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How to Incorporate in the US from Abroad - Bite-Sized Legal #8

How to Incorporate in the US from Abroad - Bite-Sized Legal #8
By Bite-Sized Legal • Issue #8 • View online
Hello,
In the last issue of the newsletter, I explained the basics of incorporating in the US as a non-US citizen or resident. I have done it myself and I can confirm that founding a US company brings benefits for entrepreneurs or freelancers who are not coming from a first-world country.
In this issue, I am going to explain how to do it yourself.
There are two ways:
  • Incorporating on your own, or
  • Incorporating through an agency.
Both options require hiring a registered agent, which is not expensive at all.
For both options, here is what you need to do in order to have an up and running US company:
  • Choose the name of the company. Self-explanatory. You need the name of the company that does not breach any other person’s IP and is not in use yet.
  • Choose in which state to incorporate. Delaware is best for C-Corps. Wyoming and New Mexico work better for single-member LLCs.
  • Prepare the files of incorporation. These are the documents that lay down how your business will be run. it is particularly important for companies with more than one founder since these document will govern the relationship between cofounders in the business.
  • Hire a registered agent. You have to have one in the state where you incorporate. The registered agent will file the files of incorporation and will receive any communication with state and federal bodies. They usually cost around $100-150 per year.
  • The registered agent submits the files of incorporation. You just sit back and wait for the company formation to be confirmed. When that happens (usually in a few days)…
  • Obtain an EIN number. The EIN number is the US version of Tax ID or Tax Number in most other countries. Your business needs this number to be recognized by the state and to open a bank account. You can do it yourself by submitting the documents to the IRS (Internal Revenue Service) or have your agent do it for you for a fee. You may need to wait for it for around 3 months (yes, that long). More on that later.
  • Handle the post-incorporation documentation, if needed. It is needed only for C-Corps and is mostly related to issuing stocks. Single-member LLCs do not have to do anything at this stage.
  • Open a bank account. Mercury is your only option to open a US business bank account remotely. It is an easy process. You cannot do it without the EIN number. Although rarely, some Mercury may refuse some applicants. Aside from a US bank account, you may open bank accounts for your business in other countries, such as your own country or some other place. Remember that local banking rules apply to any place.
  • Run your business. You have a US business with a US bank account. You are good to go now.
Now you know the steps. Let’s see how you can walk the walk on your own or through an agency.
Choose a name.
  • On your own. Google [state] company name lookup and you’ll get the website where you can check whether your desired name is free to use.
  • Through an agency. The name lookup is usually included in the price.
Choose a state of incorporation. Explained above.
Prepare files for incorporation.
  • On your own. Ideally, you’ll have a lawyer do this for you. You can also find templates for free on the internet and adjust it to your business.
  • Through an agency. Usually included in the price for incorporation, either in the basic price or as an additional service.
Hire a registered agent.
  • On your own. As explained above, a quick Google search will read you to thousands of registered agent in your desired state. Just make sure that the agent is located in that state.
  • Through an agency. The filing and the first year of registered agent services are included in the pricing.
Submitting the files of incorporation and paying the state incorporation fees.
  • On your own. Pay the registered agent the fee along with the state incorporation fee. The state incorporation fee is usually low. In New Mexico costs only $50. Fees vary greatly through states.
  • Through an agency. Included in the pricing. They will do it for you.
Obtain an EIN number.
  • On your own. You need to reach out to the IRS and submit the forms for obtaining an EIN number. You can apply online. More details on the IRS website here.
  • Through an agency. You have to be careful here. Some agencies help in obtaining an EIN number, while others do not. When hiring their services, make sure that the service includes that as well. If not, they will form the company for you and will leave you to obtain it yourself.
Post-incorporation documents
  • On your own. Just like with the incorporation documents, you need a lawyer to draft them for you or maybe use templates you can find on the internet and adjust them to your business.
  • Through an agency. If they provide this service, they usually fill-in templates. However, this is a safer option compared to doing it yourself.
Open a bank account
  • On your own. Reach out to Mercury or another bank and start the process. Accepting your application is not guaranteed. The applicants they usually refuse, though, some from countries that may have some political issues with the US and therefore may have a low reputation in the financial institutions there.
  • Through an agency. They will introduce you to the bank. It doesn’t guarantee that your application will be approved, though.

Then What?
Every year you need to submit a form to the state confirming that your business is still up and running. The fee is low and varies from state to state.
You also need to pay taxes, if you owe any.
If you are a single-member LLC founder and your company is a disregarded entity, you don’t need to pay taxes, but you still have to submit forms 1120 and 5472 to the IRS.
That’s the minimum for compliance. Anything else depends on your business.
If you are just a freelancer or a solo indie maker, this is enough in most cases.
Which Way to Go?
Starting a company on your own costs registered agent fee + state fee + your time.
Starting a company through agency costs a registered agent fee + state fee + agency fee.
I chose to incorporate through an agency called Firstbase.io. It cost me $400 to incorporate in Wyoming, with one year of registered agent fees included and some mail forwarding included.
If I did it all by myself, it would have cost me:
  • $50 state fee
  • $100 registered agent fee
  • My time.
I think that the agency fee was well worth it, particularly having in mind that the EIN number was included in the price.
Here are some agencies to consider (but pay attention to bank accounts and EIN numbers):
That’s about it.
Do you want to incorporate it in the US? Do you have any questions about it?
Let me know and I will answer all your questions.
Cheers,
Petar
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