Starting a Company in the U.S. and Work Authorization Options
Tips for foreign nationals and companies to set up legal entities in the U.S. for expanding their operations.
The next natural step in the business plans of many foreign nationals and companies is to expand their operations to the United States by setting up a legal entity in order to avail themselves of the benefits of the U.S. market. Fortunately for foreign nationals, setting up a company in the United States does not require citizenship and therefore they are permitted to incorporate a business in the U.S. There are various reasons why non-U.S. citizens choose to set up their companies in the United States, including, but not limited to, access to stable banking services, the relatively low costs of setting up a company and a higher reputation associated with one set up in the U.S. Additionally, there are a number of key considerations such as the legal entity type to be used for the business, the state in which to incorporate and the requirement for work authorization to be able to manage the business.
Similar to the corporate laws of many countries that allow for the incorporation of various entity types, the United States' system also accommodates various types of legal entities, including C-Corporations, S-Corporations, Limited Liability Companies, Partnerships and Sole Proprietorships. In general, foreigners incorporate their U.S. businesses as a Limited Liability Company (LLC) or as a C-Corp; the preference being that these two entity types limit the liability of the owners. In comparison, Partnerships and Sole Proprietorships do not limit personal liability and are therefore not popular choices. It is important to note that S-Corporations are the only entity type that are exclusive to citizens of the U.S. and permanent residents — foreigners are not permitted to choose this entity type.
Related: Choose Your Business Structure
The next consideration for a foreigner is to choose a state in which to register the business. Two states are popular amongst foreigners, Delaware and Wyoming. The reason is that operating a business in these two states is less expensive; there is no income tax (if not carrying out business in the state in which the business is registered), and there is no sales tax (if not carrying out business in the state).
Last but not least, an important consideration for foreign nationals with U.S. businesses is to obtain the proper work authorization required for the management of the business from within the U.S. Setting up a business and managing it without being physically present in the United States is a possibility for foreign nationals, however, managing the company may not be permitted within the U.S. without a valid work visa. As opposed to being a shareholder, which does not require a work visa for a foreign national, being an officer or an employee of a U.S. company and performing the associated duties within the U.S. is generally not allowed without a valid work visa.
There are various visa types that a foreign national may obtain in order to be authorized to work for a U.S. business:
B-1 temporary business visitor visa
A foreign national will be eligible for a B-1 visa for the purpose of participating in business activities of a commercial or professional nature in the United States, such as to consult with business associates; traveling for a scientific, educational, professional or business convention, or a conference on specified dates; negotiating a contract and participating in short-term training.
E visas for temporary workers (E-1 and E-2)
The E visa category is available for treaty traders and investors who come to the United States under a treaty of commerce and navigation between their country of citizenship or nationality and the U.S.
A foreign national applying for an E-1 visa must satisfy the following requirements: (1) be a national of a country with which the U.S. maintains a treaty of commerce and navigation; (2) conduct substantial trade in goods, including but not limited to, services and technology; and (3) conduct principal trade between the U.S. and their country of origin.
A foreign national applying for an E-1 visa must satisfy the following requirements: (1) be a national of a country with which the U.S. maintains a treaty of commerce and navigation; (2) have invested or actively investing a substantial amount of capital in a bona fide enterprise in the U.S.; and (3) intending to enter the U.S. solely to develop and direct the investment enterprise.
L visas for temporary workers (L-1A and L-1B)
The L visa category is available for temporary intra company transferees working in managerial or executive positions in a company (L-1A) or working in positions requiring specialized knowledge (L-1B).
H-1B specialty occupations
The H-1B visa is among one of the most popular categories for obtaining a work permit to live and work in the United States. The general requirements of this visa category are that an applicant must have theoretical and practical application of a body of highly specialized knowledge, and must have obtained a bachelor’s or higher degree in a specific specialty.
While setting up a company in the United States is generally not restricted for foreign nationals, a foreign owner of a U.S. business is not automatically allowed to manage and operate the business from within the United States and must first obtain the required work authorization. There are various avenues through which a foreign national may obtain the correct work visa and permit to live and work in the U.S., however, the type of visa category applicable for an individual is highly specific and must therefore be determined on a case-by-case basis.
Entrepreneur Leadership Network Contributor