How to open your business in the USA: a step-by-step guide
The World Bank’s 2017 Doing Business rankings rank the United States as the 8th easiest to do business in the world. That is why businessmen from all over the world are trying to open their own businesses in the States.
The founder of Russian America, Yuri Mosha, in this column gives a step-by-step guide to starting a small business, with which you can properly formalize everything legally and start your business in a matter of weeks.
What is a small business in the USA?
The US Small Business Act defines it as an enterprise:
Which employs no more than 500 people;
Whose assets do not exceed $ 5 million;
The annual profit of which does not exceed $ 2 million.
The US government encourages citizens to start their own business and provide a completely loyal environment for doing business. There are rumors on the net about inadequate taxes or excessive additional payments, but this is all nonsense. The real level of taxes is only slightly higher than the Russian ones. At the same time, the entire tax system is absolutely transparent and understandable for a businessman.
For non-residents, the conditions for starting a business are absolutely the same as for citizens.
Step 1. Choosing a business organization
In the United States, there are 4 main forms of legal business organization. Each of them has its pros and cons, so before registering, you need to decide what is right for you.
Sole proprietorship. This type of business is the easiest in terms of legal formalities. You will have to fill out a lot fewer different pieces of paper than in other types.
SP is ideal for the service industry. It is most often chosen by lawyers, accountants, private doctors, hairdressers, manicurists, and other specialties of the service sector.
But there is also a serious disadvantage here – unlimited financial responsibility. This means that fines and court compensation can also affect the personal property of the entrepreneur. And banks are very reluctant to give loans to individual entrepreneurs for business development.
Partnership – collective business management. It is divided into 2 main subtypes: general and limited liability. The general partnership strongly resembles SP – all its participants are fully financially responsible. And in a limited liability partnership, participants risk only their own contribution to the enterprise – fines and other payments do not apply to personal property.
The partnership is ideal for teams of peers – lawyers, auditors, SEOs, programmers, and more.
Corporation (Corporation) – a universal type of business that is suitable for almost any business. But it is the most bureaucratic – there is just a huge amount of official papers that need to be filled out and kept, so it is impossible to figure it out without an experienced consultant.
At the same time, American investors prefer to invest in corporations. Because they make it easier to track the use of funds.
A limited liability company is the most common type of small business. It brings together most of the strengths of a corporation and partnership. There is less paperwork than a corporation.
We recommend that entrepreneurs starting a small business in the United States choose this type of legal organization.
Of the minuses, there are only different conditions for doing business in different states, so you just need to study the legislation of the state in which the company is registered.
Step 2. Checking the name
US law is very tough on plagiarism. Including the names of companies. Therefore, before registering, be sure to check if your state has a trademark with the same name.
This can be done in 5 minutes and is completely free. On the state’s website, find the “Business name availability” or similar section. Then you just need to submit a request for verification, which will be processed within 3 days.
For example, you can check the availability of a name for the state of California.
Step 3. Submitting an application for starting a business
You can register a company online; you do not need a personal presence for this. In the questionnaire, you must indicate the name of the company, information about the founders, and the legal address of the company.
Please note that you only need to indicate the address in the state in which you open a business. If you have not had time to rent or purchase an office or plan to do so later, there is an easier option – rent a post office box. It is to her that official notifications will come.
The cost of a cell is about $ 100 per year. The service is available on many sites, so finding a cell is not difficult. For the very procedure of registration on the website of the Secretary of State, you need to pay a fee. In different states, its sizes differ: from $ 80 to $ 130.
Registration of a company in the standard mode takes 25 working days. But many sites have an urgent registration service for an additional fee. In this case, the process will take from 1 to 10 days if all documents are completed correctly.
Step 4. Registration with the tax office
To be able to pay taxes and do business legally, you need to register a tax identification number. This is where a little disappointment awaits you. If US citizens can fill out an online form, then the non-resident is required to send the printed documents by mail. They are considered much longer than online applications, so the case can be delayed.
But there is a little trick. You can use the services of an intermediary in the United States. Authorized representatives are allowed to submit online applications, so waiting times can be shortened.
Step 5. Opening a bank account
Most businesses and companies prefer non-cash payments, so a bank account is required for a full-fledged business. If the previous stages could be solved remotely, without coming to the United States, then this will not work here. Indeed, to open a current account, a company requires a personal presence.
Some banks offer the option to open an account remotely, but we do not recommend using it. Too much hassle. At the same time, you need to wait for the decision at least 28 working days, and the refusal can be justified by absolutely any reason – even the most ridiculous. If you open an account in person, the decision is made within a few hours.
Example. In my practice, there was a case when a businessman wanted to bring to the American market a Russian company that produces premium sunflower oil. And if he went through the previous stages without question, then opening a bank account turned out to be very problematic.
Three banks refused him without explanation. He turned to us to understand the situation. Everything turned out to be very simple. Banks simply doubted the legality of the company’s funds. And they cannot officially request confirmation of the legality of the income of a company located in another country.
But the client can provide evidence by himself. When we collected reports from the tax office for the last few years, the bank opened an account without any problems.
To open a company account, you need to provide a document on the registration of a legal entity and a tax identification number. But remember that banks may also ask for additional documents. We recommend that you find out their list in advance on the website of the selected bank or by calling the hotline.
When registering, you will be asked to deposit up to a thousand dollars. We do not recommend placing any more – the bank administration may have unnecessary questions about the origin of the funds. If you need more money in your account, you can deposit it in a few days without any problems.
Step 6. Obtaining licenses and permits
The last stage before a full-fledged business launch is obtaining permits for doing business. Even working as a hairdresser in many states requires a license. Serious fines are imposed for doing business or working without such a document.
Each state has different license requirements, and you can check them on the official website of the state. For example, here is the official website of the US Department of Business and Economic Development.
To find out exactly what licenses and permits you need, you need to indicate the state in which you intend to do business and the nature of the business. For example, a hairdresser or a lawyer. The system will give a complete list of documents that you need, as well as the addresses of all organizations where you can get them.
Also, the site will select institutions where you can get help on licensing issues. The number of permits required depends entirely on the type of business. To open a car wash, you only need permission from the administration of the settlement, but to open a law office you just need a huge amount of licenses.
Example. Recently, we helped a cosmetologist to open licenses in two states at once – Georgia and Florida. She bought a house in Brunswick, near the Florida border. Therefore, I planned to work in two states at once. At the same time, the requirements for a beautician license in these states are fundamentally different.
In Georgia, you need to provide documents for training the profession, pass an independent examination in cosmetology and become a member of the Georgia Association of Cosmetologists. In Florida, the exam is more difficult and has several stages. The exam is common for cosmetologists, hairdressers, and manicure specialists, so it is much more difficult to take it.
The girl had to additionally study the basics of hairdressing and manicure in order to take the test in Florida. Also, the procedure for confirming the license is different in the states, but we instructed the cosmetologist in detail, so everything went quickly and without problems.
After obtaining licenses and permits, you already have the full right to legally conduct business in the state. But if you want to expand to neighboring states, then the procedure will need to be repeated again.
Starting a business in the United States is a long process if you do it yourself. But if you value time, then we recommend using the services of intermediary companies that will help you collect all the documents for the start within a few days. Good luck in starting a business in the USA!