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Starting a business in the US is no easy feat, especially if you’re an immigrant. From overcoming language barriers to obtaining the right to legally open and operate a business on American soil, immigrant entrepreneurs certainly face their share of hardship.
Despite these obstacles, immigrants still do very well in the US as business owners. According to a report by Fiscal Policy, immigrant small business owners accounted for 30% of overall small business owner growth in America between 1990 and 2010.
Given the fact that immigrant business owners seem to thrive in the US, just how difficult is it for one to start and fund a business in America today?
Although the US is notorious for its strict immigration policies, legally obtaining passage into the country and starting a new life as an entrepreneur is not impossible.
To help you figure out what you need to start a business in America as an immigrant, we’ve covered all the steps for you below.
Table of Contents:
The first step to starting your business as a foreign business owner is to choose a company structure. For immigrants, your choice boils down to two different models: a C Corporation or a Limited Liability Company (LLC).
Both of these business structures are advantageous to foreign business owners because they can be run outside of the US and do not require residency or citizenship at any point.
C Corporations are ideal for foreign business owners because of their tax and legal benefits. The major advantages include:
One disadvantage of a C Corporation is double taxation. As a shareholder, you must first pay a corporate level tax for owning a company that turns a profit. You must then pay income tax on your dividend earnings. There are ways to reduce or avoid double taxation, but you should consult a tax advisor to do so.
LLCs are a hybrid company structure, meaning they combine elements of both limited partnerships and corporations. Under an LLC, members of the company are not held personally liable for the company’s debts or liabilities, a key feature of corporations.
Advantages unique to an LLC include:
If you do plan to run a US-based business in your home country, then you should check your native country’s tax laws to see which model would be most advantageous to you.
Once you’ve figured out the type of business structure you want, you need to find the best place to locate your business. States like Delaware, Nevada, Montana, South Dakota, Wyoming, and New York are famously known for their accessible and lenient policies towards foreign business owners, making them popular states for immigrant-owned businesses. However, if a specific state dominates your market, then you should consider locating there.
So, what should you look for in a location? Here are some considerations to keep in mind:
Again, if you do not require a specific location to establish your business, it’s in your best interest to register your business in states like Delaware of Nevada, both of which are considered tax shelters for national- and immigrant-owned businesses alike.
Once you’ve found an ideal state for your business, you need to register it. Here are the steps you need to follow:
If you do not use your own name for your business, then you must register it as a trade name, or a “doing business as” (DBA) name, with your state. When it comes to naming your business, the only thing to be aware of is trademark infringement. Do your research to see what’s available so you do not incur a lawsuit.
Each business requires a taxpayer number. As an immigrant, you must obtain an ITIN to satisfy this requirement. ITINs are issued by the I.R.S. to anyone that must pay US taxes but does not have a Social Security number. To apply for one, you need to fill out a W-7 form.
Once you’ve obtained your ITIN number, you can also apply for your EIN. An EIN is necessary to identify your business for tax purposes. You need an EIN to open a bank account, file tax returns, and apply for business licenses. To obtain your EIN, you can simply apply online.
When you register your business as a legal entity, you’ll need to file documents known as “articles of incorporation” with your state. To do this, you need to select a state registered agent to handle all legal documents for your company.
If your company has a physical US address, it can substitute as the agent; otherwise, you need to elect someone registered in your state of choice to act on your behalf. There are services to find registered agents, but they are state-specific. If you do not have any connections in your desired location willing to act as your agent, then you should search for online services in your area.
Securing funding for your business can be tricky as a foreign business owner. You may not be able to secure funding at all if you cannot legally work within the US. If you are here on a working visa or are a Green Card holder, though, there are many options available.
Some of the most common loans for immigrants are Small Business Administration (SBA) loans. The SBA is a government agency that supports small businesses by providing them with the resources, connections, and assistance they need.
So, who can apply for funding? You qualify if you are a(n):
SBA loan eligibility is complicated, so you may want to refer to the SBA’s eligibility requirements (start on page 110).
Term business loans are lump sums of cash given to you by a lender. When you take out the loan, you agree to pay back the loan over a predetermined period of time. Unfortunately, approval for term loans is more difficult for immigrants for various reasons.
To improve your chances of securing a term loan, it’s better to apply through a funding specialist from an online marketplace rather than at a brick-and-mortar bank.
Short-term loans are just like term loans, only they come with a much shorter payment period, usually around 18 months or less. The appeal behind a short-term loan is the credit threshold: You do not always need to have a strong credit score to get approved, so the likelihood of getting approved for a short-term loan is greater.
To clarify, you do not need to be a US citizen or even a Green Card holder to start a business in the US. In fact, the only reason you need to obtain a visa is if you plan on working in the US at some point in the future.
If working and living in the US is your goal, then there are many types of visas to choose from. The key is determining which visa best suits your needs. For the business-minded immigrant, we’ve listed several of the most common (and expedient) options below, and also included the standard requirements for each.
By far the most difficult visa to obtain, the EB-1 visa is reserved for individuals that exhibit “extraordinary ability” in their field. The EB-1 is so desirable because, unlike the other visas on this list, it grants you the ability to live and work indefinitely in the US as a permanent resident.
The US Citizenship and Immigration Services (USCIS) uses a point system to determine if an applicant measures up to their standards of extraordinary ability. To be accepted, applicants need to satisfy at least three of the following criteria:
With an EB-1 visa, you may:
Basic requirements and/or documentation include:
The E-2 “Investor Visa” is available to immigrant investors that wish to live and work within the US To be considered, you must place a substantial investment into a bona fide enterprise, startup, or business that you intend to work for. Essentially, this means you plan to either purchase or establish your own business within the US The E2 visa lasts anywhere from three to five years and can only be granted to individuals that come from countries that fall under the Treaty of Trade and Commerce.
With an E2 visa, you may:
The E-1 Treaty Trader visa allows nationals of a treaty country (reference the Treaty of Trade and Commerce above) to work in the US for the purpose of engaging in international trade. According to USCIS, items of trade include (but are not limited to) the following:
However, you can’t just work in one of these fields and expect to qualify for the E-1 visa. You first need to share the same nationality as that of your company, and at least 50% of your company’s trade must be with the US.
With an E-1 visa, you may:
While this is not at all an exhaustive list of the types of entrepreneurial visas you can apply for to start a business in the US, it does give you an idea of what the process is like to live and work in the US as an immigrant business owner.
National Immigration Forum
Immigrant Legal Resource Center
State Legal Resources for Immigrant Children and Families
The Immigrant Visa Process
Rights and Responsibilities of a Green Card Holder
Path to US Citizenship
Sources: FiscalPolicy | Travel.State.Gov 1, 2 | USCIS 1, 2, 3 | SBA 1, 2, 3 | IRS 1, 2 | Corp.Delaware.gov | DHS