Starting a business in the United States as a non-citizen or Nigerian can be an exciting and rewarding venture. With its large and diverse market, the US offers a wealth of opportunities for entrepreneurs to grow and succeed.
The United States was by far the best country for startups in 2022, according to data provided by StartupBlink. Many businesses throughout the world rely on access to the US market to succeed. Because that helps them take advantage of the world’s largest and most integrated national market while paying the lowest tax rate.
However, incorporating a business in the US can also be complex, with a variety of legal, tax, and immigration requirements to consider. In this article, we will guide you through the process of incorporating a business in the US, from determining the type of business entity, and filing the required documents to opening a US-based bank account.
What is incorporation?
Incorporation is the legal process a business must follow to form a corporate entity or company. Corporations can be established in most countries and are identified by terms such as 'Inc' or 'Ltd.'
Incorporation is how a business is formally organized and separates the legal business entity from the owner's assets. For this article, we will focus on how you can a small business in the USA, which is represented by LLC.
Benefits of incorporating your business in the US
- Easier to sell in the US market, from a customs and tax point of view.
- Access the capital markets in the US for venture capital, angel investors and public markets.
- Enhance the reputation of your company, both to US customers and many markets overseas.
- Easier to get a visa to work in the US (though acceptance is NOT guaranteed)
- Lower income tax.
Incorporating a business in the United States as a non-citizen can be a valuable and profitable venture, but it requires careful planning and a thorough understanding of the process. Here are the key steps you need to take to successfully incorporate a business in the US as a non-citizen.
Steps to incorporate your startup in the U.S.?
Company incorporation in the U.S. is administered at the state level for foreign nationals and U.S. citizens. It is important to note that the process is different in every state.
- Choose a Business Structure
C Corporation, Limited Liability Company (LLC) and sole proprietorship are the three most common company structures. An LLC offers limited liability protection to its owners and is a popular choice for small businesses.
Corporations are separate legal entities from their owners and offer liability protection, but also have more formalities and requirements. A Sole Proprietorship is a business owned and run by one person, with no separate legal structure, but also has no liability protection.
- Decide on the Location
Deciding the state your company will lodge incorporation and conduct business is essential. Every jurisdiction is different, and some states have stricter guidelines. Incorporating in the same state where your business operates can be cheaper. Note that you are not required to incorporate in the state where your business operates.
However, Delaware is a popular choice for incorporation due to their flexible business laws, tax structures, and shareholders and directors protection. Also, Delaware makes its corporate law website available in 10 languages and has outsider-friendly rules.
- Choose a company name
Every state has its laws and requirements. It is necessary for all states that the company name is not registered or used by another business. If your new company is a subsidiary, you can add 'U.S.A.' to your current name.
Your business name needs to comply with the naming regulations in the state where you are incorporating. You can check the availability of a name by searching the state's business registry or through a private company that specializes in this service.
- File the incorporation documents at the state office
The next stage is making all the necessary documents available for filing at the state filing office. These documents include articles of formation or articles of organisation, operating agreement, member certificate for each member, and application for Employer Identification Number.
Endeavour to follow up with any other required formation procedures for the state. In addition, also prepare and file BE-13 Survey with the US Bureau of Economic Statistics. It is crucial to have a business attorney review the articles of incorporation before filing to ensure that they meet all the legal requirements.
- Obtain a tax ID number
An EIN is a tax identification number required by the IRS for businesses operating in the US. It’s necessary not just to hire workers but to open a bank account, pay taxes, or get a business licence. It can be obtained online from the IRS.
You can get a tax identification number by applying directly to the correct agency. As a Nigerian national, you will also need to obtain a US tax identification number if you are going to be working or receiving payment in the US.
- Set up a US-based bank account
Finally, you will need to set up a US-based bank account to receive payment and manage the financials of your business. By setting up a bank account in your company’s name that is used exclusively by your company, you are ensuring that you can cleanly and clearly document your financial transactions for tax return purposes, and defend your company in the event of a tax audit.
The documents that’ll be requested at the bank include a business incorporation document, tax ID number, a copy of your passport and proof of address (the address can be your LLC office location or the address of your registered Agent).
The Bottom Line
In most cases, foreigners with business or investments in the United States should set up a domestic corporation. Consult with experts on tax law in both your home country and the U.S. before taking the plunge, as the rules for foreign nationals can be more complex than if you were a citizen.