Forming an LLC or limited liability company in the USA is considered to be a complicated procedure and one might need some guidance to enlighten them with the steps to follow in order to expand or start one’s business in the USA. LLC is undoubtedly considered to be the best business structure to follow when trying to expand to especially the USA.
LLC allows people to form businesses in the USA regardless of their citizenship i.e. one doesn’t have to be a US citizen to start an LLC. This article equips you with all the resources to explain the process of starting an LLC in the US. Before looking into the steps to form an LLC in the United States, the major deciding factor will be your ability to obtain a US Visa to travel to the United States from your home country.
Traveling to the USA is a necessity to open a bank account in the country. Additionally, one needs to know the fact that a mere formation of an LLC in the United States will not grant you with work visa in the country.
Additionally, you can also check the steps to start a business in France which you can keep as an alternative.
How to Start an LLC?
The important factors to look into before forming an LLC include deciding on your company’s name, having a US bank account and a mailing address, obtaining an Employee identification number, and many more. This article will drive you through the path of forming your LLC with ease. It is not a hidden fact that expanding your business in the US will increase your company’s reach, increase the company’s credibility and provide access to the huge US market.
1. Choose a state that suits your business best
The United States is a huge country with 50 state options to start your LLC in but choosing the best option is a task in itself. Every US state has its own pros and cons and can be ranked on the parameters of their ease of doing business or business friendliness and international relations.
The states of Nevada, Wyoming, and Delaware are the top performers when it comes to business friendliness and that makes them an ideal location for most LLCs. It is often advised to choose a state with lenient or zero taxation norms so that the only taxes you have to pay to keep your LLC running are the US Federal taxes.
But if your business requires you to have physical offices in a particular location then go for the state that has the ideal audience that you are targeting, this will require analysis of your product or service’s demand in the states. Secondly, it is advised to check for factors like suitable employees or a job site in the specific states.
However if your LLC does not have specific requirements then it is advisable to choose the states with the most foreign-friendly laws in the country and our personal recommendation would be Delaware, due to its lower annual fees and no state taxes.
Let us give you a wider look at how to choose a state for your LLC by some situations which people usually face:
- If you want to open a US branch of your business with an office then you’ll be choosing the state which best suits your requirements for a physical office.
- If you simply want to go for a US-based company then go for states like Wyoming which have the lowest state fees.
- If you want to go for a company just to gain US investment then try the Delaware corporation as this entity is required by the majority of US venture capitalists.
2. Prerequisites to forming an LLC in the United States
Once you are clear about the location of your company and have found the ideal state for your company, you need to focus on the basic resources that are required to form your company, start with choosing an eye-catching name for your company and then follow the other requirements, let’s explore these prerequisites step by step.
a. Choosing your ideal company name
It is an uncommon fact that every US state requires the LLC owners to find a name that fits their country’s criteria of naming an LLC, below are some of the brief guidelines which are set up for naming LLCs in the USA.
- It is necessary to include a limited liability company in your company’s name. You have the liberty of choosing between the abbreviation LLC or the full phrase.
- Your company name should be unique and out of the box so that you get a web domain easily and can get an URL without any hassle.
- Avoid using terms that are often used in government agencies, for instance, the state department or FBI because that might lead to confusion of your LLC as a government agency. There are also a bunch of restricted words like university, Bank, etc. which require full-fledged paperwork to be included in your LLC name.
b. Hiring a registered agent
A registered agent is a designated person that is required to be able to form an LLC in the US states. A registered agent must have an address in the state that the LLC is being formed and is the primary person who signs and completes all the formalities for the company and signs the legal documents as well. Most US states need every LLC to have a specific registered agent and that too a permanent resident in your state of operation, the registered agent can also be a company that is legally authorized to run in that very state.
There are many organizations providing registered agents at affordable rates for LLCs as well and it is strongly advised to hire a registered agent for your business to make the procedure easier as the agent will be available to help with all the documentation processes. Some of the areas that a registered agent takes care of are your document fillings, legal summons, and much more.
c. Federal Employer Identification Number (FEIN)
Commonly known as an “EIN” or just a “Tax ID number”, this Federal Employer Identification Number acts as an ID card for companies functioning in the US. Issued by the internal revenue services, The FEIN is needed in many steps in launching a business. For instance, a FEIN is required to open your company bank account in the United States.
d. An US mailing address
Having a United States address in the specific state in which you wish to form your LLC is a necessity to further facilitate opening a bank account in the state. You can either opt for a physical office in the state to get a mailing address or have to find a place in the state to show address proof.
However there are some services that help you set up a US mailing address to help you open your bank account, they also help in other fields like receiving mail on your behalf and much more.
e. Opening a bank account in the United States
After opening an LLC in the United States, accepting US payments becomes a hassle and that is the reason that opening a US merchant account becomes a necessity. Opening a bank account in the United States isn’t child’s play and has become a harder task these days but there are still plenty of options to open a bank account.
Opening a bank account is one of the key requirements to run a business in the US but it requires brief research before choosing the appropriate bank for your business. Most people try to go for a bank that has multiple branches and is easily available in their home country as well, this makes the procedure a lot easier because one can open a bank account through your home country’s local branch as well.
Some banks that have unmatched international availability and can be used to open your bank accounts for the LLC are Citibank, Chase, etc.
f. Open a US Merchant Account (to Accept Credit Cards)
Every business in today’s age requires to put forward payment options like Visa, Mastercard, American Express, and many more and a merchant account does that for you. A merchant account is nothing but an account that helps you accept payments in card forms. A merchant account in the USA firstly requires a stable US bank account in place and not just that it also requires you to have a business address as well as a mobile number to reach you.
3. Maintaining your LLC in the USA
Launching an LLC in the USA requires a hefty procedure with some complications but the maintenance of your LLC in the States is a fairly easier task, let us take you through the process.
a. Maintain your registered agent
Maintaining your registered agent and being in constant contact with them is vital for the company to keep growing. If by any chance your LLC fails to maintain the registered agent, your LLC will not be able to take care of the legal documents and that might hamper the company’s future. It is necessary for companies to file an annual report but without your registered agent, you might fail to do so.
b. A compulsory annual report
Your state of operations simply needs updates about your company and that is what we call an annual report. The annual report indicates the owner details, registered agent, and addresses of the business to the state. It is a hassle-free procedure that is generally filed by the registered agent and in this digital world, it can simply be filed online.
Companies failing to file an annual report might have to compensate by paying late fees and if this continues for a while the company can be legally dissolved and be declared inactive as well.
c. Your home country’s procedure
Look into all the documentation and filings that need to be completed in your home country because most countries have some obligations in place before you go on and start an LLC in the States.
4. Taxation
If your form an LLC in the United States, you are required to pay taxes to the US government based on certain parameters. For instance, your home country plays a role in the amount of taxes you pay to the US government, some countries have settlements known as tax treaties with the United States and have to pay minimal or zero taxes. The amount of taxes you pay also depends on your income i.e. the value of your US-based business. You might need to consult a tax advisor to handle the legal taxes and documentation in this case.
Frequently Asked Questions
Are LLCs the only type of business entity foreign nationals can opt for?
Does the LLC’s legal address have to be in the US?
Can I create an American Branch of My Existing Company?
Summary of opening an LLC in the United States
The primary prerequisite to figuring out before anything else is the ability to secure a visa to travel to the United States because you need to open a bank account there to start functioning as an LLC.
After that, you need to look into other formalities and follow the steps mentioned above. Starting an LLC is a great way to engage a new audience and expand your business reach so do not back out just because the procedure sounds complicated. There is plenty of help available online which will guide you with everything from getting a registered agent to handling taxes.
