Starting a business in a foreign country might be easier than you think, when you have proper knowledge of industry, market, economic situation.
Long ago, taking advantage of market anomalies in distant parts of the globe usually involved lot of hassles like lack of knowledge for economic situation, personal knowledge of specific industry, market research from distant place but these days, starting a business overseas might actually be much easier, less risky, and more economically sound than setting up a business in your home country. There are ample opportunities in emerging markets for entrepreneurs and small (or large) business owners with a skill set that is distinct from that of the local population.
So, now question arise where to register Company. Accessing the Western marketplace is the key to success for many businesses around the world. The Most effective and reliable way to enter global market is with a US company, to take advantage of the world’s largest, best integrated national market at the lowest tax rate. Even your company will be considered as MNC and will be easier to get brand associated with US Company.
CAN YOU SETUP COMPANY IN USA, BEING FOREIGN NATIONAL
“Yes, You Can!” Every day, foreign nationals are setting up US businesses, from major enterprises to small shops. Setting up a company in the US as a non-resident is simple when you have the help of team Skilled in Business Setups like Company formation, Obtain EIN for foreign entity, Bank Account setup, international taxes etc. Here, we help from A to Z for your company, you just focus on market and expanding the business.
So let’s discuss what are advantages for foreign national with a US Company
• Seek higher profit margins on same product or services
• Faster collection and higher liquidity in western market
• Business name, products, Intellectual properties are much secured
• Easier to enter in the global market and sell in the US market, from a customs and tax point of view
• Access the capital markets in the US for venture capital, angel investors and public markets
• Enhance the reputation of your company, both to US customers and many markets overseas
• Easier to get a visa to work in the US (though acceptance is NOT guaranteed)
• Possibly you can reduce your taxes on US-source income with proper tax planning
Incorporating a business is a smart way to reduce individual liability by creating a separate business entity. There are different types of Company incorporations. Each one of these options has its own set of benefits and drawbacks. Once you’ve decided on the structure that most benefits your organization, you still have to decide where to incorporate your business.
Incorporation laws are state-level legislation, which means that each state can make its own laws about the requirements, fees, and tax responsibilities for businesses incorporated within that state. Your experience will vary depending on the state you choose to incorporate in.
Incorporating your business creates a separate business entity from you or your partners. Even though there are costs associated with incorporating in different state, if the other factors are favorable to your business, you might make out better in the end.
How to determine which state to incorporate the business, there are a number of factors that are going to determine whether you have a smooth or bumpy ride. The best state to incorporate in is determined by the formation fees, annual filing fees, taxes, and legal structure, privacy protection and business laws. We’ll go through each one of these paying special attention to which states rank high for each category and which ones bring up the rear.
- Legal System
Best Legal System for Corporations: Delaware, Nevada, and Wyoming
Worst Legal System for Corporations: Mississippi and New Mexico
The corporate laws in a state can affect the experience of owning a business there. Delaware, for example, is known for having the best business laws in the country. The state has a Court of Chancery, which hears corporate case laws instead of a jury of citizens. This is completely unique to Delaware. Corporate cases are handled more quickly and more efficiently there. You will be dealing with a court that is only handling business manners instead of waiting for your case to be seen on a general docket. You will also be in courtrooms with judges who are well-versed in business law and procedures. The result is that legal costs can be much lower in Delaware than in a state with less business-friendly laws.
Since Delaware has become known as the most corporate-friendly state in the country, it has become one of the most desirable states to incorporate in. In fact, the Delaware Division of Corporations claims to be home to 66 percent of the country’s Fortune 500 companies. Many serial investors will insist that a business is incorporated there before cutting you a check. The reason is that the overall risk is much less where the business laws are predictable and favorable.
Delaware has some competition, though. Both Nevada and, more recently, Wyoming are becoming well known for the same legal benefits for corporations. On the opposite side of the fence are those states that aren’t quite as business-friendly in their legal structure. According to a 2017 CNBC roundup of best and worst states for businesses, New Mexico and Mississippi both ranked very low on the list for business friendliness.
- Formation Fees
Best States for Formation Fees: Arkansas, Colorado, Hawaii, Iowa, and Mississippi
Worst States for Formation Fees: Connecticut, Texas, and Massachusetts
Let’s start with the first costs associated with incorporating a business: the formation fees. These are the one-time fees you pay to the state when you apply to incorporate your business there. Filing fees vary by state and you can find the most current requirements on each state’s Secretary of State website. Keep in mind that these are in addition to any fees charged by professional companies.
How much the formation fees factor in your decision to incorporate in a state depends on how much you can contribute for start up cost. If you’re counting every penny during start up, the formation fee may be a very big deal. But, it’s also only a one-time fee, so the long-term effects on your bottom line are minimal. In most cases, formation fees are less of a factor than filing fees.
Formation fees can range from $50 to $455. The states with the lowest formation fees are Arkansas, Colorado, Hawaii, Iowa, and Mississippi. The ones with the highest fees are Connecticut at $455, Texas at $310, and Massachusetts at $295.
- Annual Filing Fees
Best States for Annual Filing Fees: Alabama and Ohio
Worst States for Annual Filing Fees: Nevada, District of Columbia, and Maryland
The formation fees are just the beginning of costs required to incorporate your business. Each year you will also be required to file a one-page report with a filing fee, which will vary depending on the state. (In some states, it’s actually required every two years and is therefore called a biennial report.) This report is to keep the state informed about any changes in your business, including the principal address, authorized signatories, and the number of stocks issued by the business.
Currently, the only states that don’t require regular filings are Alabama and Ohio. Over the course of the life of your business, you can save a lot in terms of money and time from not having this yearly obligation. On the other end of the spectrum, Nevada has the highest annual filing fee, topping out at $325. The District of Columbia has a $300 fee. Maryland’s filing fee is based on business income but the minimum is $300.
- Taxes
Best States for Corporate Taxes: Nevada, Wyoming, and South Dakota
Worst States for Corporate Taxes: District of Columbia, New Jersey, California, Minnesota, and Rhode Island
Taxes are a huge factor in determining the best state to incorporate in. The less you pay in taxes, the more your business can keep for running costs and profit. There are different types of taxes to consider—state income taxes, corporation taxes, and franchise taxes. Corporation taxes are levied on C-corp. LLCs might be affected by either type of taxes. Franchise taxes are for the privilege of operating and existing within a state that recognizes these types of taxes. You can find more information on taxes.
Nevada, Wyoming, and South Dakota all rank high for best tax laws because they do not have state income tax or corporate taxes. However, keep in mind that this only works for businesses that operate within those states. While you might incorporate there, if you operate your business in another state you will still be subject to that state’s tax laws. On the other hand, the District of Columbia has some of the highest personal and corporate income taxes in the country. New Jersey, California, Minnesota, and Rhode Island are not far behind.
The Bottom Line
These factors can all have long-term effects on the success of your business so it is important to at least consider them when making the decision on where to incorporate. But ultimately, the best state to incorporate in depends on where your priorities lie. If you are courting investors or considering your legal options, the legal structure is the most important factor. Are you worried about the potential costs associated with yearly obligations of filing in a certain state? Then the annual reports and filing fees will be your priority.
No matter what your perspective might be, do your due diligence on the state you are considering for your corporation. As always, it’s a good idea to get the advice of a professional advice who can guide you in making the right decisions for your business.