Incorporating in the United States as a Foreign National
Venturing into the United States market can be rewarding for many foreign-based businesses, and since U.S. citizenship and residency are not requirements, non-U.S. citizens are free to start or expand in the United States without wading through any more red tape than a U.S.-born small business owner. With BizFilings, it's easy for you to incorporate online in the U.S.
Choosing a legal business structure
Using the standard incorporation procedures issued by each state, citizens and residents of other countries outside of the United States are free to incorporate their business on U.S. soil. The primary benefit of incorporation is that your personal assets are protected from risks such as losing your house or savings.
In deciding which legal structure to set up, many non-U.S. companies operating in the United States consider the following business types:
- Limited liability company (LLC). An LLC is appealing because it has no limit on the number of owners (members) or who can be an owner. Also, LLCs allow for pass-through taxation, where no tax is paid on business profits at the entity level. Instead the profits/losses are reported on the owners’ individual tax returns and any tax due is paid at the individual level.
- C corporation. The standard corporation, or C corporation, also does not have limits on the number of owners (shareholders) or restrictions on who can be an owner. Unlike an LLC, the profits of a C corporation are taxed at the entity level. If the corporation’s profits are then distributed to shareholders as dividends, the shareholders must pay income tax on those dividends. This creates what is called a double taxation of the corporation’s profits. (Please note, S corporations, which are corporations that have elected a special tax status with the Internal Revenue Service, are not allowed to have non-U.S. citizens as owners.)
- Nonprofit corporation. A nonprofit corporation is a company or organization formed for purposes other than making a profit. Charities and organizations established for the public good are formed as nonprofit corporations.
Under some circumstances, the laws of the company’s home country may determine the choice of legal business structure. It is important to consult with an attorney familiar with both U.S. and international law to make an educated decision regarding which entity type is best for you business and goals.
Incorporating your business in the United States can earn more credibility with U.S.-based customers as well as potential investors. Special tax credits and incentives exist as well for businesses, including foreign tax treaties. IRS Tax Treaty Overview