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How to Do Business in the United States: the Beginner’s Complete Guide

For decades, the United States has been one of the best places to start and maintain a business in the world.

According to SelectUSA, the United States registers more patents than any other country and is recognized as a leader in research and development.

 

From the incredible economy to the quality of life, why wouldn’t the U.S. be on your list of go-to countries for business growth?

 

However, it’s one thing to dream of doing business and another to…well, do it.

 

In this guide, you’ll learn everything you need to start discovering how to do business in the United States from choosing a state to register in to getting a tax ID. Let’s dive in!

The Benefits of Doing Business in the United States: 5 Reasons Why You Should

Perhaps you’ve heard about a few perks of doing business in the U.S., but are wondering what those benefits are and what they entail.

 

While there are benefits and risks to every decision you make as a business owner, below are five reasons why doing business in the United States is one worth making.

Reason #1: The U.S. is Home to the World’s Largest Market

With a GDP of $20 trillion and a population of 325 million people, the United States is home to the largest consumer market in the world, per SelectUSA.

 

Additionally, people in the U.S. have the highest household spending rate on the entire planet, and America’s household spending makes up more than one-fourth of the world’s global household consumption.

 

Finally, the U.S. also holds free trade agreements with 20 other countries.

 

What does this mean for you as a business?

 

The answer is simple: doing business in the United States gives you instant access to millions of consumers and allows you to market to people with a world-record high budget.

 

Reason #2: The Federal, State, and Local Governments Offer a Variety of Incentives to Businesses

Depending on where you choose to establish your business (and what kind of industry you’re in), you might qualify for several incentives offered by the federal, state, and local governments.

 

According to USA Corporate Services Inc., many states (and even some cities) offer financial incentives (many of which come in the form of tax credits) to foreign investors if they agree to establish their business in a certain location.

 

As far as federal government incentives go, as a foreign business investor you automatically get lower commercial real estate taxes as well as business assistance that becomes available whenever you decide to open yours.

Reason #3: It’s Easy to Do Business in the United States

The U.S. was ranked sixth for “ease of doing business” by the World Bank in 2019 (with South Korea being number five).

 

And the country’s stable political environment is a big contributor to that high position.

 

When looking for a beneficial country to invest in, political stability takes a major priority in the decision-making process. The United States is a democratic republic, and its consistency and stability have made it a safe, secure place for businesses and investors to expand.

 

Reason #4: Access to Hardworking and Ethical Employees

A few centuries ago, the concept of “the American Dream” was born, and its effects are still very much alive today.

 

Although the U.S. is a highly individualistic culture, it’s home to some of the world’s most dedicated, hardworking employees. American culture is one that rewards and encourages an excellent work ethic, taking initiative, being independent, and professionalism.

 

Overall, the U.S. is a great place to outsource if your business values outstanding performance and individual accountability.

Reason #5: Equality and Diversity

The United States values racial, age, orientation, and gender equality despite being one of the world’s biggest melting pots.

 

When doing business in the U.S., not only are you stepping into a work culture centered around excellence and high performance, but also into a culture where diversity is appreciated and equality is valued.

 

Communicaid reports that, when starting to do business in the U.S., owners might be surprised by the seemingly informal working environment. Contrary to many other cultures, this informality is not due to a lack of respect, but rather due to an emphasis on equality regardless of age, religion, gender or ethnicity.

Where to Establish Your Business in the United States

The U.S. is a big country. There are 50 states, each of which have very different laws, and many include personal and federal income tax laws, sales tax laws, and more.

 

Due to these varying state regulations, some places can be more beneficial to run a business than others. Let’s take a look at some of the most popular, best places to do business in the United States.

 

Seattle, Washington

Home to world-renowned companies Microsoft and Amazon, Seattle has a big, diverse, vibrant population. And according to CNBC, it’s expected to keep growing over the next 20 years. It also boasts tourist destinations, lively entertainment, the perfect shopping locations, and enormous tech industry.

 

Over the years, Seattle has become a hotspot for business start-ups. However, because of the excellent entertainment, high quality of life, and growing population, Seattle is on the more expensive side of the spectrum. So if you have a small budget, this might not be the place for your business.

