Below we will cover:
Benefits of a US LLC
Best State to form an LLC In
US Phone Number
Getting an EIN
Stripe vs PayPal
US Tax Filing Requirements
LLC Annual Reports
Benefits of choosing the US to start your business
The US has one of the best reputations in the world for being business-friendly! The US also has a very competitive corporate tax system and a relatively easy LLC formation system. One of the biggest perks is the low startup costs in comparison to many other countries and the prestige of having a company based out of the US.
Can a non-US resident start a US LLC?
One common misconception about creating US companies is that you have to be a US citizen to start one and have a US SSN (Social Security Number).
This is wrong. You don’t have to be a US citizen, be a US resident (i.e. “green card holder”), or have a US SSN.
That means you can start a US LLC as a non-resident, online, as a foreigner and get
A US LLC
A US Bank Account
Access to US Payments
One of the biggest benefits of being a non-US resident starting a US LLC is that an LLC is a "pass-through entity", meaning that taxes can pass through to the owners. This means that your business would not be subject to US tax as long as your LLC:
Is 100% owned by non-US tax residents (either natural or legal persons)
Has no US presence or economic substance
The income must not be “effectively connected"
What is an LLC?
An LLC gives you a business entity to then set up a bank account, take payments, and as the name "limited liability company" might imply, it protects you from "liability!"
"With an LLC, only the assets owned in the name of the LLC are subject to the claims of business creditors, including lawsuits against the business. The personal assets of the LLC members cannot be claimed to satisfy business debts. For most people, this is the most important reason to form an LLC."
You can read more about LLCs in this post from Investopedia: https://www.investopedia.com/terms/l/llc.asp
Should I form an LLC or a C Corp?
If you are looking for liability protection and flexibility (limited admin upkeep, tax flexibility) an LLC is a great choice for new businesses. LLCs are considered easier to start and maintain.
If you are currently raising or will need to raise US venture capital and take a company public a C Corporation is a great choice. US investors require a C Corporation to invest venture capital.
At the end of the day: it's your business, your choice!
Here is a full blog post that dives into this topic in much more detail: https://www.unstack.com/blog/llc-vs-c-corp
What is the best state to form my LLC in?
The best state to form your limited liability company (LLC) in is nearly always your home state. This is because your company is doing business primarily in that state, whether it is a physical business or an online business.
There are two exceptions to this rule:
You are a non-US resident (in which case you can choose any state and we recommend Wyoming or Delaware)
Or if you have a real estate LLC essentially the "home state rule" doesn't apply here)
Some people may also want anonymity in which case Delaware, which does not require owners to list their names, and Wyoming, which allows a "nominee" to list their name as the owner, are what we recommend.
Here is a full blog post that dives in to this topic in much more detail: https://www.doola.com/blog/what-is-the-best-state-to-form-my-llc-in
What do you recommend between Wyoming vs Delaware?
I recommend Delaware only if you have plans to in the future convert your LLC to a C Corp (to raise venture capital from U.S. investors) or if you really want the "prestige" of saying your company is from Delaware. Some customers say this matters to them and if it does, it is your business, your choice!
Otherwise, I recommend Wyoming. Why? Wyoming is the most popular state for non-residents who are online businesses, e-commerce businesses, or business owners who want an easy and simple way to form and manage their companies. It's the most popular state among doola customers, has lower annual fees ($60 vs $300 in Delaware), a low filing fee ($100), and was the first state to ever create an LLC. Also, don't sleep on Wyoming's prestige as well; it has a friendly business environment and has even been called "The Switzerland of the Rocky Mountains."
If you want to get more in the weeds on the differences between Wyoming and Delaware, check out this guide here: https://www.doola.com/blog/wyoming-vs-delaware-llc-the-ultimate-guide-to-decide-where-to-form-your-llc
How should I form my LLC?
If you'd like to file on your own in Wyoming or Delaware:
Here is a guide on how to file in Wyoming (there is a $100 filing fee with the state): https://www.doola.com/blog/how-to-create-a-wyoming-llc
Here is a guide on how to file in Delaware (there is a $90 filing fee with the state): https://www.doola.com/blog/how-to-create-a-delaware-llc-the-ultimate-step-by-step-guide
If you're looking for a "one-stop-shop" long-term solution that helps you not only form your LLC but also help you with getting a registered agent, US address, EIN, Phone Number, IRS tax filings and more + serves as a long-term partner, check out doola
How do I get a US Mailing Address?
