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Expats Owning and Operating a Business in the United States Of America

Submitted: November 2013

If you are an expat wishing to start your own business in the USA, make sure to start planning well in advance!

Business Plan

First of all, remember that the US market is extremely competitive, therefore it is vital to have a strong business plan. You should have a clear idea of what you want to do and to what extent your business idea is feasible. Make sure to research which businesses already operate in your field and local area. Determine your potential customers, partners and competition. Furthermore, think through your best financing options. Based on your research you can then develop a proper business plan (around 3-5 pages) which sets out your business objectives, target market, commercial strategies, potential obstacles and financial projections. For further guidelines and sample business plans see the website of the U.S. Small Business Administration (SBA).

 

Immigration Matters

Another crucial step is to ensure that you have the legal right to live and work in the US. For most expats, this will mean applying for an Immigrant Investor Visa or other types of Business Visa. Generally, you will have to prove that you have the necessary financial means and qualifications in your area of expertise and show how you will benefit the US market. To read more on US immigration matters in general see Immigration.

Legal Structure, Registration and Obligations

The next important step is to decide which legal structure is best suited for your business. The legal structure will determine the nature of your legal, financial and tax obligations. The two most common business types in the US are ‘sole proprietorship’ and ‘limited liability company’.

Sole Proprietorship

The advantage of setting up your business as a ‘sole proprietorship’ is that it is very cheap to set up and operate. You will have full ownership and control over the business and all profits after taxes will remain yours. At the same time, however, you will be personally liable for any losses your business might make.

Another good news is that it is fairly simple to start a sole proprietorship in the USA. First of all, you should check whether you need any license to perform your business activity. The requirements for licenses and permits differ from state to state. For this purpose, it is best to have a look at SBA’s License and Permit Search Tool. If you decide to do business under a name other than your own, you should also register a unique business name.

Remember also to take care of your tax obligations. Sole traders in the US are taxed as individuals. This means that you will have to report your business income on your personal income tax return (Tax Form 1040). You will also be required to file Schedule C and Schedule SE. To read more on tax obligations for sole proprietors have a look at the Internal Revenue Service (IRS) website.

Limited Liability Company

A ‘limited liability company’ is an independent legal subject which you set up to run your business. Typically, it is run by a director and has members who have shares in the company. The main advantage of a company is that its finances are separate from your personal finances and you are therefore not personally liable for any losses incurred. On the other hand, it is more expensive to set up and maintain a company than a sole proprietorship.

Normally, the steps to starting a limited liability company will include:

Note also that certain states, such as Arizona or New York, require you to formally announce the new limited liability company in a local newspaper. It is thus highly recommended to contact the local SBA office for further information on local specifics.

Other business structures

In addition to sole proprietorships and limited liability companies, you can also opt for a Cooperative,  C Corporation, Partnership, or S Corporation.

Employing staff

As employer, you will have to ensure that your business complies with US labour regulations. You should familiarise yourself with different types of contracts, minimum wage requirements, equal opportunities policies, work permits and recruitment options. Note also that regulations differ significantly from one state to another. The US Government provides extensive information online at Hire & Retain Employees.

See also: Work Culture and Labour Market

Further information

It is a good idea to contact one of the US SBA’s local offices which can provide free advice on starting a business in the US and guide you through the start-up process.

 

 



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