How to Set-Up Company in the US from India

By Harish Chandra  |  Wednesday, 19 May 2021, 05:55 Hrs


How to Set-Up Company in the US from India

If you want to establish your business in the US but you are a non-US resident, you will need to go through more processes to do so compared to a US citizen.

Although the United States is open to doing business with other countries worldwide, they still have laws that you need to comply with. Moreover, it should be noted that some of these laws are different from state to state.

Here are the basic things you need to know and understand when starting a business in the US.

  • Only two business entities are allowed in the US: Corporation or LLC.
  • Some US states have business-friendly laws for foreign entities.
  • There are more legal requirements that you need to comply with than a US citizen.
  • Taxation laws are different for a foreign entity than US citizen entities.

Whether you want to do your operations in India for your US business or fully manage your business operations in the US, the requirements still hold true for both.

  1. Choose whether to be a corporation or an LLC (Limited Liability Company)

Determine first which one of these legal structures matches the company you want to set up. As a refresher, the difference between Corporation and LLC is the type of ownership.

Here is the comparison between the two:

  • A corporation is owned by its shareholders, and an LLC is owned by two or more individuals.
  • A corporation is suitable for big businesses, while an LLC is ideal for start-ups and small businesses.
  • However, both provide personal liability protection for LLCs without the corporate formalities, board meetings, and whatnots.
  • A corporation is taxed lower than an LLC. However, it is more expensive to set up, with more paperwork and more formalities than LLCs.

You can decide which of these structures you want to take, depending on the scope and size of your business.

  1. Identify which state you want to set up your business.

Some states in the US have more foreign entity-friendly laws. In other words, they are more business-friendly than other states.

According to USA Today, here the top five most business-friendly states where you can start your business: Massachusetts, Utah, Colorado, Washington, and North Dakota. Do your research on these states, and find out if the nature of your business matches their needs.

  1. Prepare all the legal requirements for foreign citizen-owned businesses.

There are more legal requirements for a foreign entity than a US citizen-based business. You need to prepare the necessary documents as follows:

  1. 1 Filing of pertinent documents with the US Securities and Exchange Commission

    If you don’t have the time nor legal know-how about these documents, you can hire a registered agent to help you set up your business.

    However, you need to ensure that the agent you will be hiring has a legal and physical office in the United States.

    They should be available during business hours and accept and sign official and legal documents on behalf of the company.

    • For Corporations
      1. Certificate of Corporation or Articles of Incorporation
      2. Minutes and By-laws with pertinent signatories
      3. Share certificate for each shareholder
      4. Duly filed IRS Form SS4 for taxation purposes
    • For LLCs
      1. Articles of Formation or Articles of Organization
      2. Operating Agreement
      3. Member Certificates for Each Member
  2. 2 File for Federal Employer Identification Number

    You may also need this when you open a US bank account. The FEIN, or most popularly known as tax ID number, is issued by the US IRS (Internal Revenue Service). This serves as the tax identification number of the company.

  3. 3 Acquire a business license

    Business licensing compliance varies from state to state. Therefore, you need to find out the state’s local requirements. Also, some special license requirements are required, depending on the kind of service or products you offer.

  4. 4 Immigration requirements

    These are basic requirements that any foreign nationals need to comply with if they want to stay in the US for quite some time.

    However, if you start a business in the US remotely, meaning you will not be coming to the US, you don’t need to file for a visa.

    Otherwise, if you intend to manage your business and be physically present in the US, you need to file for a visa.

  1. Know and understand taxation laws for non-US residents.

Understanding taxation laws for non-Us residents is one thing you need to do to save you from unnecessary tax penalties.

If your company’s taxation requirements are not properly structured, you could incur unnecessary taxes and penalties. So, how do you know if your business is required to file for EIN?

  • If your company will operate through a virtual office, it is not taxable. Some examples of this are personal services from abroad like creating and selling digital products, web designing, etc. and selling products if the selling originates from outside the US.
  • If you are engaging in a US trade or business, you may be taxable. You are taxable if you have at least one dependent agent in the US. This also includes instances wherein your agent is engaged in something substantial other than administrative, as well as if you are involved in continuous and regular business in the US.

Once you have thoroughly understood the above essential things for foreign nationals to start up a business in the US, you can begin planning for other important details. These details can be as follows:

  • Scouting for a physical office in the state of your choice.
  • Opening a bank account in the US and India for more effortless transactions. Find banks that offer business-friendly accounts and services.
  • Applying for a US phone number.
  • Getting a website.
  • Applying for a merchant account on Amazon, etc.

Conclusion

All start-up companies undergo some birth pains, but the secret to success is to anticipate every potential obstacle, read more, learn more, and follow the law.

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