More and more start-ups, primarily targeting the U.S. market, are flirting with the idea of starting a business in the U.S.
U.S. citizenship or residence is not required to establish a business in the U.S., and the procedures are the same for foreigners and natives alike. The establishment of a company takes place at the state level, so the procedures differ appropriately, but only minimally.
Table of Contents
What options do you have to open a company in the USA?
Choosing a Legal Entity Foreign companies wishing to do business in the United States generally have the following options:
(1) opening a branch or organizational unit of a foreign company;
(2) entering into a partnership with a U.S.-based company;
(3) the establishment of a subsidiary corporation;
(4) the establishment of a Limited Liability Company (LLC).
The establishment is possible at the level of a joint-stock company (corporation, Corp, Inc.) or a limited liability company (LLC). There are otherwise two forms of joint-stock company, S Corp and C Corp. The essential difference between the above: choosing S Corp or LLC avoids double taxation of income, which simply means that taxes are not paid by the company, but through income tax returns of its partners or shareholders, while C Corp is a separate taxable entity.
When thinking about expanding your business in the US, the question usually arises as to what type of legal entity would be most appropriate to set up. This is a very important step, as the type of legal entity chosen can have significant tax and liability consequences for the US subsidiary and the foreign parent. When choosing the type of legal entity, this must also be legally established. In this step, the company must decide in which state it wants to have its main business unit and whether it wants to do business in other states. In addition, this step may involve filing applications with local and federal and/or federal organizations, which is important because incorrect applications can result in unnecessary delays or costs. Once a incorporate company in USA is established, the company must constantly take care of issues concerning the legality of its operations in order to ensure that all the company’s obligations are met and to avoid possible penalties from state authorities.
The most suitable form for start-ups
Although a branch or organizational unit is the simplest and cheapest way to set up a business in the US, this structure is usually not recommended, the main reason being that there is no US-based intermediary to protect the foreign company from liability and income tax return in USA. In other words, a branch or organizational unit is considered part of a foreign company. Because there may be a variety of cross-border complications in such a case, most U.S.-based companies choose a different structure of legal entity that separates the U.S. and overseas business. If a foreign company decides to open a branch or organizational unit, it should ensure that it carefully formulates its contractual obligations and reduces its liability to the maximum extent permitted by law.