Atlanta, Georgia

Everything about Atlanta is attracting business start-ups and people looking for the perfect place to call home—outstanding school districts, a population of over 5.3 million, and home to approximately 150,000 businesses.

 

Additionally, Atlanta offers business owners the perfect community to receive support, encouragement, and motivation while starting or running their business through a community nonprofit called “Startup Atlanta.” According to CNBC, the group’s goal is to grow the startup ecosystem locally and help startup entrepreneurs connect.

 

El Paso, Texas

If you aren’t interested in expensive cities and high taxes, El Paso might be the city for you. With taxes, labor, office rents, and more being some of the cheapest in the country, El Paso is ideal for businesses on a budget.

 

It’s the western-most city in Texas and is located on the U.S./Mexican border. Additionally, it’s home to one of the largest metropolitan areas in the South. If you can speak Spanish (or have an employee who can), your language skills will be a serious benefit while making yourself at home in El Paso, as approximately 80% of the population is Hispanic.

Oklahoma City, Oklahoma

Another great place to go while on a budget is Oklahoma City. The city is ranked in the top five places in the USA for its low cost of doing business, which is about 5% lower than the national average. This is due to the state’s low energy costs and low state and local taxes.

 

Not only is Oklahoma City a low cost for doing business, but it’s also a low cost for living (which is a little over 15% lower than the national average). Additionally, it’s ranked among the top 10 cities in the U.S. for the best places to start a career.

 

Plus, the city’s incentives to businesses are among the best in the country, especially for businesses who have 90 employees or less.

Salt Lake City, Utah

If you’re in the technology industry, Salt Lake City might be particularly attractive to you. In recent years, the city has become an ever-growing hub for entrepreneurs and businesses specializing in tech. It’s also home to Brigham University, the University of Utah, and Utah State University, making it an ideal place for recruiting educated employees.

 

Plus, low taxes and affordable real estate make for the perfect budget-friendly place for all businesses alike.

How to Do Business in the United States in 3 Simple Steps

Now that you know a few solid reasons for doing business in the U.S. as well as five of the best places to start, let’s take a look at the process of taking your business across U.S. borders.

Step 1: Choose Which Type of Business You Are

There are four main types of businesses in the United States…

 

  1. Sole proprietorship
  2. S-Corporation
  3. C-Corporation
  4. Limited Liability Company (LLC)

 

However, not each one is ideal for doing business as a non-U.S. resident. First, we’ll discuss what each of these business types is and mean. Second, we’ll learn which business type is most recommended for you as a foreign business.

Sole proprietorship

Not many foreign businesses are sole proprietorships, and it’s for good reason. However, you may be tempted to declare your business as this type because it’s the simplest of all four (because it does not require any formal filings).

 

As a sole proprietor, you participate in business activities but aren’t registered as a specific business type. As a result, you are personally liable for all business matters. This means if your business goes into debt, you personally also go into debt. In the words of business lawyer Sam Mollaei, “your business assets and liabilities are not separate from your assets and liabilities.”

S-Corporation

Because non-U.S. residents aren’t allowed to register their business as an S-Corporation, we won’t spend too much time on it. However, it’s important to know what it is. Available to only U.S. residents, this corporation is not subject to double taxation and only files taxes once a year.

 

According to Incorporate, an S-Corporation “offers investment opportunities, perpetual existence, and that coveted protection of limited liability.”

S-Corporation

Because non-U.S. residents aren’t allowed to register their business as an S-Corporation, we won’t spend too much time on it. However, it’s important to know what it is. Available to only U.S. residents, this corporation is not subject to double taxation and only files taxes once a year.

 

According to Incorporate, an S-Corporation “offers investment opportunities, perpetual existence, and that coveted protection of limited liability.”

C-Corporation

If you’re looking for investors in your company and wish to issue shares, registering your business as a C-Corporation is ideal. This is because people who choose to invest in your business can hold shares without having to worry about taxes (until they choose to sell them).

 

However, unlike an S-Corporation, C-Corporations (also just called “corporations”) are subject to double taxation. What this means is that not only does the corporation have to pay taxes when it makes money, but shareholders are also taxed when the corporation issues dividends.

