The business world in the United States can be fascinating, but also overwhelming, especially if it's your first time starting a business. The first decision that needs to be made is the type of business structure to be selected. Business registration must also be completed, after which local laws need to be adhered to. Any founder, whether a US resident or a Foreign National, needs to know the fundamentals to move forward with confidence.
Choosing The Right Business Structure
Deciding the appropriate business structure is very important in starting a business, as the entity influences tax issues, personal assets, compliance with local laws, and various other matters. Different business structures available to select for a startup are:
- Sole proprietorship: Allows for personal business assets to be protected. Easiest to set up a business, but it does not offer protection in case debts are incurred.
- Partnership: Another business structure similar to sole proprietorship, but for multiple owners. However, liability is a major issue.
- Limited liability company LLC: Popular amongst startups as it is easy to set up and provides personal asset protection and flexibility regarding profit and tax distribution.
Corporation: This is an intricate legal framework that offers liability safeguarding but mandates more rigorous documentation and reporting. Corporations also face double taxation. The corporation pays taxes on earnings, and shareholders pay taxes on received dividends.
Your industry, long-term aspirations, and plans to hire, bring in outside investors, or both, determine which option is best.
Registering Your Business
Your business now has a legal structure, so it's time to register it. This step is different for every state, so check local requirements.
Most states expect you to:
Submit forms to the Secretary of State or similar offices.
Make a payment.
Name a registered agent to accept official correspondence and documents for the business.
A registered agent must maintain a physical address in the state of formation. To satisfy this requirement, many businesses hire professional services.
Employer Identification Number (EIN) and Other Essentials
Your business now has legal standing and will need an Employer Identification Number. The IRS issues it as the business tax ID. An EIN is mandatory for:
Creating a business bank account.
Submitting federal and state taxes.
Recruiting staff.
Acquiring certain licenses and permits.
While most American citizens and residents use their social security number to apply for an EIN, foreign founders can apply directly with the IRS, even if they lack a social security number. This means that a foreigner wanting to learn how to start a business in the US will always have access to the identification needed to operate legally.
Starting a Business in the US as a Foreigner
Non-citizens have to address a few more things when setting up a business. The positive news is that foreigners can create LLCs and corporations in almost every state.
Key steps include:
Selecting a Business Structure. LLCs and corporations have become the most sought-after and preferred types of business structure among international entrepreneurs. This is mostly due to the cost-effective liability protection they offer and the added business credibility.
Hiring a registered agent. This is important for non-citizens as they may lack a US address. As such, they will require the services of a registered agent.
Applying for an EIN. This is a must for business-related taxes, payroll, and even banking. Foreigners without a Social Security number can apply for one using Form IRS SS-4.
Opening a Business Bank Account. Many banks let foreign entrepreneurs open business bank accounts without requiring them to be physically present in the US, although some banks do require a face-to-face meeting.
Compliance with State Laws. Ensure you know all the rules, fees, and requirements of the state you registered in. This will be important when trying to operate a business in a different state.
As complicated as it may seem, the United States is home to thousands of new businesses started by international entrepreneurs every year.
Creating a Business Plan
Every entrepreneur, no matter their origin, should aim to write a proper business plan. This plan should detail the business's intended goals, method of funding, target market, operational plan, and other relevant information. A proper business plan will help you:
Obtain funding from banks or investors.
Maintain focus on the long-term goals.
Recognize and manage potential risks and opportunities.
Templates and resources are available to help from the Small Business Administration.
Permits and Licenses
Every business type has different licenses and permits that are business-specific. A permit is needed for every business type. A permit for professional services is granted, and the holder is recognized as a professional. A permit may be a restaurant's health. These permits are state and city-specific. If a proper authority is not granted, fines or business delays will be incurred.
Business and personal finances are required to be kept separate, and Proper separation will ensure the following:
A business bank account is opened.
Proper record keeping is maintained.
Business and entrepreneurs' finances are separate.
The major reason to choose an LLC as an option or a corporation is that it will protect their personal assets. A home, savings, and other personal assets are generally shielded from liability.
Entrepreneurs are kept away from lawsuits or business debts.
**Avoid mixing personal and company funds.**
Keeping personal and company funds separate ensures your legal structure is valid and your legal protections are intact.
Hiring Employees
As your business expands, you might consider hiring employees or consultants. This step brings new obligations and responsibilities, such as:
Registering with state labor departments.
Withholding federal and state income taxes.
Compliance with workplace safety and wage regulations.
With your EIN, you'll report and pay employer taxes on wages. Many new business owners hire payroll companies or accountants to help with compliance and minimize mistakes.
Paying Taxes and Compliance
These are also chief responsibilities for founders to ensure they are compliant with tax obligations for their business structure.
Sole Proprietorships and Partnerships: Owners are taxed on profits on their personal returns.
LLCs: Profits pass through to owners and are not subject to double taxation. However, LLCs can choose to be taxed as corporations.
Corporations: Subject to corporation tax rates, which may mean the corporation pays tax on profits, and then shareholders pay tax on dividends, taxed again.
Founders are often required to seek professional assistance to be compliant with varying state or city tax laws.
How EasyFiling Can Help with Business Formation in the US (Especially for Non-Residents)
Starting a business in the US can feel overwhelming, especially for non-residents navigating legal structures, tax rules, and compliance requirements. EasyFiling specializes in simplifying this process by offering tailored solutions for both US residents and international entrepreneurs.
Here's how EasyFiling can support you:
Guidance on Business Structure: Whether you're considering an LLC or corporation, EasyFiling provides expert advice to help you choose the most tax-efficient and legally secure option.
Business Registration Services: From filing with the Secretary of State to ensuring compliance with state-specific requirements, EasyFiling handles the paperwork seamlessly.
Registered Agent Services: Non-residents often lack a US address. EasyFiling acts as your reliable registered agent, ensuring you never miss critical legal correspondence.
EIN Application Assistance: EasyFiling helps foreign founders obtain an EIN directly from the IRS, even without a Social Security Number, so you can open bank accounts and handle taxes.
Banking and Compliance Support: EasyFiling guides you through opening US business bank accounts and maintaining compliance with state and federal regulations.
With EasyFiling, entrepreneurs, especially international ones, can focus on growing their business while leaving the legal and administrative complexities to professionals.
Achieving Long-Term Success in the US Market
Understanding how to start a business in the US is only a small part of the whole picture. Achieving long-term success in any business requires a keen sense of planning, flexibility, and maintaining strict business compliance. By appropriate selection of the business type, accurate registration of the business, asset protection, and crafting a detailed business plan, long-term sustainable success can be achieved.
The US is still one of the most attractive places in the world to start a company. It has a rich and diverse market, possibilities to access capital, and the Small Business Administration. The country provides a vast range of opportunities to both new and seasoned business owners, and it's important to take the right steps from the start to succeed.
