For many people all over the world, the USA is the home of business and enterprise where you can make all your dreams come true with dedication, hard work, and a bit of luck. The United States is one of the most welcoming countries in the world when it comes to business. By law, you do not have to be a citizen of the country or even live there to incorporate your company. While the venture of taking your business abroad might seem a bit complicated, it’s all quite fairly simple with the right guidance. In this guide, we will outline everything a freelancer in Dubai needs in order to set up a company in the US and open a US bank account.
Reasons why the USA is an excellent place to incorporate your company
- The US has a federal corporate income tax of 21%, which is significantly lower than in other countries. However, you also have to pay state taxes where they apply as some states don’t have the state corporate tax.
- The state of Delaware is considered the standard jurisdiction for companies dealing in technology. The state is also a favorite for many non-residents incorporating companies because of its low taxes, rigid corporate law, and maintenance fees. If your business requires discretion, you can incorporate your company in a state like Nevada, which has robust privacy laws.
- The US is also one of the biggest economies the world over and has a wide array of opportunities.
- In terms of talent, the US is home to smart and highly skilled individuals.
Splitting equity among the founders
Before you even get to decide on the company’s name, you should first come up with a strategy for splitting the equity between the founders. Typically, companies are recommended to have 10 million shares, each with a value of 0.00001 a share, which adds up to a total of $100. A percentage of these shares are then to be divided among the founders, and the remaining unallocated shares can be awarded to future employees and investors.
Decide on the corporate entity to be registered.
There are only two types of companies a non-resident can open in the US. These are;
The LLC is primarily a corporate structure where the business is a separate entity from the owners and cannot be liable for any of the company’s debts or liabilities. In a nutshell, they are like a hybrid of a sole proprietorship and a partnership or corporation. A C-Corp, on the other hand, is a favorite for many because, unlike the LLC, this one can expand as the company grows to offer unlimited stock to other entities as they come in. Because of this feature, the C-Corp is very popular with investors. Additionally, the C-corp also creates some distance between the owners from close interaction with the IRS.
Starting a Non-U.S. LLC or Corporation
Different states in the US have various departments that take care of the registration of companies. However, the requirements are almost similar all through. These are the steps that need to be considered before you can incorporate your company:
1. Finding a name for the company
The company, in spite of the corporate entity, needs a unique name. This means searching through the state’s database to see if there is a similarly named company. For instance, in Delaware, you will have to search through the Division of Corporation’s website to see if there is a match. If your chosen name is available, reserving is not mandatory as the name will belong to your company automatically once the state records your corporation’s filings.
2. Retain a registered agent
Since your business might not have an actual operational physical space, you need a trusted third party who is registered in the same state as the enterprise being established. This registered agent can then receive and send official documents such as tax forms, official documents, legal letters such as being sued on behalf of the company. If you are living in a state where you incorporated the company, you can then be the registered agent for the company.
3. File a Certificate of Organization or a Certificate of Incorporation
This document will largely depend on the entity being incorporated. For those interested in Limited Liability companies, we have the Certificates of Organization and Certificates of Incorporation for the C-Corps. The corporation works better for most non-residents because of the alignment with other country’s laws. However, as highlighted above, should you derive income in the US, you will owe the I.R.S some taxes which must be paid.
4. Get an EIN
For your company to be able to pay its taxes, it needs an Employer Identification Number (EIN). After the state notifies you that your incorporation documents have already been processed, you can apply for the EIN by merely filling out the Form SS-4 provided by the Internal Revenue Service (IRS). You can make the application either by phone, online, or even by mail. It’s just one piece of paper with clear and direct instructions.
Once you have already gotten your company registered, you have to keep it that way by paying a maintenance fee. Each state also has its own rules when it comes to this. In Delaware, however, you can expect an annual tax of $300 for an LLC. For a corporation by law, you are required to pay a franchise tax and also file an annual report.
6. Bank accounts
A business requires bank accounts to operate efficiently and smoothly without a hitch. As a freelancer in Dubai, opening a US bank account will enable you to receive payments from your clients online. This will ensure that money smoothly flows in and out. Opening a business account without physically going to the bank is incredibly difficult. That is because of the stringent security measures banks must comply with. Some of the most popular banks in the US include Bank of America, Citi, JPMorgan-Chase, Wells Fargo, US Bancorp, among others.
Although many people think registering a company in the US without being a resident is impossible, we can see now that it’s not. With careful coordination and planning, you can wrap it all up in very little time. Furthermore, there are a lot of resources on platforms such as the US Small Business Administration, and you can even learn about the different state laws for corporations to further gain knowledge of what is expected of you.