What does the legal process look like for starting a business in the U.S? The U.S. offers one of the most open environments in the world for entrepreneurship, meaning that foreigners can set up shop quickly and without having to go through any more legal complications than Americans. Here, I’ll go over some common questions that I’ve received from foreign entrepreneurs in my law practice.
How Long Does It Take?
Delaware, where many, if not most businesses in the U.S. are registered, requires entrepreneurs to go through a registered agent for incorporation. Most online registered agents are able to register a new business within just a few days. Entrepreneurs can typically expect to receive government filing confirmations from their registered agents and incorporation documents from their attorneys within a week or two, unless additional legal documents are required for their business models. This makes the U.S. one of the fastest countries in the world for the speed at which new businesses can be opened.
What About Banking?
So long as a tax identification number, or EIN, exists for a business, a bank account can be opened within a day. EINs for registered businesses are issued upon application for entrepreneurs with American social security numbers, but can take up to a few weeks for foreign applicants. In my experience, foreign entrepreneurs usually receive their EINs within three weeks, meaning that, including the time it takes for incorporation, they can fully set up shop in the U.S. roughly a month after applying. U.S. banks do not discriminate between foreign-run and American-run businesses that have their legal documents in order.
Are There Any Other Legal Requirements?
Nope, that’s it! Once all of the above is set up, foreign entrepreneurs can start operations immediately. Of course, depending on their business models, they may need to connect with accountants and certain industry-specific professionals early on, but in terms of the legal requirements for incorporation, they are good to go.
Should You Incorporate in the U.S.?
Many foreign entrepreneurs wonder if it is worth the time and expense to incorporate in the U.S. if their only goal is to have access to the U.S. market. It definitely is, and here’s why:
- It is easier for a U.S. business to work with another U.S. business than with a foreign business. Contracts can be signed without consideration to significant jurisdictional differences, as contract law is fairly standard across most U.S. states. This makes it easier for foreign entrepreneurs to navigate relationships with U.S. investors, partners, and customers.
- Because there are no restrictions on shareholder residency or citizenship, U.S. businesses can be set up as subsidiaries of foreign businesses (or vice versa), meaning that foreign entrepreneurs can establish a “head office” in another jurisdiction while maintaining access to the U.S. market. This allows for maximum flexibility in business and tax planning.
What About the Business Address?
I often receive questions on where new businesses should be registered. My go to answer is Delaware because of the transparency of corporate laws. This doesn’t mean that businesses have to be taxed in Delaware, or even that they have to abide by Delaware laws in contractual or other legal matters. In the U.S., the state of incorporation is separate from the state of actual operations. This means that foreign entrepreneurs can take advantage of state-specific laws in any state that they decide to run their businesses in.
Many websites provide physical mailboxes and office addresses at a low cost, which can be useful for complying with state-specific laws on operational and taxation matters. They employ agents on the ground to forward communications, so foreign entrepreneurs don’t ever need to check their mail in person.
In a Nutshell
Starting a business in the U.S. can be easier than you think! The U.S. market is large, and there are countless online service providers, lawyers, and accountants available to guide foreign entrepreneurs on the incorporation and banking processes. And, because the entrepreneurship environment is so open in the U.S., entrepreneurs can skip bureaucratical considerations to focus on what makes their businesses competitive. When the success of a business depends only an entrepreneur’s skill and luck (as opposed to institutional barriers), entrepreneurship becomes all the more exciting, thrilling, and fulfilling.
