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How to Open a Company in the USA
Open a company in the USA can be a daunting task. There are many things to consider, such as what type of company to form, what state to incorporate in, and what taxes and regulations you will need to comply with. In this article, we will provide an overview of the process for starting a company in the USA. We will also discuss some of the most important things to keep in mind when starting a business in America.
Step 1: Choose What Kind of Business Entity to Form
In the United States, there are different kinds of business entities and it is important to understand the differences and implications between one another when choosing which to form. Differences between business entities include limited liability protection, tax treatment, and government requirements. There are 6 types of business entities in the US: Sole Proprietorship, General Partnership, Limited Partnership, S-Corporation, C-Corporation, and Limited Liability Company (LLC).
When attempting to open a business in the United States from abroad, shareholders without USA citizenship can choose between an LLC or a C-Corporation.
A C-Corporation offers limited liability protections and exists separately from its owners, or shareholders. Although there is typically a board of directors in charge of the corporation, one person may fulfill this role as well. C-Corporations must comply with many regulations and tax laws and face double taxation (the company pays corporate tax and the shareholders pay taxes on the dividends of their tax returns). With that being said, they are also granted more tax deductions than other business entities. This type of business entity also faces high government requirements.
LLCs also offer limited liability protections but have fewer requirements and ongoing paperwork. They give business owners the option of how the IRS is to tax the LLC. Therefore it can be taxed either as a corporation (and, as such, as a separate entity from the owner), or as a partnership (a pass-through entity on the owner’s taxes). One of the benefits of choosing an LLC is that it offers the ease of a sole proprietorship with the protections of a corporation. This type of business faces moderate government requirements.
Step 2: Choose a State
When opening a company in the United States, deciding which state to incorporate in is fundamental. This decision determines the regulations and taxes your company must abide by.
The best way to make this decision is to consider the specific needs of your business. For example, if you plan on having a physical office or store location, you’ll need to choose a state that allows for commercial activity. Or, if you want to take advantage of certain tax benefits, you may want to choose a state with no income tax.
If you are opening a company in the United States from abroad, you may want to choose a state that is more “international-friendly”, such as Delaware, Nevada, or Wyoming.
You can find a list of all the states and their corresponding information on the website of the U.S. Small Business Administration (SBA). The SBA website also provides helpful resources such as an overview of each state’s business climate and what kind of permits and licenses are required for different types of businesses.
Once you’ve decided on a state, you will need to register your business there. This can be done with the Secretary of State’s office, a Business Bureau, or a Business Agency.
Step 3: Select and Reserve a Name for your Company
Rules for selecting and reserving a name for your company vary depending on the company’s structure and the state in which you are seeking to do business. Generally speaking, however, these are the steps you should take.
First, you should check the availability of your business name. If another company is already using it, or one that is very similar, your state may not allow you to register it. You can check the availability of a business name in different ways. Most states have online databases you can access to see if a name has already been taken.
Next, you should also check the URL availability of your chosen business name and consider registering a domain name right away. Even if you don’t plan on having a website for your company at first, you should ensure that creating one is possible down the line. This also prevents others from starting a website with that domain name.
In addition to this, you should consult the U.S. Trademark Electronic Search System (TESS). Doing so will allow you to know whether your chosen business name is already being used. If it is available, you should consider trademarking your company’s name. This prohibits others from using your name, even if they are located in another state.
Finally, most states require you to register your business in order to register the name of your company. This can be achieved with the Secretary of State’s office, a Business Bureau, or a Business Agency.
LLCs and C-corporations must meet specific criteria in the naming process. LLCs, for example, must have a name that includes the phrase “Limited Liability Company” or one of its abbreviations. They are also not allowed to use any words that confuse the LLC with a government agency (such as State Department, FBI, etc.). Similar rules also apply to corporations.
Step 4: Hire a Registered Agent
When setting up your company in the USA, you will need to appoint a registered agent. This is a person or company that lives in the state you are seeking to conduct business in (or is allowed to conduct business in that state). They accept important legal and tax documents on behalf of your business and are available during all business hours. It is also their responsibility to keep track of any changes to your company’s status and notify you of them.
There are many registered agents to choose from, but it is important to do your research first. Make sure to read reviews and compare pricing before making a decision. You can find a list of registered agents on the website of the National Association of Secretaries of State (NASS).
Once you’ve chosen a registered agent, you will need to provide their contact information when you register your business with the state.
Step 5: File Your Company with the State
Once the above steps have been completed, it is time to file your business with the state you have selected.
To file your company with the state, you will need to complete the necessary paperwork and submit it to the appropriate agency. The specific forms and procedures will vary by state and by your company’s structure, so be sure to check the website of the state you plan to do business in for more information. Generally, however, you will need to provide the following information:
- The name of your company;
- The name and address of your registered agent;
- The names and addresses of all company officers;
- The business purpose of your company;
- The date your company was formed;
- The authorized capitalization of your company.
Step 6: Apply for FEIN (Federal Employer Identification Number)
After filing your company with the state you have selected, it is time to apply for a Federal Employer Identification Number, or FEIN.
A FEIN is a nine-digit number that is used to identify businesses for tax purposes. It is also required to open a company bank account and file taxes. To obtain a FEIN, you will need to file Form SS-4 with the IRS. The form can be downloaded from the IRS website or requested by mail. You can also apply for a FEIN online via the IRS website.
When completing Form SS-4, you will need to provide the following information:
- The name of your company;
- The business purpose of your company;
- The date your company was formed;
- The authorized capitalization of your company;
- The name and address of your registered agent;
- The names and addresses of all company officers.
Step 7: Set up a Physical US Mailing Address and Open a Bank Account
When starting a business in the United States, you will need to have a physical mailing address. This can be your home address, or you can set up a mailbox at a local UPS Store or other mail service.
Another way to obtain a physical US mailing address is by establishing a physical office in the state where the company is going to be formed and conduct business there if required.
Companies may also choose to hire a “mail forwarding”/ “virtual office” service. Such services receive business mail and forward them to you on a weekly or monthly basis for a fee.
To open a bank account for your company, on the other hand, you will need to provide your company name, FEIN, and physical mailing address. The bank will also likely request copies of your company’s Articles of Incorporation and bylaws. Once your account is open, you will be able to deposit money, write checks, and conduct other banking activities in the name of your company.
Step 8: Comply with Tax Filing Requirements
Most states require companies to file an annual report with the state, providing updated information on the company’s officers, registered agents, and capitalization. The report is typically due in the late spring or early summer.
In addition to state taxes, companies doing business in the United States are also required to pay federal taxes. The specific tax liabilities will depend on the structure of your company and the type of business you are conducting. For example, sole proprietorship and partnerships generally pay taxes via the personal income tax return of the owners, while corporations are subject to corporate income tax.
Payroll taxes may also be applicable if you have employees. These taxes include Social Security and Medicare taxes, which are withheld from employee paychecks, as well as unemployment taxes, which are paid by the employer. For more information on payroll taxes, please see the IRS website.
Tax requirements may vary for non-US citizens and non-US residents based on their country and other factors. For example, many countries have “tax treaties” with the US or are taxed at a reduced rate (or not at all!). For more information on tax filing requirements, you may visit the IRS website.
To Sum Up
Starting a company in a new country can be stressful. There are a lot of things to think about, from finding the right location to applying for the necessary permits and licenses. But by doing your research and following the steps outlined in this article, you can ensure that you are well on your way to setting up a successful business in the United States.
