Setting up a Limited Liability Company (LLC) in the United States offers numerous benefits for both American and foreign entrepreneurs. Contrary to popular belief, you don’t need to reside in the US to open a US LLC. However, understanding the nuances of the process and the newly implemented requirements is crucial for non-residents.
What is an LLC?
An LLC is a business structure that combines the limited liability protection of a corporation with the operational flexibility of a partnership. This hybrid structure protects your personal assets in the event of legal disputes or bankruptcy while offering tax efficiencies due to its flow-through nature.
For foreign entrepreneurs, a US-based LLC can serve as a gateway to the American market, providing credibility and access to a vast consumer base.
However, if your primary goal is to seek funding from venture capitalists or angel investors, forming a C Corporation might be a better option due to its favorable structure for equity financing. (We can help you determine the best approach for your business structure.)
Where to register your US LLC as a non-resident
You have the freedom to choose any state in the US for registering your LLC. We typically recommend Wyoming for non-residents due to its low taxes, minimal maintenance fees, and strong corporate laws. Nevada is another popular choice for those prioritizing privacy.
However, if you have strong ties to a specific state—such as an office, warehouse, or other business operations—the advantages of incorporating in a different state may diminish. In such cases, it might be better to register the LLC in the state where you have significant business activities.
How to open a US LLC
The specific requirements for forming an LLC vary by state, but the general steps include:
1. Articles of Organization
The Articles of Organization must be filed with the relevant state entity to officially form your LLC. This document typically includes the business name, a US business address, a broad description of the business purpose, and the names and addresses of the LLC members (required in some states).
2. Operating Agreement
Although not mandatory in all states, we highly recommend having an LLC operating agreement. This legal document outlines the rights and responsibilities of LLC members and details the organization’s operational procedures. Therefore, it can prevent internal disputes by clearly defining roles and expectations.
Banks often require an operating agreement to open a business bank account.
3. Employer Identification Number (EIN)
You must have an EIN, or Tax ID, to open your US LLC. To obtain an EIN, you’ll need a unique business name, a US business address, and a brief description of your principal business activity.
We advise to have alternative business names ready, in case your preferred name is unavailable.
The EIN application also requires the name, address, and Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN) of the responsible party (the owner).
4. Registered Agent
A registered agent is a third party that is responsible for receiving legal documents on behalf of the company. The agent is located in the same state where the LLC is registered.
If you’re incorporating in a state where you do not reside, you must appoint a registered agent. Some entrepreneurs choose to hire professional registered agent services to fulfill this requirement.
5. Licenses, permits, and other requirements
Depending on your business activities and the state of incorporation, you may need specific licenses and permits.
For example, New York requires LLCs to publish a notice of formation in local newspapers. Additionally, maintaining your LLC in good standing often involves filing an annual report and renewing the registered agent service.
6. US business address
As of 2024, a US business address is now a mandatory requirement for all LLCs, including those owned by non-residents.
This address can be a physical office, a virtual office, or the address of your registered agent. It is essential for receiving official correspondence and maintaining compliance with state laws.
Open a US bank account
Opening a US bank account is not a legal requirement. But we highly recommend doing that for managing your LLC’s finances separately from your personal funds. This separation helps preserve the limited liability protection offered by the LLC structure.
However, opening a US bank account as a non-resident can be challenging. Some banks require you to visit the US in person, and approval is at the discretion of the bank. Additionally, certain nationalities may face restrictions due to US banking regulations.
Our team of incorporation specialists can help with opening a bank account remotely. But keep in mind that the final decision is with the bank, so we cannot give a guarantee.
Navigating the challenges of US LLC formation
As a non-resident, it can be complex to open a US LLC, especially when dealing with various state and federal requirements. From obtaining an EIN and filing the Articles of Organization to opening a bank account and appointing a registered agent, the process involves multiple steps that can be time-consuming and confusing.
Fortunately, professional services are available to assist you. At Entity Inc, we specialize in helping non-residents navigate the intricacies of US LLC formation.
Our services include everything from filing the necessary paperwork to setting up a registered agent and assisting with bank account openings. We ensure that your LLC is set up correctly, allowing you to focus on growing your business.
In addition, we have strong expertise in US tax compliance and help with LLC tax filings and other reporting obligations of your new company.
Talk to our Incorporations Specialists to get started with your US LLC formation journey!
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