The Foreign Citizen’s Guide to Starting a Business in the US

The United States doesn’t bar foreign citizens from establishing businesses in the US. In fact, at first glance, it may seem easy for a foreign citizen to do so – in general they need merely follow the same procedure as a US citizen.

However, there are a myriad of factors that can stymie a foreign business owner. There are issues of immigration visas, international tax issues, and the decision of where would be the best place to establish your enterprise. Once you have a handle on these three, you can begin the process of establishing your business in the United States.

Immigration Visa

When people hear the word “immigration” they frequently think of permanent residence or new citizenship. This is not the case. Immigration also refers to short to long term “passes” for foreign citizens, which may come with single to multiple entries.

Many foreign investors wish to retain the citizenship of their own country but still be permitted to regularly visit or stay for long periods of time in the United States while overseeing their business.

However, the United States has a complicated immigration process. In fact, many attorneys in the United States who practice immigration law only practice immigration because of how deeply specialized and nuanced it can be. Because of this, it is wise to seek consultation from a US immigration attorney to who can establish what visa will work best for you and guide you through the process.

As a foreign business owner you will likely apply for a B-1 visa (short term business visa).

Taxation

Even though you may not be a citizen of the US if you’re involved in a business you’ll still be taxed like one.

The Internal Revenue Service is the US government entity that oversees taxation. The IRS has stated that a nonresident alien who is engaged in a trade or business in the US during the year must file a tax return. Beyond this, you may still owe taxes under international tax regulations or to your country of citizenship.

Location

In the United States, location matters. The US is governed by two sets of law, federal and state. And State law significantly influences business incorporation and management. Beyond this, the statistics of a city should be carefully analyzed for potential growth and opportunities as well as obstacles. It can be difficult for new business owners to find the ideal location for their business or branch because of just how varied states are from one another, and the problem becomes even more complex when cities are taken into consideration.

Below are three examples of cities in three different states, all of which are great candidates to start a new business or branch, but vary in desirability based on industry.

Seattle, Washington, for example, has become a hub for tech-based businesses (including Microsoft) and it has no shortage of educated, skilled, and innovative potential-employees. However, Seattle is approximately 25% more expensive than the average US city and minimum employee salaries are $13 per hour, with a rise to $15 expected in 2021.

For those seeking to create a business that is rooted in education, arts, tourism, or financial services then Sarasota, Florida may be the ideal city. The cultural industry drew revenue of $2.6 billion USD in 2015 and the cost of living is a little lower than average. The city is also anticipated to become a growing hub for e-commerce.

Charlotte, North Carolina, however, is perhaps the ideal state for those seeking to get involved in health-care, banking, or retailing. The city is also notable for having a nonprofit called Business Innovation and Growth Council, which seeks to support entrepreneurship by helping small businesses connect with resources in order to foster growth.

Because of the nuance involved it is key to carefully research the location of your new enterprise.

Establish your business

With these three major obstacles out of the way, the next matter is how can you actually create your business?

The process is not dissimilar from a US citizens and, in fact, it’s a process that shares many similarities with establishing a business in China.

The first question to ask is what type of corporate entity you want to establish. The two major types are corporations and limited liability companies.

What type of business entity?

A corporation is an independent legal entity owned by shareholders and is generally suggested for established, larger companies with multiple employees. If you are seeking to establish a branch of your firm, for example, a corporation may be ideal. The corporation model shields it shareholders from business debts and the actions of the corporation, as corporations may be sued. However, the tradeoff is that the corporation is an entity that is double taxed. First at the entity level and then at the shareholder level. In terms of tax, the IRS considers global income, not just US revenue.

The second entity discussed here is the limited liability company. An LLC, as it’s known, is a hybrid entity that provides certain features of a corporation and a partnership, another form of business entity. An LLC can be preferable because investors may only lose as much as they invested (and no more), but the business entity doesn’t receive the double taxation that a corporation does.

 

What state will you incorporate in?

As discussed above, your location matters. Not only because of opportunities and obstacles but because you will need to incorporate in that state and follow that state’s process. To incorporate in the state of California, for example, you will need to mail all relevant paperwork to the Secretary of State.

What industry will you you be working in?

Your industry can influence the type of licenses and permits the state you incorporate in requires. For example, a law firm would need a license to practice law, among a myriad of other permits and licesnes which are required by nearly all businesses. Such as a land use permit and a business license.

Other considerations

It is important to note that in order to open a bank account, secure a business license, obtain loans, hire employees, and pay taxes you will need an Employer Identification Number. An EIN must be applied for through the IRS.

Applying for a US Tourist Visa as a Filipino citizen comes with its unique challenges

Getting a visa to the United States can be a challenge for citizens of some countries, even if you only want a visa for a short amount of time.

For Filipino citizens, temporary visas are obtained through the U.S. Embassy in Manila. These temporary visas are nonimmigrant, which means that you will not be able to use it to obtain a green card or citizenship in the United States. However, there are many different types of visas which fall into the nonimmigrant category, with different visas requiring different things from their applicant.

There’s a general sense that it is difficult for Filipino citizens to obtain US Tourist visas (B-2), though the processing for applying for a US tourist visa as a Filipino citizen is fairly standard.

Beyond the basics of having a valid passport, you will first want to apply for a B-2 visa, which is for persons who wish to enter the US temporarily for tourism, pleasure, or visiting. With a B-2 visa you’re permitted to visit friends and relatives, participate in social events, sports and contests (so long as you’re not being paid to participate), and even enroll in short term courses for recreational study so long as that study does not give you credit towards a degree. An example of recreational study is taking a weekend long cooking class.

However, there are certain activities which are not permitted by those using a B-2 visa. Broadly, these are study, employment, paid performances, and any effort to stay long term to permanently in the United States.

To begin the application process, you must obtain and complete the DS-160 Form. This form must be submitted online as well as printed and brought to your interview. You will need to upload a picture of you that is formatted to meet the US embassy requirements.

Next, you must schedule an interview at the U.S. Embassy with the exception being if you’re under the age of 13 or over the age of 80.

With a B-2 visa, you will need to pay $160 USD or 7,933 PHP (as of April, 2017). This is a non-refundable, non-transferable visa application fee. You can pay your fee at Bank of the Philippine Islands (BPI) or, if you are an account holder at Bank of the Philippine Islands (BPI) or BancNet, you can pay online. The visa application fee must be paid whether a visa is issued or not.

Once you have paid, you may request multiple entries with a validity period of 120 months for your B-2 visa.

While this speaks to the legal process that an applicant must go through to obtain a B-2 visa, a Filipino applicant may still be denied if he or she does not carefully consider other nuances, which arise primarily in the interview.

At the interview, you should expect to be interrogated by the Consular Officer. There have been many people who have had difficult experiences with Consular Officers. The reason for this is that some Filipino citizens who come to the United States on a tourist visa choose to overstay their visas. It’s a phenomena that is described as tago nagn tago, literally “hiding and hiding”, and the reason for the sometimes gruff to rude behavior of these Consular Officers. For this reason, you may want to compile a file that shows that you have significant ties to the Philippines. Significant ties meaning family, assets, or a business that provides enough motivation to return to the Philippines once your visa has expired.

Failure to do so may lead to the rejection of your visa. If this occurs, you will have no choice but to re-apply, and re-pay your $160 fee. There are no refunds with rejections.