We welcome you to our country and wish you prosperity and success in your business here.

  1. Form U.S. entity, preferably with limited liability
    Adopt Articles of Incorporation; Bylaws; Organizational Minutes
    Appoint board of directors (1 or more persons)
    Appoint officers (president, secretary, treasurer)
    Issue shares to owners or parent corporation
  2. Conduct trademark (name) search; verify that company name and important product names are not used by other parties; file trademark application to protect company name, logo and key product names
  3. Reserve and apply for Internet domain names
  4. Apply to Internal Revenue Service to obtain Employer Identification Number; register with state tax authorities.
    Normally parties apply for the Employer Identification Number on IRS Form SS-4, Application For Employer Identification Number
    If the signatory executing Form SS-4 does not have a social security number, however, such party must apply for an IRS Individual Taxpayer Identification Number on IRS Form W-7, Application For IRS Individual Taxpayer Identification Number
  5. File local company registrations
    If a company is incorporated under the laws of one state (e.g., Delaware) and has offices in a second state, it must file registration documents in the second state referred to as “Qualification of Foreign Corporation To Conduct Business”
    Local city or county registration
  6. Execute lease for office space
  7. Open bank account
  8. Obtain visas for key foreign persons who will be working in the U.S. or helping in setting up the U.S. office; comply with I-9 and E-Verify procedures for verifying the identity and work authorization of each new hire.
  9. Hire initial employees; begin process for federal and state tax withholding, FICA and similar items
  10. Arrange for employee health insurance and other insurance
  11. Have all employees execute Employee Confidentiality Agreement
  12. Consider employee compensation incentives such as incentive stock options or similar benefits (common in U.S. technology companies); adopt qualified or non- qualified stock option plan
  13. Conform key contracts to U.S. law in state where office will be situated.
  14. Consider filing for patent protection under business process patent laws for technology products and e-commerce processes (common in U.S. technology companies); file U.S. registrations for patents obtained in foreign countries.

One of the most important considerations for a foreign entity in establishing a business in the United States is the selection of the form of business entity. A variety of considerations must be addressed in making this determination, including the organizational structure of any existing business, tax concerns and the type of activity that the foreign investor intends to pursue in the U.S.

Types of Entities.There are numerous types of entities used by foreign companies to conduct business in the United States, including corporations, limited liability companies, partnerships, limited partnerships and branch office operations.

Limited Liability Entity. It is advisable for the foreign company to insulate itself from liabilities which might arise in the United States. To achieve this goal, we generally recommend that foreign companies conduct their operations in the United States through subsidiaries which are limited liability entities such as corporations or limited liability companies. With such entities, liabilities which are incurred in the United States usually are retained at the entity level and do not pass up to the parent company.

Corporation. The corporation is the most common form of business entity in the United States. It has limited liability and a separate legal existence from its shareholders. A corporation is managed by a board of directors and officers. It is suitable for public or private ownership. Key organizational documents are the Articles of Incorporation and the Bylaws.

Limited Liability Company. The limited liability company has certain attributes of a corporation and certain attributes of a partnership. It is normally structured like a general partnership, but unlike a partnership its members have limited liability (in a general partnership the partners have full liability for all of the liabilities of the partnership). It is normally managed by a managing member (similar to a managing partner in a partnership), but can also be structured to be managed by officers and directors. The fundamental documents of a limited liability company are the Articles of Organization and Operating Agreement.

Preferred Type of Entity. Corporations do not have “flow through” tax treatment and hence are required to file tax returns. Limited liability companies, on the other hand, have “flow-through” tax treatment and are not required to file income tax returns; rather their parent companies must file income tax returns in the United States. Since most foreign companies do not want to file tax returns in the United States, the preferred form of entity for U.S. operations of foreign companies most often is the corporation.

Entity Selection Summary

Jurisdiction of Incorporation. Corporations and limited liability companies can be formed under the laws of all 50 states. Most corporations are formed under Delaware law due to low franchise tax and laws which are favorable to management. A party can form a corporation under Delaware law but establish its office and conduct its business in other locations.

Qualification. If a corporation is formed in one jurisdiction (e.g., Delaware) and has offices in another location (e.g., New York) the corporation must file a short registration in the jurisdiction where it conducts business (called “Qualification to Conduct Business”).

More Complex Operations In the United States. Business operations can be expanded in the U.S. through a variety of means including through the use of affiliated corporations (e.g., a second corporation in the U.S. owned by the foreign parent company), a second-tier subsidiary (a second U.S. corporation owned by the first-tier U.S. subsidiary), or similar arrangements.