Business Law

Doing Business in The United States as a Foreigner

Doing business in the United States is a dream for many foreign entrepreneurs.  With corporate income tax rates in the country currently being one of the lowest in the world, now is the time to take the first step. Businesses looking to break through to The United States market can take advantage of the stable economy and the 21% income tax rate it offers. 

Starting a business in America comes with its share of challenges. With corporate law and The United States tax structure changing from state to state, entrepreneurs must be aware of what it takes to launch a business and expand. The attorneys at Frost Law can give you the guidance you need for doing business in The United States 

Here are some points to be aware of. 

Types of Business Entities

One of the major decisions a business will have to make is the type of entity it would like to be. Here are some options.

Corporations

Corporations are the most common type of business entity for foreign businesses. To qualify, you must be considered a foreign national or natural person. Foreign companies are not eligible. 

The most common type of corporation is a C-corporation. C-corporation owners must pay U.S corporate tax that is taxed at a corporate income tax rate separate from the company’s owners. That means owners must pay taxes at both the corporate level and owner level. 

This double taxation does not apply if you form your business as an S Corporation. S corporations are not subject to corporate income tax.  

The United States LLC

The United States LLC or Limited Liability Company is run by ‘members’. It can be taxed as a corporation or income can be passed through to members who will then pay tax on it. 

Partnerships

Partnerships are made between two or more individuals or entities who agree to do business together. It is recommended that the parties enter a written agreement. Foreign companies, as well as foreign and natural persons, may form a partnership. 

Branch Office

A foreign company can set up a branch office in The United States instead of opening their own company. However, because the office represents an entire organization operating in The United States, it is liable for The United States taxes on all business regardless of where it is conducted. Therefore, it is not recommended unless an attorney advises it. 

How are the Activities of Non-Tax Resident Vehicles Taxed?

If you choose not to incorporate your business, you will be taxed on The United States effectively connected income. This is the company’s net income effectively connected with the business it does in The United States 

A non-resident company that has a residence in a country that has double tax treaty benefits with The United States is typically subject to be taxed on any profits made through business conducted in The United States

A non-resident company’s The United States source income generated from passive activities like dividends and interest will be subject to The United States withholding tax if the income is not effectively connected with The United States trade or business. They will also be subject to the tax if a treaty applies, and the income is not due to its U.S business, and withholding tax is not eliminated under the treaty. 

Do I Need an Attorney for Doing Business in The United States?

If you are a foreign company or person looking to open a business or a branch of a business in the United States, it is advisable to have a reliable attorney on your side. An attorney will advise you on the best entity to choose and they will educate you on the United States tax structure to make sure you stay on the right side of the law. 

Frost Law has years of experience dealing with a variety of legal issues including tax controversy, business litigation, and more. We help foreign companies and individuals doing business in The United States set up their business in an aboveboard manner. Call the business attorneys at Frost Law to make sure your company is set up properly and headed on a trajectory for success.

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