Foreign startup founders’ challenges
Through my consulting work, I have met with many founders who were from a foreign country as well as talked to many who were currently live in a different country and wanted to develop their business to the U.S.
If you think running a business is challenging, running a business in the U.S. as a foreign founder just adds another layer of challenges.
Navigating through the U.S. immigration system can be a daunting experience for foreign founders.
Although I am not a lawyer and this article is not a legal advice by any measure. I intend to shed some light for some of the foreign founders.
First of all, you might not need to set up a business in the U.S.
Many people mistakenly think that just because they want to sell to the customers in the U.S. they have to set up a U.S. company.
It is not true.
For citizens from many countries, you should be able to come to the U.S. to attend business meetings, acquire customers, and sign contracts with your B1/B2 visitor VISA.
You just can’t perform any actual work for those customers while you are in the U.S. with that VISA.
In fact, there are some disadvantages of opening your company in the U.S. when this is not necessary.
You now are a U.S. company and have to pay tax in the U.S. which is often higher than many EU countries’ corporate tax.
You should speak to an accountant who is familiar with the tax for foreign owned U.S. companies about it to make a decision to set up the company in the U.S.
There are unnecessary costs that are related to maintaining this company in the U.S. such as the rent of a virtual office or physical office.
If you still believe setting up a business in the U.S. is the right choice, here are the steps.
Step 1. Decide what business you want to start, what you want to sell, and in which state you want to operate your business and have your head office.
Many people would suggest setting up the company in Delaware regardless where your company’s physical location is for its more favorable corporate law.
Many investors prefer Delaware companies. Many of them require you to open the business in Delaware as a C Corp in order for them to invest.
However, if you are not planning to acquire investors, it might not necessary to register it at Delaware, you can just register it at whichever state you want to do business at.
Keep in mind, even you register it at Delaware, you will likely still have to register it at the State you actually run your business.
Step 2. Talk to an accountant.
As I mentioned above, you want to talk to an accountant to decide if you should really open a company in the U.S., which State you should open the company, etc.
You might also want to ask them about the tax implication on your personal tax, as you will now be receiving either salary or other forms of payment from a U.S. company.
Step 2. Find a virtual office provider at the State you want to do your business or a physical location.
Having a virtual office is particularly necessary if you are not otherwise planning to have a physical address.
There are many virtual office providers so you should compare the price, services, and reputation.
With them, you will have an actual physical address to use to register your business, open your bank account, and to receive mails.
Many of them also provide mail scanning service. They will open all your mails and scan them, and email you a copy.
If you are going to have your own physical location such as a brick and mortar business and will have employees there to accept mails for you, then a virtual office might not be necessary.
Step 3. Register the business.
You need to decide what type of company structure you want. The most common two types will be C Corp and LLC.
You might want to consult a corporate lawyer or accountant to decide which type of company you want to register.
There are many online business registration service providers so you should choose carefully.
But through them, you can simply register your company online for a small amount of fee.
Of course, you can also pay a lawyer to do all that for you.
You should also apply for a EIN number, employer identification number, for tax and other purposes.
Step 4. Licenses and permits
You need to acquire all the necessary business licenses potentially from the State level, the Municipal level, and the Federal level. This can be very different from business to business.
Step 4. Open a bank account.
Of course, your goal of starting a company is that so you can make money. And when you receive payments from your customers, you will need a bank account to deposit it.
And even when you apply for E2 VISA, you will need to have a bank account to accept the investment you are required to make to the company.
To open a bank account, the bank will need your EIN number and a physical U.S. address. They will also want to identify you and might ask for your U.S. Tax ID or Social Security Number.
Step 5. Hire employees.
This alone is another beast.
There are many considerations when you hire U.S. employees and you don’t want to unknowingly break the law.
For example, you are required to purchase Worker’s Compensation. You will need to pay your employer portion of employment tax and maybe do the tax withholding for your employees.
Step 6. Run your business.
It is technically possible to run this business remotely from a different country depending on what type of business you have.
I know two business owners who owned a hostel in the U.S. and they only came to the U.S. to see the hostel probably once a year and had a manager running the place for them.
You can come to the U.S. to check on your business but you are not allowed to work on this business in any way while you are in the U.S. if you are on a B1/B2 VISA.
If you are planning to actually run this business while you are in the U.S., you will then need to apply for a different type of VISA such as E2 which will allow you to work for this company while you are in the U.S.