as you know your various options. TRUiC has a more detailed step-by-step plan on how to form a corporation.
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