Selling Goods and Services in the United States

Companies owned by non-US citizens that want to do business in the US must decide whether they plan to have a presence in the country and how to handle the myriad of issues that multicultural business activities can generate.

Companies owned by non-US citizens that want to do business in the US must decide whether they plan to have a presence in the country (for example, sales offices and staff), whether to form a corporation or a limited liability company (LLC) here and how to handle the myriad of issues that multicultural business activities can generate.

There’s no simple answer to every non-US company’s needs when it comes to selling in the U.S. The steps to take depend on a careful assessment of the business plans, legal rules in the US and abroad, financing issues and more.

Business Plans

What type of activity does the company plan to undertake in the US? The answer to this question dictates whether a company should be formed here. In other words, the foreign enterprise’s business plan determines whether US company formation is advisable.

If a company only plans to sells goods, perhaps through the Internet or wholesaling to US companies, it may not be necessary to form a US company. But this answer is not necessarily the final word–some US consumers are more likely to purchase things over the Web from a US company rather than a company oversees, so it may be desirable for marketing purposes to form US company after all.

If the business plans to sell services here, it is inescapable that a U.S. company is needed to run things locally. By being here, the company can be held accountable for its actions.

There are no US or state laws barring non-US citizens from forming businesses in this country. The American marketplace is open to all.

Assuming a non-US business decides to form a company here, the next question to solve is which type of company should be used. Many non-US businesses operating in the US choose to form their business as a limited liability company (LLC). There is no limit on the number of investors who can own interests in the business, and there is no restriction on non-US citizens being members (owners) of the LLC.

Non-US businesses need to understand that company formation in the US is controlled at the state, and not at the federal, level. The LLC can potentially be formed in any one of the 50 states or the District of Columbia. In which state should the LLC be set up? The answer depends on whether the company has an actual presence in the US For instance, if the company has an office in Miami, it may wish to form the LLC in Florida. If the company does not plan any physical presence here (meaning it will operate solely from overseas), then formation of the LLC in Delaware or Nevada, the two most business-friendly states, may be preferable. If a non-US company operates in more than one US state, it may form the LLC in any of these states, but must also register to do business in the other states (a process called foreign qualification).

While LLCs are a very popular choice of business entity today, a number of businesses opt to form regular corporations, which are called C corporations, in the US. A primary reason for this choice is the ease of getting additional investors involved and the possibility of taking the company public in the future (something that cannot be done with an LLC).

In some cases, the laws of the company’s home country may affect the choice of entity, so it is vital to consult with an attorney familiar with both US and international law to make an informed decision regarding which entity is best for your business.

It is important to note that non-US business owners who form a regular corporation cannot elect S corporation status. S corporation status allows shareholders (owners) to report their portion of business income and expenses on their personal income tax returns and avoid corporate level taxation. The US tax rules state that non-US citizens cannot be shareholders of S corporations.

Tax wise, non-US companies that are engaged in business in the US or have a permanent business establishment are subject to US taxes in the same manner as wholly-US companies. If the business is an LLC, this means filing federal and state income tax returns for the LLC as well as for each of the LLC’s members.

Members would need to determine their resident status. If they are nonresidents, they are taxed in the US only on US source income (for example, their share of the LLC’s income). If they are US residents, they are taxed on their worldwide income. Resident status is not limited to those having a Green Card. Resident status also applies to those with a physical presence in the US. For example, for 2006 a person is treated as a resident if he or she is in the US for at least 31 days and at least 183 days during 2004, 2005 and 2006 (counting all the days in 2006, but only 1/3 of the days in 2005 and 1/6 of the days in 2004). Even if this residency test is satisfied, a person can still be treated as a nonresident in certain situations (for details on determining residency and tax obligations, see IRS Publication 519, U.S. Tax Guide for Aliens, at www.irs.gov/pub/irs-pdf/p519.pdf).

Non-US businesses that do not operate in the US (for example, do not have any income from US sources) do not owe any federal income taxes; however, there may be annual state charges or fees for maintaining the LLC or corporation.

Financing

Some non-US businesses may want to become US companies to gain easier access to capital. Banks in the US lend money to small businesses more readily than many of their foreign counterparts. Once a non-US business has been operating in the US for at least two years, this business has the same access to capital through US banks as wholly-US companies.

Other issues

In some cases, non-US businesses that have no intention of doing business in the US may still want to form a US company. Why? Throughout the world, US companies have more credibility than companies from many other countries. This phenomenon has been observed by attorney Dan Harris of Harris & Moure PLLC, an international law firm for small business, located in Seattle, Washington. They have helped businesses from such countries as Russia, China and South Korea set up companies in the US for the sole purpose of doing business overseas with the mantle of US credibility.

For example, say a company in Bulgaria wants to bid on airport contracts in Poland. By forming a US company, its bid may be viewed more favorably than if it had come directly from a Bulgarian company. Or take the software company in India that wants to sell their technology worldwide. Again, forming a US business helps establish creditability. Such strategy is not deceptive to companies that do business with them. By forming a company here, the business can be sued in the US and is subject to the same responsibilities as wholly-U.S. companies.

Alternative: Non-US companies that do not want to form a business here but merely wish to import their products to the US should explore import rules through the US Customs and Border Protection (www.cbp.gov and click on “import”).

Total
0
Shares
Previous Article

Ecommerce Tips

Next Article

Great business community

Related Posts
the rigbt software
Read More

The Right Software is Essential for Your Evolving Business

You started a business with a great idea, but when it comes to scaling it up with speedy and effective execution, you need something more than the average spreadsheet and software that only meet your business’s primitive needs. Often, business owners make the mistake of sticking to outdated software which hinders growth and profitability. Business...
employee experience
Read More

Employee Experience: Culture, Involvement and Career Development

Businesses focusing on customer experience is a given. After all, no business will thrive, or even succeed, without the support of the market it seeks to capture. But ensuring customers remain happy with your products and services is not the be-all and end-all of effective business management. Or at least it should not be. An...
work from anywhere
Read More

Why Working from Anywhere Matters from Dell

Where work or learning physically happens no longer defines the user experience. Fueled by an appetite for digital experiences and capabilities, we’ve clearly entered a “do anything from anywhere” world, creating limitless potential for borderless innovation and flexible collaboration. Now that remote and hybrid experiences—where team members shift between performing remotely and on-site—have become standard,...
scale up
Read More

6 Strategies for Local Startups to Scale Up Nationally

If you’re thinking about launching a business or have started one recently, there’s no need to restrict your goals to the local area. Here are six ways to compete on a national level. 1. Create products that address common pain points. One way to increase your chances of becoming nationally relevant is to ensure your...