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How to Start a Business in the US

Feb 9, 2024 | Business Setup

Embarking on the entrepreneurial journey of how to start a business in the US can be a thrilling and rewarding endeavour, whether you’re a citizen or a non-resident. The US economy presents a cornucopia of opportunities across diverse industries, making it a hotspot for business-minded individuals seeking to establish or expand their ventures. With its business-friendly environment, the US offers a straightforward pathway towards setting up various types of business entities, each with unique benefits and considerations.

From understanding the legal requirements and securing funding to building your brand identity and establishing an online presence, this comprehensive guide will navigate you through the essential steps to transform your business idea into a reality. So, let’s delve into the intricacies of starting and growing a successful business in the land of opportunity.

How To Start A Business In The US As A Non-Resident

Understanding the US Market and Legal Benefits

Starting a business in the US as a non-resident can be quite appealing, considering the country’s significant share of the global GDP, which stands at 13.5%, and its strong market demand. The US’ robust economy offers fertile ground for foreign entrepreneurs like you looking to establish a presence and tap into its vast market opportunities. Plus, non-residents can take advantage of lower tax rates and enhanced legal protections that come with operating a business within the United States.

Choosing the Right Business Structure

You don’t need to be a citizen or hold residency to start a small business in the US, which opens up the entrepreneurial landscape to a wider audience of international business people. When weighing your options for the type of business structure, you have two main choices: the C Corporation and the Limited Liability Company (LLC). Each structure has its own set of advantages and regulatory requirements.

C Corporations and LLCs

The C Corporation is a separate legal entity from its owners, offering liability protection and the ability to issue unlimited shares. This can be particularly beneficial for businesses aiming to raise capital through stock offerings. However, C Corporations face double taxation, where the corporation’s profits are taxed, and dividends paid to shareholders are taxed again at the individual level. On the other hand, LLCs offer similar liability protection without the strict compliance requirements and the burden of double taxation, as they allow for pass-through taxation.

Selecting a State and Managing Legal Requirements

When setting up a business, you have the freedom to choose any state in the United States for your business entity. States like Delaware, Nevada, Wyoming, South Dakota, and Florida are popular due to their business-friendly laws and tax regimes. Each state has its own set of requirements for a business licence and formation, including appointing a registered agent and understanding tax obligations.

Tax Identification and Banking in the US

For tax purposes, all businesses in the US must have a Taxpayer Identification Number (TIN). Managing a business in the US also means opening a US-based bank account, despite the stricter requirements for foreigners with business bank accounts introduced by the US Patriot Act.

Visa Options and Professional Assistance

As a non-resident business owner, exploring visa options like the E-2 and EB-5 Visas can be crucial for managing your business in the US. Additionally, seeking help from experts such as accountants and attorneys can simplify the complexities of business formation, compliance, and management.

Business Buildings In The US

How To Start A Business In The US As A US Citizen

Market Research and Planning

As a citizen, embarking on a business venture within the United States involves strategic planning and understanding legal mandates. Conducting market research to validate the viability of your business concept and crafting a comprehensive business plan are critical initial steps.

Choosing a Legal Structure and Obtaining EIN

Selecting an appropriate legal structure is crucial, impacting everything from registration processes to tax obligations. Obtaining an Employer Identification Number (EIN) is essential for various operational aspects, including tax filings and establishing financial and business bank accounts.

Licences, Permits, and Financial Management

Navigating through the complexities of licences and permits ensures lawful operation while establishing a business checking and separate business bank account aids in a financial organisation. Understanding and managing ongoing tax responsibilities is also a key aspect of business ownership.

Protecting Your Business and Online Presence

Securing appropriate insurance and establishing an online presence are necessary steps to protect your enterprise and engage with customers. Setting up a payment processor, business bank, and merchant account is essential for businesses accepting card payments.

Employment and Expansion

Familiarity with employment regulations and managing payroll systems is crucial when a small business administration hires employees. After a period of operation, considering business loans can provide capital for growth and expansion. Access to resources like the SBA can offer valuable guidance on various aspects of running a business.

