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Opening a Business in the USA

San Francisco

Many people who emigrate to America dream of setting up their own businesses. In part that’s because the kind of enterprising person who crosses an ocean (and goes through all the struggles necessary to get a green card) in order t build the life they want is also often happier self-employed. And in part, it’s because the land of the free attracts people who have an enterprise they’d like to make something out of. America welcomes entrepreneurs!

The first thing you need to know is this: You don’t need to be a US resident to open a business in America.

If you’re a resident, the process looks something like this:

You’ll need to write a business plan, if for no other reason than that your financial backers will want to see it. In practice, a business plan can help a business enormously by laying the groundwork for where you want to go and how you aim to get there. There’s free help available writing the plan, locating and growing your business, and securing financing. There’s also a range of finance available including low-cost loans and some grants as well as bank loans.

So far, so much like setting up a business anywhere. The next step is specific to the USA, though. You’ll need to choose a legal structure for your business. Some of these are more or less analogous to their UK equivalents – being a sole proprietor in the US is like being a sole trader in the UK – but there are differences too. Depending on what you want to do with your business and how big it is, you’ll want to look into different structures that include partnership, corporations, S corporations, Limited Liability Companies, and Professional Limited Liability Companies. LLCs are a recent development that permit some of the advantages of a corporation without the restrictive organizational rules; PLLCs are LLCs governed by slightly different rules, for practitioners of regulated professionals like doctors.

setting up a business in America

Different company structures put different responsibilities on their members, and they’re taxed differently too. Look twice: if you’re an LLC but you’re the only member, for instance, you’ll be taxed as a sole proprietor – you’ll simply pay ordinary income tax on what the LLC makes you. If you’re setting up a large company or you think you need to understand legal company structure in depth, the most effective and least expensive method might be to hire a lawyer who can help you negotiate your way through the regulations.

If you’re going for a more complex company structure like a corporation, you’ll need to decide where to incorporate. This usually means choosing between the physical location of the company and the state of Delaware, first choice for large or nonlocal (ecommerce, for instance) companies because the tax laws are favourable. If you incorporate in a state other than the state you do business in, you have to qualify to do business in your home state as a foreign business. So the question is, is your company big enough or nonlocal enough for all this to be worth it? If not, set your company up in the state where you’ll be doing business.

Non Resident

If you’re not a US resident, things are more complicated. In some situations, they’re downright paradoxical: you can control an LLC from outside the USA if you’re not a resident – but not from inside the USA, unless you have a work visa. Being a director or shareholder outside the USA is allowed; being an officer isn’t. Without a visa you can be in the USA and own a business – but not work for it. If you work for your own business without a valid visa you can be deported without right of return – and you’ll have to pay the fines for hiring yourself as an illegal alien! So it’s vitally important to get one of the USA’s types of business visa.

There are 9 types of US business visa and they all confer different rights and responsibilities. It’s important to get the right one for what you plan to do. Details of visitor visas can be found here and here, but essentially they are either temporary and restricted, intended to lead to permanent residency or designed to facilitate intercompany transfers. You may be able to apply for residency on the back of your business, but only if it has a very high turnover – the investor’s green card requires an investment of between $500, 000 and $1m as well as hiring requirements.

If you’re not a resident you’ll probably want to work towards residency status as you lay the basis for your business. Employment visas can be restrictive when it comes to creating a business so you might need a partner who’s a citizen to handle officer roles, contract signing and so forth. The restrictions on various visas are covered here. Obtaining residency is covered in detail here.

Having dealt with residency issues, it’s time to focus on the business environment.

In the USA you’ll typically deal with three layers of laws: federal, state and local, which means city or county. They take precedence in that order, so the job of state law is to refine rather than contradict federal law, but when you factor in zoning and bylaws things can get complex. You’ll deal directly with federal law when you come to figure out income taxation but state and local law can affect the taxes you’ll pay on any buildings you own.

To help clarify things, let’s take a concrete example: setting up a business in Chicago. The city requires you to obtain a business license, which means registering with either the Clerk’s Office or the Illinois Secretary of State, obtaining an Employer Identification Number and an Illinois Department of Revenue Account ID Number, applying for the license itself through the City, and providing a Business Information Sheet. There are also city taxes and zoning and planning laws applying to overground storage, accessibility laws for your business site, and more.

The good news is that localities tend to supply online support. Chicago’s is here, for instance, New Jersey’s is here, San Francisco’s is here. A Google search will usually introduce you to the support you need and while it can initially be confusing and appear fragmentary, it’s important to remember that the US is extremely business-friendly and they’re eager to supply advice, guidance, support and even money as well as forms. They want your business to succeed!