How to Set Up a US Business
To get a flying start in your business journey, it is important to stay abreast of incorporation legalities. If you want know how to set up a US business as a non-resident seamlessly, we have got you covered. This article spans every detail that will lead to a seamless business establishment.
Underscoring what is required to set up a US business
To understand how to set up a US business, you must comply with the requirements mentioned below in the procedural steps:
Step 1: Select a viable state
State selection plays a vital role in the incorporation journey as it defines what types of compliance you will be going to meet in the future. So, it is a good idea to delve into state-wise compliance and weigh each one against your requirements.
Both LLC and corporation have distinct incorporation and operational regulations which vary state-wise. To form these companies, you have to pick at least one state for the establishment, decide on a business name, and file an application.
Step 2: Make sure the business name is legal
Keeping tabs on name regulations and guidelines set forth by authorities is important while knowing about how to set up a US business.
While deciding on the business name, make sure to ensure to avoid the inclusion of certain words, such as trust, bank, university, or college without the approval of respective State departments. The name regulations vary structure-wise.
To illustrate, unlike other structures, LLC can include the term “trust” in their name without being subjected to additional scrutiny. However, they are not eligible to include the terms such as Corporation, Corp., Incorporated, or Inc.
You can team up with Offshore Company Corp to avail name reservation services. Once you select a suitable name, these companies can perform a legal check on your behalf to confirm whether the selected name is valid or not.
If they find no legal issue with the selected name, they will proceed with name reservation formalities.
Step 3: Draft Article of Organization
This paperwork defines the company’s objective and entails details concerning members, directors, and shareholders.
Step 4: Obtain Necessary Licenses and Permits
Secure industry-specific approvals and permits to run your company. These include sales tax licenses, trade registration, tax licenses, and professional licenses.
Step 5: Open a corporate Bank Account
Opening a bank account to handle business-related transactions is mandatory from the incorporation and business standpoint. Make sure to visit the designated bank for this purpose or align with a third-party service provider like Adviso.
Step 6: Register for Taxes
When you strive for imbibing all the detail about how to set up a US business, you confrontation with taxes would be inevitable. It is because adhering to applicable tax laws is as important as meeting operational compliances. Therefore, you must register with tax authorities namely the IRS and the Department of Revenue without fail.
Documents required by non-residents to set up a US business
While knowing how to set up a US business, you would come across the documentation part, which sits at the forefront of the registration process, irrespective of which structure you choose. The below-given documents are vital for non-residents seeking a business establishment in US:
- Business Plan
- Entity Type Selection Documentation
- Employer Identification Number (EIN) Application
- Registered Agent Appointment
- Articles of Incorporation/Organization
- Operating Agreement/Bylaws
- Bank Account Opening Documentation
- Foreign Qualification (if applicable)
- Business License and Permits
- IRS Form 5472 (if applicable)
- Visa/Immigration Status Proof
- Physical Address Details
- Compliance Documentation
- Shareholder Agreements (if applicable)
- Business Contracts and Agreements
- Trademark/Intellectual Property Registration
- Insurance Policies
- Financial Statements
- Tax Compliance Documents
- Proof of Funds
Understanding the tax implications for local and foreign entities in the United States
Knowing everything about how to set up a US business is not sufficient to ensure the seamless business journey. Delving into the taxes and ensuring clear understanding of the same can make a huge difference and bring you one step closer to growth and success. The following tax implications will influence your overall income in the United States.
- US tax reform namely P.L. 115-97 came into effect in 2017 and the biggest change it brought was the introduction of a ‘territorial’ system of taxation. Besides, it reduced the CIT rate by 14 percent, bringing it to an effective rate of 21%.
- Non-residents earning income in the US via a business venture fall under a specified tax slab. However, tax applicability on them depends on their income threshold and residency tenure in the country.
- Unless mentioned otherwise in legislation or treaties, businesses run by non-residents are subjected to a tax cut of 30%. This is a standard tax cut on their income, be it interest, dividends, or royalties.
- S corporations upholded by shareholders (being a person) may be taxed accordingly as per Subchapter S of the Internal Revenue Code (IRC or ‘the Code’). As such no taxes are imposed on such entities directly, unlike partnership firms. Instead, the tax cut is levied on members. That is the reason why these entities are referred to as S corporations.
- Local and non-resident entities generating US-source gross transportation income (USSGTI) are subjected to the annual rate of 4%.
- The Base Erosion and Anti-Abuse Tax (BEAT) may be applied to non-resident companies in the US if they meet the specified conditions, one of which is having average annual gross receipts of at least USD 500 million.
Conclusion
Knowing how to setup a US business requires imbibing adequate information about state by laws and incorporation legalities. In the view of the above, it can be concluded that setting up a US business as non-resident requires following steps like state selection, registering with a concerned tax authority, securing trade-specific approval, and opening a corporate bank account.
New businesses tend to make mistakes while striving to secure business registration no matter how cautiously they proceed. This is where an expert assistant comes in handy. At Adviso, we help new businesses thrive with tailored and professional services. Our bespoke incorporation service will let you open your dream venture in any part of the world with zero legal hassle.
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