What are the advantages of starting a business in the U.S. as a non-us resident?
Most foreigners are familiar with the United States of America. But many of them don't know that it's easy to start and maintain a business in the United States, with the potential benefits of structuring a tax-free US company (Before you proceed, make sure you have everything in order by following this comprehensive business checklist).
Starting a business in the United States offers so many advantages, we are advocating that the US should be your first choice of country to register your company.
In this article, we’ll explain the benefits of a US company for your business and why you should consider it as your first option when starting a new online business. This article is part of the US LLC for Non-Residents Ultimate Guide. If you don’t know the difference between an LLC and a Corporation, we recommend you read that article before returning to this one.
With that out of the way, let us look at the myriad of benefits a US company offers to foreigners:
The United States of America is the biggest economy in the world. Companies based in the US are perceived as more reputable. If you use an offshore company registered in a tax haven like Seychelles or Bermuda Islands, your European clients might have trouble accepting your invoice or making financial transactions with you, as transactions with offshore companies are usually scrutinized very closely by European tax authorities.
If you use a US company to issue invoices to your customers, you won’t have this problem.
Customers won't think twice about accepting your invoice because the USA isn't generally known as a tax haven.
If you decide to register a US company, you will undoubtedly be concerned about taxes. The good news is that, contrary to popular belief, there’s a way to structure your US company to be tax-free in the US with the LLC structure.
If you’ve read our article on how to start a tax-free US business with the US LLC structure, you know that you can start a tax-free online business with a US LLC structure if you do not have a physical presence in the US and do not have employees or agents in the US. This is true whether you offer services such as copywriting, consulting, software development, dropshipping or SaaS, to name a few. Of course, there are some caveats and I suggest you read the guide and understand what is a US LLC.
As we all know, the US consumer market is the largest and most lucrative on earth. The U.S. has a GDP of $25.44 trillion and 333.3 million people with the highest household spending in the world ($17,511.75B in 2022), accounting for more than a quarter of global household consumption.
With a US company, you have easy access and the ability to sell directly to the US market without middlemen. Not to mention that US consumers prefer to buy from a US company rather than a company based in another country.
The US also has the most respected venture capitalists in the world; there are more VCs and deals in the investment sector here than in other countries. If you have an exciting startup idea, it is best to start a company in the US and approach investors in the US.
If you decide to go this route, forming a Delaware C-Corp instead of a US LLC is the only viable option because most angel investors and venture capitalists only invest in Delaware Corporations because investors are more familiar with Delaware Corporations Laws.
However, forming a C Corporation would negate the tax advantage previously mentioned. Therefore, it is important to evaluate your situation and decide whether you should form a corporation or register an LLC.
Don't get us wrong, the American banking system isn't perfect. But it's a lot of advantages. For example, banking fees are low, the US dollar is a stable currency and is accepted virtually everywhere. Bank accounts in the U.S. are insured up to $250,000 by the U.S. government, higher than in most European and other first world countries. US banks also offer the most perks and bonuses for U.S. credit card holders when compared to credit cards offered by banks from other countries. Not to mention that you can easily buy and sell cryptocurrencies with US dollars with a US Bank Account. Read our article US Business Bank Accounts for Foreigners to learn more.
There's basically no shortage of payment processing options in the USA, basically all the ones you've heard of are readily available. You can use Stripe, Shopify Payments, Paypal, and even high-risk payment processors with your US LLC.
One of the most popular payment processors for LLCs owned by non-US residents is Stripe. With a US LLC and Stripe, you can quickly start an online business even if Stripe is not available in your country.
Even if your country supports Stripe, you should consider a US-based Stripe account because a US-based Stripe account offers the fastest payout, in just 2 business days. And if you are in urgent need of cash, you can even apply for instant payout which will just take a 1% processing fee.
A faster payout will inevitably allow you to improve your cash flow while running your online business. Compare this to a Stripe account from Brazil, which takes 30 days, and 7 days for a Stripe account from Singapore.
And perhaps the most important feature that distinguishes a U.S.-based Stripe account from Stripe accounts in other countries is that you have access to Stripe Capital, the branch of Stripe that offers loans based on your past performance history. You can qualify for loans from Stripe even when you do not have any credit history, as long as you have a business registered in the US and have a steady stream of revenue for the past few months.
If you are an online business, it is inevitable that you will need to market your products or services through paid advertising in some point in time depending on your company growth. The good news is if you are advertising with a company registered in Delaware or Wyoming, you do not have to pay sales tax, VAT or GST for every dollar you advertise on Facebook, Google or Tiktok.
In contrast, you pay 18% GST with a Indian company; 13% with a Chinese Company; 9% with a Singaporean Company; 23% with a UK company if you are not VAT-registered, because when you are not VAT-registered in the UK, you can’t do a reverse-charge, and thus pay 23% on Ireland VAT rates.
Related Reading: US LLC vs. UK LTD
Believe it or not, if you choose the right state, the US is among the few countries where registration and renewal are affordable. The process is quick and easy without having to be physically in the US. There is also no need for a lawyer, local director, or corporate secretary, for which you will have to pay high fees.
The fee for filing an LLC in Wyoming, for example, is only $100; compare that to Italy, where total fees can easily exceed 2000 euros.
Finally, it's just as easy to dissolve a business as it is to incorporate. If your business is not doing well in the US, you can simply dissolve it. Closing your business can cost less than $100 in some states.
It's important to know that as a business, some countries require you to spend a lot of time on annual compliance. Some countries even require you to have your books audited by a certified public accountant every year, no matter how small your business is. In some cases, you may even need a local director in the country, such as in Singapore. If you do not have anyone in the country, you will have to pay a few thousand dollars a year just to have someone as a nominee director. Not to mention, this is even more difficult if you are registering a company in a country whose language you do not speak.
Fortunately, if you register a US company in the US, everything is simple. It can be 100% foreign owned. And if you register a US LLC, all you have to do is pay the annual reporting fee, annual Registered Agent Service and file the Form 5472 if you have no federal tax liabilities. To structure a tax-free US LLC, please remember to read our guide on LLC in the US. You will be amazed on how powerful this company structure could be.
We hope we have convinced you by now. If you think there is another country that offers such great opportunities for online entrepreneurs or digital nomads like you, feel free to post them in the comment section below and we could discuss the pros and cons with you.
Overall, the US is the best option for any foreigner who wants to start an online business. The fees are low, the process is easy, there is a wide range of alternatives for payment processing and the availability of capital is very high. Best of all, you can make it totally tax-free!
We are glad you have made it this far, but this is just the beginning of your journey to building your online empire with a US LLC. If you have any questions and want to register a US company, please follow the rest of the articles in this guide or contact us at hello@startfleet.io.
StartFleet helps you with your US Company formation. Apart from helping you to register a US company we offer a lot more:
Kathleen Schweitzer is an international taxation expert, providing strategic counsel to businesses with complex compliance, tax and financial issues in an effort to help them grow their business globally. She often gives lecture on U.S. tax developments, transfer pricing, taxes on the sale of goods and services, U.S. tax policy development, taxation of internet commerce and multi-jurisdictional global tax planning. Kathleen enjoys reading, photography, cooking and spending time with her husband and eleven-year-old daughter.
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