There are a ton of different options out there to get a US Mailing Address. Here are a few options:
How do I get an EIN?
I'll break this up into a few sections! But if you want to skip ahead and see how long it is currently taking to receive an EIN in real-time check out this page which has real-time updates from the IRS: https://www.doola.com/how-long-will-it-take-to-get-an-ein
Can I apply for an EIN online?
In order to apply for an EIN online, the person applying must have a valid Taxpayer Identification Number (SSN or ITIN).
If you don’t have a Social Security Number or Individual Taxpayer Identification Number (which international founders might not have), then you have to mail or fax an application in to get an EIN for your US company.
What is the overall process to apply for an EIN?
With SSN: If you have a Social Security Number, you can go to this website and apply for your EIN Online. If all your information is valid, you will receive your EIN in minutes!
Without SSN: If you do not have a Social Security Number, you must fill out an SS-4, and fax it to the IRS. It can take anywhere from 2-4 months from the day of submission
What is the latest timeline for how long it will take to get an EIN back?
Check out this website for real-time updates on how long it will take to get an EIN: https://www.doola.comhow-long-will-it-take-to-get-an-ein
I'm skeptical about these delays, can I confirm them for myself/check in on the status of my EIN application?
If you want to contact the IRS to check on your EIN Application, here are the steps:
Call the Business & Specialty Tax Line at 800-829-4933
The hours of operation are 7:00 a.m. - 7:00 p.m. local time, Monday through Friday.
Follow the instructions to discuss EIN's
You will need your SS-4 form readily available to confirm any information the IRS may ask for.
What is an EIN vs an ITIN vs an SSN?
These acronyms can get pretty confusing so thought it'd be helpful to define them!
EIN stands for Employer Identification Number.
The IRS issues an EIN to a business for tax reporting requirements and you also need an EIN to open a US business bank account once you have opened an LLC.
Check out this blog post here on how to get an EIN!
SSN stands for Social Security Number.
ITIN stands for Individual Taxpayer Identification Number.
The IRS issues an ITIN to people who have a US tax filing (or informational reporting requirement) and are not eligible for an SSN.
How do I get an ITIN / do I need one?
Check out this blog post here on how to get an ITIN! Unless you are filing a US tax return OR are trying to set up a US PayPal account, you don't need an ITIN (more on this coming up in how to set up a Stripe / PayPal account).
How do I get a US Phone Number / do I need one?
You will need a US Phone number to apply for a US bank account and to set up your Stripe account (and more). Here are some of the main reasons why a US Phone Number is important to get:
Business Verification: When applying for a bank account, Stripe/PayPal account, Amazon Seller account and more, a U.S. phone number is required
Proof of Location: Many services will require a utility bill as proof-of-location to conduct business. If you want to sell on Amazon, this is a must!
Customer Support: Sometimes customers want to talk to people rather than read a website to search for answers!
Professionalism: Give your LLC an added element of professionalism with a U.S. Business Phone number instead of an international cell, or no number at all!
In terms of phone number options, there are many many providers online! A quick Google search can show you a ton of different possibilities.
If you're looking for a Phone line with a utility bill that also has SMS, unlimited international text and calling, and "digital access via a computer" check out: https://www.doola.com/blog/us-phone-number-with-utility-bill-proof
How do I set up a US Business Bank Account?
Unfortunately, there are very limited options when it comes to banking in terms of who can support:
Without a US SSN
No requirement to travel to the US
We offer our own banking service "doola banking" in partnership with Piermont Bank, FDIC-insured.
Our banking service comes with:
Business Checking Account
Virtual Debit Cards
Access to 35,000+ ATMs
International Wires (through Wise). Please check our step-by-step guide to find out how to do it.
And more industry-leading features.
We ONLY provide support to our paying customers to set up their US Bank account after they get their LLC and EIN. If you set up your business with us, you can apply and use it for free! If you already have a business, you can migrate to our platform we can definitely help you set up your US Bank and Payment gateway.
