How to set up a company in the USA

Starting a company in the United States can be an exciting and rewarding endeavor. However, the process involves careful planning, legal considerations, and adherence to specific requirements. It is possible for individuals and businesses from India to establish a company in the USA, but the procedure can be intricate and time-consuming. It entails complying with numerous legal and regulatory obligations. Factors such as taxation, intellectual property protection, and state-specific business licensing requirements should be carefully considered.
Selecting the appropriate legal structure for your company is crucial. Common options include Sole Proprietorship, Partnership, Limited Liability Company (LLC), and Corporation. Each structure has different legal and tax implications.
At the moment, there are two types of corporate entities non-citizens can open in the US :-
i) Limited Liability Company (LLC)
ii) Corporation (C-Corp)
The limited liability company (LLC) and C-Corporation are the two primary corporate structures in the United States. Selecting the appropriate structure has implications for how you operate your business and how you handle tax obligations within the country. Although C-Corporations are commonly recommended for foreigners, there are notable benefits
to incorporating as an LLC. One key advantage is limited liability, which safeguards members
from personal liability in case of business-related decisions or legal actions, ensuring their
personal assets remain protected. Additionally, LLCs face fewer recordkeeping requirements
compared to C-Corps and have more flexibility in distributing profits among members.iv
However, many new businesses still opt for the C-Corp structure due to its significant
advantages. One prominent benefit is the ability to offer unlimited stock, which appeals to
potential investors and facilitates expansion opportunities. Foreign owners also appreciate the CCorp structure as it provides a level of protection from extensive IRS involvement. Although CCorps are subject to double taxation, careful tax planning can mitigate most of the financial impact, making it a viable option.
Main differences between LLCs and C Corps
Taxes: LLC owners are subject to personal income tax rather than corporate taxes, whereas CCorps face taxation at both the corporate and individual shareholder levels. This double taxation is a key reason why entrepreneurs often prefer to establish an LLC in the US.
Stock market: C-Corps have the advantage of being able to issue stocks and participate in the stock market, while LLCs are unable to do so. LLC members can only trade ownership interests on a securities exchange to achieve a similar outcome.
Financing: C-Corps have an easier time raising capital compared to LLCs. C-Corps can sell
shares and attract unlimited shareholders for financing their operations. On the other hand, LLCs are limited to offering debt or equity to raise funds for their business ventures.
Similarities of C Corps and LLCs
Liabilities: In both LLCs and C-Corporations, the company is considered a separate entity from its owners (members for LLCs and shareholders for C-Corporations). This legal separation ensures that the personal assets of the owners cannot be seized to settle the company’s liabilities.
Tax filing: Both LLCs and C-Corporations are required to file taxes on a quarterly basis.
Type of owners: Both LLCs and C-Corporations allow individuals and corporations, whether
domestic or international, to become members or shareholders, respectively. However, LLCs
have a limitation of up to 100 members, while C-Corporations have no restrictions on the
number of shareholders they can have.
Corporate laws in the United States exist at the federal, state, and local levels. Each of the fifty
states has its own set of laws, while federal law establishes basic requirements for the trading of company shares and governance rights. The Securities Act of 1933 and the Securities Exchange Act of 1934 outline many of these standards. One notable aspect is that corporations have the freedom to incorporate in any state of their preference, regardless of where their headquarters are situated, as permitted by the US Constitution.
Apply for an EIN from the Internal Revenue Service (IRS). An EIN is a unique identifier for
your business and is required for tax purposes, hiring employees, opening a business bank
account, and filing tax returns. Determine the state and local taxes applicable to your business. These may include sales tax, income tax, employment tax, or other taxes. Register with the relevant state and local tax agencies to obtain the necessary permits and identification numbers.
The tax laws in the United States are intricate, requiring thorough tax planning and professional guidance for companies operating in the country. Businesses are subject to distinct federal, state, and local tax obligations. The Internal Revenue Service (IRS) collects income tax, capital gains tax, taxes on dividends, interest, and other passive income, as well as employee payroll taxes on behalf of the federal government. Additionally, businesses are likely to have additional tax responsibilities specific to the state in which they operate.vii
In the United States, there is no minimum capital requirement for a corporation or limited
liability company.

Creating a business bank account for your company can be done once you have completed the LLC registration process and received your Employer Identification Number (EIN). You’re
required to get one to carry out business financial transactions in the US especially for LLC and corporation types. It is legally possible to start and own a business in the United States even if you are not a citizen. However, entering the country without a valid work visa is not permitted. You can manage an LLC or corporation from outside the US, but it is important to consult the US Embassy in your home country or the US commercial service for detailed information and assistance regarding visa applications.

Various types of business visas are available, with the E-2 visa being a popular choice among entrepreneurs. To qualify for an E-2 visa, you must be a citizen of a country that has a Treaty of Friendship, Commerce, or Navigation with the US, have made or plan to make a substantial investment (at least $100,000) in a US business, and demonstrate ownership of a controlling interest (50% or more) in your company.

Article Written By: Kartikey, NLU Kochi

Another option for entrepreneurs is the possibility of obtaining a ‘Green Card through Investment,’ which grants permanent residency in the US. This option applies to foreign investors who can invest $1 million in a new commercial venture (or a minimum of $500,000 in designated employment regions).
In conclusion, setting up a business in the United States requires careful planning, adherence to legal requirements, and understanding of the regulatory landscape.
i USAINDIACFO. (n.d.).
https://lp.usaindiacfo.com/?gclid=CjwKCAjwhdWkBhBZEiwA1ibLmCi7JgMC2vUy3uptmEU3gNhTllVxcsArhQH
DVafk9lFQ8tr-7HVlQhoCRncQAvD_BwE.
ii A guide to starting a business in the US as a non-citizen. (2021, March 21). Wise. https://wise.com/gb/blog/start-abusiness-in-usa-non-resident.
iii Globalfy. (2023, May 8). How to open a company in the USA for non-citizens? Globalfy.
https://globalfy.com/blog/how-open-usa-company-for-non-citizens/.
iv Supra note 2.
v Id.
vi Abogados, I. (2020). The Essential Corporate Law in the United States (USA). ILP Abogados.
https://www.ilpabogados.com/en/the-essential-corporate-law-in-the-united-states-usa/.
vii Id.
viii Nagaraja. (2022, November 15). How to Set Up a US Company as a Non-Resident. Vakilsearch | Blog.https://vakilsearch.com/blog/set-up-a-us-company