Forming a company in the U.S. is relatively simple, inexpensive and fast in comparison to many other countries around the world, even if you are not a U.S. citizen or do not live in the United States. For most types of businesses, there are no minimum capital requirements except in certain industries; there are only a few restrictions on foreign ownership or participation in business; and forming a company can be done in one day if need be. (State requirements differ so consult your attorney for details).
Also, you also do not need to physically be in the U.S. to have a U.S. company. You can create your company in any state you choose. If you plan to have an office in the U.S. eventually, it may be most cost-effective to form your company in the state where your office will be located.
For those who do not live in the United States and have no compelling reason to form in any given state, Delaware or Nevada are popular choices because of their business-friendly environment and easy compliance requirements. Also, companies that plan on doing business in many states often choose Delaware or Nevada as the state of formation for the same reasons.
The basic steps required to form a company are similar from state to state. As Delaware is one of the most popular states to form a company, it will serve as a useful example. The steps in Delaware are as follows:
1) Choose the company structure (e.g. LLC or Corporation). Delaware’s Secretary of State has a comparison chart of its various business entities on its website. This is one of the most critical steps in setting up a business in the U.S. Which entity you choose is very specific to your needs. Each business form has its pros and cons. This decision should be made only after consulting with an accountant, a lawyer and any other professional that may have information and advice relevant to your new business.
2) Choose your name: Be sure to select an original name to avoid claims by another business of using its name. You can reserve your name in advance of filing your company formation documents.
3) Obtain a registered agent: Having a registered agent is required by law (some states refer to a registered agent as a “resident agent” but they function in the same role). The purpose of the registered agent is to receive documents and tax notices from the state and service of process for any legal proceedings against your company. A registered agent can be an individual or a company that meets your state’s requirements. In Delaware, a registered agent must have a street address in the state (not a P.O. box) and be open during normal business hours to receive service of process. If your company is physically located in Delaware, then you may act as your company’s own registered agent. If your company will not be doing business in Delaware you can appoint a registered agent. Professional companies offer this service in every state at reasonable rates.
4) File the formation document(s) for your desired entity type (e.g. for a corporation the Certificate of Incorporation).
5) During this time you will also need to apply for an Employer Identification Number (EIN) with the IRS for your company. You can obtain this number within minutes by applying online. This number is necessary for certain business activities, such as filing taxes and opening a bank account.
6) States may have other steps to complete before doing business, such as applying for licenses or registering with certain local and state agencies. In addition, IRS and state taxation offices have certain other requirements to fulfill upon creating a business. For corporations, as an example, the owner must decide whether it should be a C corporation or S corporation. Each carries different federal tax implications. Consult with your attorney and accountant to be sure you have followed all proper procedures before opening your doors.
For Delaware, the formation costs include:
– $89 for filing the Certificate of Incorporation
– $30 for a certified copy of the Certificate of Incorporation.
– Registered agents can be found for $50 a year in Delaware. Rates in other states will differ. The Secretary of State of Delaware maintains a list of Delaware registered agents on its website.
– Other costs include required licenses and attorney, accountant and other professional fees. These fees will vary from locale to locale.
See also our related article Comparison of Business Forms.