Legal Considerations in Business Formation

Deciding on a Business Entity

Selecting the appropriate entity is a pivotal step that influences your operational processes, best business structure, susceptibility to personal financial risk, and the complexity of compliance obligations. While sole proprietorships offer simplicity and direct control, they do not shield personal assets from business liabilities. Partnerships involve multiple individuals and can take the form of LPs or LLPs, each providing varying degrees of liability protection.

Corporations, including C corps and S corps, offer robust protection from personal liability but come with stringent requirements for documentation and reporting. S corps are structured to allow profits and some losses to affect the owners’ personal income tax directly, thus preventing double taxation. LLCs offer a blend of a corporation’s liability protection with a partnership’s tax benefits and operational ease.

Selecting the most fitting entity requires careful deliberation of these options in relation to your personal finances and business objectives. Professional advice from legal and financial experts can be instrumental in determining the most advantageous structure. Although it is feasible to alter your business entity at a later stage, doing so may introduce further complications and limitations.

Registering Your Business Name

Securing your business name is crucial in confirming your legal intellectual property ownership and adherence to state-specific naming laws. Each state has unique regulations, including prohibitions on names that could be confused with existing entities or suggest unauthorised government associations.

While state registration typically safeguards your business name within that jurisdiction, it does not extend protection to other states where you have not registered. A trademark search is recommended for broader protection, especially if operating in multiple states. Legal experts can provide assistance in ensuring your chosen name complies with all necessary regulations.

Tax Obligations For Citizens

Your chosen entity dictates the taxes you are responsible for and the forms you must submit. Corporations are taxed independently from their owners. LLCs, sole proprietorships, and partnerships pass profits and losses to the owners’ personal tax returns.

Businesses must designate an accounting period for tax and record-keeping purposes. Most entities will require an EIN for tax identification. Keeping the IRS updated on any changes related to your EIN, such as address or responsible party, is imperative.

The IRS provides resources to assist new business owners with tax obligations. Seeking advice from a tax professional can help ensure compliance with federal and state tax laws.

Tax Obligations For Non-Residents

Non-resident business owners must pay taxes on income from US sources. Depending on the business type, they may be subject to various taxes at different government levels, including payroll taxes if they employ US workers, sales taxes, franchise taxes, and excise taxes. Non-residents must stay informed about their tax responsibilities, complete all necessary forms, and consult with tax professionals to ensure adherence to US tax regulations.

Streets Of New York City

Securing Financing and Capital

Exploring Funding Options

Securing the necessary capital is a pivotal step in launching your business. Traditional bank loans are a staple in financing. Still, they often come with stringent requirements, including a solid credit history and a minimum of two years in operation.

Should these conditions prove challenging, SBA loans can be more accessible due to the federal guarantee provided to lenders. Alternatively, online lenders offer expedited approval and funding, sometimes within 24 hours.

Credit unions present another option: competitive rates and a more localised approach. Small-business grants and equity financing are viable alternatives for those hesitant to take on debt. The latter involves trading a share of ownership for capital and can come from various sources, including personal networks, angel investors, or venture capitalists. However, equity financing is typically more suitable for nascent businesses.

Preparing to Pitch to Investors

Crafting an investor pitch requires careful preparation and an understanding of your audience. Venture capitalists will scrutinise the details, focusing on metrics and risk assessment. In contrast, angel investors may be more interested in the overarching vision and market potential.

Your pitch should begin with a concise introduction and proceed with a presentation supported by data, including market analysis, revenue projections, and marketing plans. Demonstrating your product or service, as well as highlighting a skilled team, can enhance your presentation.

Distinguishing your pitch is essential in a competitive environment. Support your assertions with solid data and be explicit about your capital requirements. Prepare to address potential risks and have a clear exit strategy in mind. Regardless of the outcome, follow up with a note of gratitude and use the experience as a learning opportunity.