Limited Liability Company (LLC)

Limited Liability Company (LLC)

The LLC route is the one taken by most non-U.S. citizen business owners and it’s easy to see why: it separates your assets from your business’s liabilities, debts, and lawsuits. In other words, by registering your business as an LLC, you won’t be held personally responsible for any financial trouble your business gets into.

 

Not only do they offer personal protection, but LLCs are also cheaper and simpler than most business types in terms of taxes due to its “pass-through taxation.” This kind of taxation means the money made from your business doesn’t have to be filed as a separate tax form by an accountant and instead simply “passes through” to your income tax.

So, which business type is best for you?

The first choice as a non-U.S. citizen is typically an LLC (Limited Liability Company) thanks to the protection it provides to your assets and cheaper taxations. However, if you’re a larger company with investors who hold company shares, the best option is a C-Corporation.

Step 2: Register Your Business

Hopefully, you have an idea of where you want your business to be located. Before you do anything else—such as apply for an Employer Identification Number (EIN)—you must register your business somewhere in the U.S.

 

The tricky part about this step is that, in some ways, the requirements and forms for registering a business vary from state to state.

 

However, an example many people use is the state of Delaware, because its forms and requirements are a pretty accurate model even for most other states. Here’s the simple, straightforward process for registering a business in Delaware provided to us by Investopedia:

 

  • Step 1: Choose a company name
  • Step 2: Select a registered agent who will receive legal documents for the company (in some states, such as Delaware, if a company has a physical address it can serve as its own agent)
  • Step 3: Fill out the certificate of incorporation (only 1 page)
  • Step 4: File a report and pay franchise tax once per year (filing a report costs $50 and the franchise tax starts at $175)

Step 3: Get an Employer Identification Number

According to Investopedia, an Employer Identification Number (EIN) is defined as “ a unique identification number that is assigned to a business entity so that it can easily be identified by the Internal Revenue Service (IRS).”

 

Having an EIN is a crucial first step to starting your business because, not only will you need it to pay employees, but also for tax purposes. As a result, it’s also known as a Tax Identification Number (TIN), and it gives your business an identity in terms of taxes.

 

U.S. residents have Social Security Numbers (SSN) which give each resident an individual identity and can act as a person’s Tax Identification Number. But as a non-U.S. resident and a business, you need an EIN to do any legal business in the United States.

 

But before obtaining an EIN, you must decide which type of business you are and where your business will register, as the EIN provides the IRS (Internal Revenue Service) with information about which state your business is registered in.

How to Get an Employer Identification Number (EIN)

To get an EIN, you must fill out an application (which you can find here on the IRS website) and is free of cost. The form can be submitted electronically and once validated, you will be assigned an EIN immediately. You can also apply for an EIN by phone, fax, or mail.

 

However, it’s important to note that before you’re eligible to receive an EIN, your business must already have a U.S. location and have a valid taxpayer identification number.

 

Finally, all four types of businesses (sole proprietorship, S-Corporation, C-Corporation, Limited Liability Company) can apply for an EIN.

Doing Business in the United States is Beneficial, Stable, and Straightforward

If you’re considering doing business in the United States, the bottom line is: you should.

 

The countless benefits (from local and state tax, business assistance, and educated employees) combined with the straightforward processes of registering and obtaining an EIN are just a few reasons why establishing a U.S. company is a better idea than you might think.

 

Of course, this is just getting to first base when it comes to running a full-time, profitable business in America. Each state has unique tax laws, processes, and more that you’ll need to study once you’ve decided on a specific location.

 

But these are things you’ll learn as you commit yourself more to doing business in the U.S. and some of which can be learned along the way.

 

So what are you waiting for? Take the next biggest steps of your career and start doing business in the United States.

Brooke

Brooke Bagley

Brooke Bagley is a freelance B2B copywriter and content marketer addicted to helping businesses, marketers, and entrepreneurs build their empire through the power of strategic content. With a passion for writing and an entrepreneur at heart, Brooke uses her knowledge of SEO to bring websites organic traffic from search engines with the content she writes. She’s also the Founder and Lead Writer of Writing & Thriving, where she blogs about digital marketing and offers her freelance copywriting services.

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