Starting a business in the United States as a foreigner can seem daunting, but it is possible with the right preparation and knowledge. Here is a step-by-step guide on how to start a business in the USA as a foreigner.
Choose a Business Structure
The first step is deciding on a business structure. The most common structures for small businesses in the US are:
- Sole Proprietorship – This is the simplest structure where you will be fully responsible for all liabilities of the business as an individual.
- Partnership – A partnership is formed between two or more people who share responsibilities and profits. You can form a general partnership or a limited partnership.
- Limited Liability Company (LLC) – An LLC protects your personal assets and is a popular choice for small business owners. You’ll have pass-through taxation where business income is taxed only once personally.
- Corporation – Forming a corporation will protect your personal assets from business liabilities. However, corporations are more complex with stricter operational requirements.
Consult an attorney to determine which suits your specific business needs. LLCs are a popular choice as they limit liability but avoid double taxation of corporations.
Obtain an Employment Visa
Foreigners need a proper US work visa to start a business. Some popular options are:
- E-2 Visa – For citizens of countries with trade treaties with the US. You’ll need to make a substantial investment in the business.
- EB-5 Visa – Requires investing $900,000 to $1.8 million in a new commercial enterprise that creates at least 10 full-time jobs.
- L-1 Visa – For intracompany transfers if you already work for a foreign company with a US office.
- H-1B Visa – For skilled foreign workers sponsored by a US employer. Annual cap of 85,000 visas.
Consult an immigration attorney to explore which work visa is suitable for your goals and circumstances. Apply well in advance as visa processing can take 6+ months.
Register Your Business
Once you have a visa, choose a business name and structure. Register your business by:
- Applying for an Employer Identification Number (EIN) from the IRS to identify your business for tax purposes.
- Registering your business name by filing with your state and local authorities.
- Obtaining any required business licenses and permits for your specific business activities and location.
Open a Business Bank Account
You’ll need a US business bank account to manage finances, accept payments, and pay taxes. Visit banks in person with:
- Your passport and US visa.
- Documents that prove your business registration and ownership.
- Initial deposit funds.
Shop around to compare account features and fees to pick the best option.
Understand Tax Requirements
As a business owner in the US, you’ll need to comply with various federal, state, and local tax filing and payment obligations:
- Obtain an Individual Taxpayer Identification Number (ITIN) from the IRS if you don’t have a Social Security Number.
- File for Federal, State and Local tax IDs to report income, payroll taxes, sales tax etc.
- File business tax returns. The IRS Form 1040 for individual income and either Form 1120 or 1120S for corporations and S-corps respectively.
- Make estimated tax payments each quarter to avoid penalties. Calculate these with IRS Form 1040-ES.
Hiring an accountant can help ensure you meet all compliance requirements.
Look into business insurance policies like:
- General liability insurance to protect against claims of bodily injury, property damage etc.
- Professional liability insurance for service-based businesses.
- Workers comp insurance which is required if you have employees.
- Cyber insurance and business interruption insurance for added protection.
The right insurance reduces risks and provides peace of mind.
Starting a small business as a foreigner in the US requires research, capital investment, legal compliance, and patience. But thousands of immigrants have achieved the American dream of entrepreneurship. Stay organized and seek help from professionals like lawyers, accountants and tax advisors. With hard work and dedication, you too can succeed.
- IRS. “Limited Liability Company (LLC).” https://www.irs.gov/businesses/small-businesses-self-employed/limited-liability-company-llc
- USCIS. “Working in the US.” https://www.uscis.gov/working-in-the-us
- SBA.gov. “Register Your Business.” https://www.sba.gov/business-guide/launch-your-business/register-your-business
- NerdWallet. “How to Open a Business Bank Account.” https://www.nerdwallet.com/article/small-business/how-to-open-a-business-bank-account
- IRS. “Self-Employed Individuals Tax Center.” https://www.irs.gov/businesses/small-businesses-self-employed/self-employed-individuals-tax-center
- Fundera. “Small Business Insurance.” https://www.fundera.com/business-insurance