Applying for Loans and Grants

When seeking loans and grants, it’s important to familiarise yourself with the specific criteria of each program. SBA-guaranteed loans often feature competitive terms, but finding a lender that’s a good fit for your business is crucial. Grants can be a boon for businesses, providing funds without the need to repay.

Considering Crowdfunding and Bootstrapping

Crowdfunding harnesses the collective support of many individuals through online platforms, which usually charge a fee for their services. While only suitable for some business models, it can be a viable alternative to traditional funding methods.

Bootstrapping is another strategy where you rely on personal assets and business income to support growth. This approach can enhance your autonomy and encourage innovative solutions due to resource constraints. Bootstrapping is widely accessible and can be particularly effective during periods of economic fluctuation. It demands a steadfast commitment to your business concept and a willingness to eschew traditional paths.

Launching Your Business

Building Your Brand Identity

Establishing a robust brand identity is crucial when embarking on your entrepreneurial journey. This encompasses your company’s ethos, the feelings you wish to evoke in your clientele, and their overall experience with your brand. It encompasses more than visual symbols such as logos; it’s the narrative and interaction your brand fosters with its audience.

Consider the iconic red of Coca-Cola and its distinctive typography; these elements are symbolic of pleasure and assurance. Similarly, brands like Hustle & Hope and POP Fit have carved their niches by addressing broader societal issues and championing inclusivity.

Burt’s Bees champions environmental responsibility, while Asana’s minimalist design and thoughtful use of colour aim to enhance user interaction. To establish your brand identity, thorough market research is necessary to understand your demographic. This involves developing a visual and linguistic identity that resonates with your audience, ensuring consistency across all platforms.

Developing an Online Presence

A robust online presence is indispensable for modern businesses. With a preference for digital interactions among consumers, maintaining a dynamic website and engaging social media profiles is critical. The majority of consumers engage with brands digitally, underscoring the importance of active online participation.

Ensuring your e-commerce platform is optimised for mobile devices is crucial, given the prevalence of mobile browsing and shopping. Optimising for search engines is equally important, as many consumers begin their online experiences with a search query. Business listings and customer feedback play significant roles in establishing your digital footprint.

Even modest advertising investments can significantly enhance your brand’s digital visibility. Regular engagement with your audience is necessary to maintain prominence and relevance.

Setting Up Your Physical or Digital Storefront

The traditional retail store remains relevant for those who prefer tangible shopping experiences. Launching a physical store requires a comprehensive business plan that addresses consumer needs, funding, marketing strategies, and regulatory considerations such as business structure and permits. Factors like location, in-store experience, and relationships with suppliers and employees are vital to a retail store’s success.

Conversely, launching an online store entails creating a user-friendly e-commerce platform that performs seamlessly across devices. Both physical and online stores require meticulous attention to detail and dedication to delivering a customised shopping experience.

Implementing Sales and Distribution Channels

Establishing efficient sales and distribution channels is essential for delivering your products to consumers and enhancing their purchasing experience. Your distribution strategy should encompass sales, delivery, and after-sales service, and the decisions you make in this area can significantly impact your product’s success.

You must decide between direct and indirect channels and align your marketing strategies to engage your target market effectively. Ensuring that your distribution methods are convenient for customers and align with your marketing strategy is crucial for maintaining customer relationships and promoting your product successfully.

Embark on Your Entrepreneurial Journey

As you set sail on your entrepreneurial adventure within the vast seas of the US marketplace, remember that the journey of a thousand miles starts with a single step — and you’ve just plotted your course. Whether you’re a non-resident exploring the fertile American economy or a citizen diving into the homegrown market, the blueprint for success remains the same:

  • Thorough planning
  • Steadfast adherence to legal norms
  • Unwavering commitment to your business vision

Adopting a business structure that mirrors your ambitions, navigating the intricacies of tax obligations, and securing the capital to fuel your dreams are parts of this exciting voyage. With the wind of comprehensive planning at your back and the compass of professional advice, the horizon is yours for the taking. Set forth with confidence, and make your mark on the business map!

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