Setting up a non-resident company in the United States can be an attractive prospect for entrepreneurs due to its vast market, robust legal system, and business-friendly policies. While the process might initially seem complex, understanding the key steps, compliance requirements, and transfer pricing regulations can make it manageable. This guide outlines everything you need to know about Set up a company in the US as a non-resident, from choosing the proper business visa to navigating legal obligations.
Step-by-Step Process for Non-Residents
To set up a company in the US as a non-resident, the following steps must be followed:
1. Choose the Type of Business Entity
The first step is selecting the appropriate business entity for your company. The most common options include:
- LLC (Limited Liability Company): This entity type is ideal for smaller businesses, offering flexibility in tax filings and liability protection.
- Corporation (C-Corp or S-Corp): Suitable for larger companies or those looking to attract investors. C-Corp is more common for non-residents since S-Corp requires all shareholders to be US residents.
2. Register Your Business
To officially start operating in the US, your business must be registered in a specific state. Delaware is famous for its business-friendly laws, but other states may also be viable, depending on your industry. The basic steps include:
- Filing the necessary formation documents (Articles of Organization for an LLC or Articles of Incorporation for a corporation)
- Appointing a Registered Agent, who must be a resident or authorized business entity within the state
- Paying the required filing fees (varies by state)
3. Obtain an Employer Identification Number (EIN)
An Employer Identification Number (EIN) is required for tax purposes, and the IRS issues this number as a tax identification for your business. It is essential for opening a business bank account, hiring employees, and filing tax returns. However, for non-residents, obtaining an EIN can be more complex. While residents can apply for an EIN online, non-residents often need to apply via mail or fax by submitting Form SS-4, which can take several weeks to process. It’s advisable to work with a US-based representative or legal expert to navigate this process efficiently.
4. Open a US Bank Account
A US business bank account is crucial for managing finances, especially when dealing with US customers or suppliers. Most banks will require:
- Proof of company registration
- EIN
- A valid passport or other form of identification
- A local US address, which can be your registered agent’s address
Many non-residents choose to use online banking services if they do not have a physical presence in the US.
5. Comply with Federal and State Taxes
Tax compliance is a critical part of running a business in the US. Your company’s tax obligations will depend on the type of business entity you choose and the state where your company is registered. For example:
- LLCs: Typically treated as “pass-through” entities, meaning the income is reported on the owners’ tax returns.
- C-Corps: Subject to corporate income tax at the federal level and potentially state taxes.
Non-residents must also file Form 5472 with the IRS if they own at least 25% of a US company. The form reports foreign ownership and certain related-party transactions.
6. Transfer Pricing Compliance
Transfer pricing refers to the pricing of goods, services, or intellectual property exchanged between related entities. Complying with US transfer pricing regulations is essential for multinational companies to avoid double taxation or disputes with tax authorities.
To ensure compliance, companies need to:
- Establish arm’s length pricing, which means that the prices charged between related parties must be comparable to what would have been charged between unrelated parties.
- Maintain documentation supporting transfer pricing policies, such as contracts, invoices, and accounting records.
The IRS mandates that any transfer of goods or services between related parties must follow the arm’s length principle—pricing must be consistent with what independent parties would agree upon. Consulting with legal experts specializing in international business taxation is advisable. For forex transfer pricing cases
7. Compliance and Reporting
Once your business is established, you must comply with federal and state regulations. This includes:
- Filing annual reports with your state’s business registry
- Renewing your business licenses
- Staying current on your federal and state tax filings
Non-residents should also know local employment laws if they hire US-based employees. This includes wage requirements, workers’ compensation insurance, and providing the necessary benefits under state law.
Conclusion
Establishing a company in the US as a non-resident is a strategic move that can unlock new business opportunities. While the process involves navigating various legal, tax, and compliance requirements, following the outlined steps can make it manageable. Choosing the right business entity, registering in a business-friendly state, obtaining an EIN, and adhering to transfer pricing rules are crucial steps. By seeking professional advice and being mindful of US regulations, non-resident entrepreneurs can successfully set up and operate their businesses in one of the world’s most attractive markets.
FAQs
1. Can I set up a US company without living there?
- Yes, non-residents can own a US business without residing in the country.
2. Is US tax compliance mandatory for non-resident businesses?
- Yes, non-residents must comply with federal and state tax laws based on their business structure.
3. How long does it take to get an EIN?
- For non-residents, obtaining an EIN can take several weeks when applying by mail or fax.
4. Do non-residents pay US taxes?
- Yes, non-residents must comply with US tax laws, based on the business entity chosen.
5. What is transfer pricing?
- Transfer pricing ensures transactions between related companies follow fair market value to comply with tax regulations.
If you have any questions or need business-related tax consulting advice, please contact us at: [email protected]
