The United States welcomes foreign investments, allowing non-US residents to own US-based companies – even if they are not citizens or do not have primary residence within the country.
In this article, you will have an overview of the implications, restrictions, and other aspects of business ownership for non-US residents.
Owning a Business in America as a Non-US Resident – Understanding the Concept
Under the Internal Revenue Service (IRS) system, taxpayers are classified into three different categories – US citizens, resident aliens, or non-resident aliens. The category of resident aliens includes non-US citizens who meet certain IRS requirements (i.e., green card or substantial presence test).
Non-US citizens who do not meet these specific requirements are classified as non-resident aliens, which results in distinct legal and tax implications.
Which Types of Businesses Can a Non-US Resident Form? – An Overview
Most business structures have no citizenship or residence requirements for ownership. For example, an eligible non-US resident is free to form and own a US-based C-Corporation or a limited liability company (LLC).
However, not all business entities permit foreign owners. To form an S-Corporation, the owner of the company must meet specific residence requirements established by the IRS, which precludes foreign ownership in S-corps.
The difference between a C-Corp and an S-Corp is the election with the IRS. All corporations are formed as C-Corps, but a corporate business may apply to be taxed under Subchapter S of Chapter 1 of the Internal Revenue Code.
Many foreign investors in Florida prefer to form companies structured as limited liability companies (LLCs). This way, non-US residents can incorporate as an LLC and operate the company in compliance with US tax codes without living in the country.
Requirements for Forming a Business Entity as a Non-US Resident in Florida
The first requirement to form a US business as a non-resident is to file for the appropriate visa with the United States Citizenship and Immigration (USCIS). The USCIS has several visa options that permit non-US residents to own a business without necessarily residing in the country.
After obtaining an adequate non-immigrant visa, the next step is to apply for an Individual Taxpayer Identification Number (ITIN).
The ITIN is required in the application process for an Employee Identification Number (EIN), a nine-digit identification number used by the IRS to keep track of your business’s tax reporting.
Assigning a registered agent within the company’s jurisdiction to handle official correspondence on behalf of the business, including subpoenas, regulatory and tax forms, summons (service of process), and other legal documents.
In this process, the guidance of an experienced business attorney is fundamental to:
- Advice on legal, financial, and tax implications of different business entities
- Structure a business that suits your needs
- Anticipate potential issues and reduce the risk of liability
- Protect your interests
- Help in the process to obtain business financing (e.g., define payment structures, review loan agreements, etc.)
- Provide follow-up legal representation once the business is formed