How to open a company in the United States
Many times, you have thought about how you could open a company in the United States and if it would be necessary / beneficial for your business.
From the point of view of online business, it is very interesting to have a company in the United States and sometimes even necessary.
If you want to do dropshipping for example, the vast majority of dropshipping providers in the United States do not want to work with companies that are not in the United States.
You will also want to benefit from not being subject to taxes.
There are certain states in the United States that are free of taxes. You can even bill your customers from the rest of the world without charging any tax (unless you are selling physical products and you have a warehouse in that country).
But we will talk about taxes, the big word “Nexus” and how they affect, for example, the Amazon sellers who use FBA, in another post.
Of course there are more countries where companies can be opened and with more tax advantages (Caribbean, Asia or even in Europe).
It is even interesting for online companies from outside the European Union, to have a company or a tax identification in the European Union to be able to move their products, but we will talk about it in other posts. Now we focus on the United States.
There are four companies models
– Regular or “C-Corporation”
– Limited Liability Company
We are going to focus on Limited Liability Company or LLC, because it is ideal for online business. LLC can be described as a mixture between a corporation and a partnership.
It seems a corporation in which:
Provides the liability protection of a corporation without corporate formalities (Board meetings, Shareholder meetings, minutes, etc.)
It is a separate legal entity, although there is no stock.
The owners are called “members” instead of “shareholders”.
It seems a partnership in which:
Provide easy management. Fiscally, Taxed the same as a sole proprietorship (1 Member LLC) or partnership (2 or more Members).
Every LLC has a document known as “Operating agrement” that sets the rules for operating the company and can be modified as the business grows and changes.
States with Free Sales taxes
Only five states do not have a sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. This is not entirely true, because some of them have other types of taxes.
For example, Delaware doesn’t have a sales tax, but it does impose a gross receipts tax on businesses.
States with Low Sales Taxes
Among the states that do have a sales tax, some are less important than others.
Thirteen states impose taxes of 5 percent of the purchase price or less, including five states where the tax is only 4 percent.
As of 2018: Alabama (4%), Colorado (2.9%), Georgia (4%), Hawaii (4%), Louisiana (5%), Missouri (4,225%), New York (4%), Carolina North (4.75%), North Dakota (5%), Oklahoma (4.5%), South Dakota (4.5%), Wisconsin (5%), Wyoming (4%) and we could add New Mexico as it barely exceeds 5 %.
Combined State and Local Taxes
Thirty-eight states collect sales taxes at the state and local levels beginning in 2018. Only Connecticut, Delaware, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, Montana, New Hampshire, Oregon, Rhode Island, and the District of Columbia they do not allow local sales taxes.
This makes Montana, New Hampshire and Oregon the only states that do not really impose any sales tax or additional taxes that can reach the consumer.
As you see, there are many factors that influence when choosing a state to create the company and pay or not taxes.
Steps to open a company
You can do it yourself, hire our services here or the services of many companies that are dedicated to this (at the end of the post we will share some links). It depends of the time you want to invest of it.
Example: Steps to follow for Wyoming.
- Open a LLC in Wyoming and then you will get an address there.
- It takes between 3 and 5 days and you will need to hire an agent.
- Hire it Now
- Get an EIN Document SS4
- It takes between 7 and 10 days
- It’s better if you choose to send it by Fax.
- Apply for EIN Online
- Wyoming sales tax ID
- It takes around 2 days
- Send by mail: add the address of the LLC (Wyoming address). You will have to take care of the 4% of taxes with your customers only if they are in Wyoming.
- Wyoming Internet Filing System
- Open a bank account
- Well, This is more difficult. My best tip is take a holidays, go to USA and open the bank account there. You will get your company debit/credit card too.
- Best options: Bank of America Bank, Wells Fargo and Silicon valley Bank
Links of interest
Please note: This blog is for informational purposes only. For specific advice regarding your business, contact us or other expert.