We don't open your bank account. Please note that the application for the bank account has to be filled out by you through the doola dashboard as it requires certain confidential and business-related questions that only you can answer. However, we do provide the business documents that you need and ongoing support at each stage of the process.
Why should you choose doola banking?
If you are an international founder, you won't be able to open a bank account in a physical bank unless you live in the US and/or have an SSN.
That leaves virtual banks as the only alternative. Virtual banks have a relatively low acceptance rate for global founders. Also, you wouldn't normally know the reason for the rejection! All of this changes with doola banking. We provide a high acceptance rate and the ease of use of having all your business needs in a centralized location with seamless integrations. Also, doola Banking will allow us to make taxes/compliance & Bookkeeping an enjoyable experience with how easy it will become.
24/7 doola level CS support will make the overall process of managing your business bank account effortless.
In case of a rejection, we bend our back over to reapply on rejections and resolve them manually and don’t default deny applications.
Once I have a bank account should I use Stripe or PayPal?
Stripe does not require a US SSN and only requires an EIN + Formation documents.
PayPal does require a US SSN or ITIN in addition to an EIN + Formation documents. Unfortunately, if you do not have a US SSN or ITIN, PayPal is not an option.
This is why Stripe is a much more convenient option!
How do I set up a US Stripe Account?
To open a US Stripe Account you'll need
An EIN Number
A physical location in the country of your EIN
A phone number in that country
A Government ID from any country
You should also make sure you are not on Stripe's list of restricted businesses! As long as you don't see your business on the list, there is little reason to believe you won't be able to work with Stripe :) https://stripe.com/restricted-businesses
To read more in full about how to open a US Stripe Account as well as learn more about their exact requirements (as directly told by Stripe) check out: https://www.doola.com/blog/how-to-create-a-us-stripe-account
How do I set up a US PayPal Account?
To create a Business PayPal account, you'll need:
A Company Phone Number
A Company Address
An EIN Number
A Social Security number or an Individual Taxpayer Identification Number
To read more in full about how to open a US PayPal Account as well as learn more about their exact requirements (as directly told by PayPal) check out: https://www.doola.com/blog/how-to-create-a-us-paypal-account
How do I file taxes / stay compliant with the IRS?
Taxes and IRS filing requirements can be extremely confusing. So below is an overview of the required filings + key deadlines to keep in mind to stay on top of taxes and/or IRS filing requirements for your LLC.
I am a Foreign Single Owner/Sole Proprietor (Foreign Single Member LLC)
If you own a Foreign Single Member LLC, and you are not considered as “Engaged in US Trade or Business” you are not required to file 1040NR or pay personal income taxes.
As a "Non-Resident Alien" (aka foreigner), you are only required to file and pay taxes in the U.S if you have FDAP income for which withholding was not done at source, or have effectively connected income with US Trade or Business.
However, as of 2017, you still report information like a corporation (see Section 1.6038A-1). Therefore, unless you have registered as a corporation, all single-member LLCs are subject to these requirements. Failure to file or incorrect filing will incur a minimum penalty of $25,000.
April 15, 2021: Deadline for LLC tax returns when filing as Foreign-Owned Disregarded Entity (Forms 1120 and 5472) or to request a six-month extension of time to file.
April 15, 2021: Deadline to file individual tax returns for foreign individuals (Form 1040NR) or to request an extension for an extra six months to file your return.
I am a Multi Owner (Multiple Member LLC)
Preparation of partnership return (Form 1065)
March 15, 2021: Deadline for partnership and LLCs owned by multiple members to file tax returns (Form 1065) or to request a six-month extension of time to file.
Do I have to pay a professional CPA to file any needed forms?
No you are not required to do so. But folks sometimes find these forms confusing, or stressful to fill out so working with a professional is always an option to remove some stress here. To read about this in more detail + see an option for professional help check out this guide here: https://www.doola.com/blog/us-tax-filing-requirements-for-my-llc
Where do I submit my LLC Annual Report / Filing?
As mentioned above in Wyoming there is a $50 payment + an annual report due each year to the state and in Delaware there is a $300 annual franchise fee tax.
Both of these can be paid online, directly to the state!