How to Set Up a US Company as a Non-Resident

As we all know, the USA is known to many for having the most technologically advanced and powerful economy to the largest consumer market. 

The USA could be the best destination for forming a business as a non-resident and take advantage of the benefits as you get excess to its huge market exposure.

Benefits of forming a US company as a non-resident

Enhanced credibility and brand awareness 

Registering a company in the U.S will help the business to enhance the reputation of organizations in the future. 

Market Access 

The USA company can reach a large consumer base, enabling you to tap into new customers and opportunities. 

Tax Benefits 

The USA has very favorable tax laws for different businesses, offering potential tax savings and incentive modules.

State Guides Provides More Information About Specific State

If you’re a non-resident Choosing right State is the most crucial part. As a non-resident, you may want to consider Wyoming and Delaware. Both states offer unique advantages for businesses. 

Wyoming is known for its low taxes rates and regulations, and providing strong privacy policy protection for entrepreneurs, making it an attractive option for business owners. 

Delaware On the other side, can be a preferred choice due to its established precedent and business friendly laws and regulations. Many large businesses choose to establish in Delaware because of its well-established corporate law structure. 

When deciding between Wyoming and Delaware, consider factors such as your business needs, industry, and long-term goals. Consulting with a legal or business professional can also provide valuable insights.

LLC vs C-Corp

LLC (Limited Liability Company) 

LLCs afford entrepreneurs the benefit of pass-through taxation, where profits and losses are reported on the owners’ individual tax returns. This can lead to potential tax advantages compared to traditional corporate structures. 

Wyoming can be a better option for forming LLC, as it was the first state to introduce LLC, and it also has lower annual fees (i.e 60$) compared to Delaware (i.e 300$). 

C-Corp (C-Corporation)

C-Corporations offer a distinct advantage in terms of scalability and access to capital, making them an attractive option for businesses with ambitious growth plans. 

Delaware can be a better option for forming a c-corp as 70% of the fortune company are registered here. 

The main difference between an LLC and a corporation is that an LLC is owned by one or more individuals, whereas a corporation is owned by its shareholders. No matter which entity you choose, both entities offer benefits to your business. Incorporating a business allows you to establish credibility and professionalism. It also provides limited liability protection.

Here are the steps on how to set up a business entity.

  • First, choose your business entity

Decide what type of business entity you want to form LLC or c-corp. This can affect different aspects like your taxes and legal liability.

  1. Next, pick your state

Choosing which state you want to form your company in can be a crucial part as every state has different laws and fees, so do your research! 

  • Then, find a registered agent

You can appoint someone from your friends or family who are available during office hours or find a registered agent to receive legal and tax documents on behalf of your company. This is where a registered agent comes in.

  • Now, file your formation 4 documents

This is the paperwork that makes your company official. It typically includes things like articles of incorporation.

  • Apply for an EIN 

EIN Number is a unique identifier for your company that you’ll need for tax purposes. Think of it like a social security number for your business.

  • Register for state taxes

Depending on your business type and location, you may need to register for various state taxes, like sales tax and income tax.

  • Get any necessary licenses and permits

Finally, make sure you have any licenses or permits you need to legally operate your business. Don’t skip this step!

Types of US Company Taxation Non-Resident should know

1: Double Taxation (C-Corp)

A C corporation, also known as a C corp, is a type of business entity that is taxed separately from its owners (shareholders). Unlike pass-through entities, such as partnerships and S corporations, a C corporation is subject to what is often referred to as “double taxation.

Corporate Income Tax: The C corporation itself is required to file its own tax return (Form 1120) and pay federal income taxes on its profits at the corporate tax rate. The corporate tax rates can vary, and they may be different from individual tax rates.

Dividends Distribution: If the C corporation distributes dividends to its shareholders, those dividends are considered taxable income for the individual shareholders. The shareholders report the dividends on their personal tax returns and pay taxes at their individual tax rates.

2: Pass-Through Taxation (LLC Companies)

Limited Liability Companies and partnerships (Multi Member LLC) can be taxed as a pass-through entity. By default, an LLC and partnership are treated as a partnership for tax purposes, which means the profits and losses of the business “pass through” the LLC and are reported on the individual tax returns of the members (owners) in proportion to their ownership interests.

In pass-through taxation, the LLC itself does not pay federal income taxes. Instead, the individual members are responsible for reporting their share of the LLC’s profits or losses on their personal tax returns and paying taxes at their individual tax rates. 

This avoids the double taxation that occurs with some other business structures, such as C corporations, where both the corporation and the shareholders are subject to separate taxation.