Updated: Dec 5, 2022
The short answer is yes, non-U.S. residents and non-U.S. citizens can set up and incorporate a business in the United States. However, the longer answer and our number 1 disclaimer is that: incorporating a business in the U.S. and having the necessary authorization to work in and for said business are not one in the same. Most foreign nationals who are not yet U.S. citizens or residents and live in the United States need an Employment Authorization Document. This week’s tip solely discusses high-level considerations when incorporating a business in the U.S. as a foreign national. However, an immigration attorney can best counsel a foreign national on how to obtain the necessary authorization to work in the U.S.
While this list is not exhaustive, the following are some considerations for setting up and incorporating a business in the U.S. as a non-U.S. citizen or non-U.S. resident:
What legal entity can I form?: There is no U.S. citizenship or residence requirement to form a C Corporation, LLC, general partnership or sole proprietorship. Non-residents, however, are prohibited from owning S Corporations. In this context, “non-residents” are foreign nationals that do not reside in the United States. And to be clear, if you are a resident in the U.S. that passes the IRS’s “green card test”, you can own an S Corporation.
Do I need to obtain an EIN?: The IRS requires all U.S. businesses to have an Employer Identification Number (“EIN”), and an EIN is generally required to open a bank account for your business. The online EIN application requires either a social security number (“SSN”) or Individual Taxpayer Identification Number (“ITIN”) in order to apply for an EIN. If a foreign national does not have an SSN or ITIN, such individual should consult with an accountant that can provide more detailed guidance and assistance on the process to obtain an EIN.
Will I have any additional obligations?: All U.S. business owners, including non-U.S. citizens and non-U.S. residents, will need to adhere to its business’s applicable obligations in the state, county and/or township where the business is located. For example, you may be required to obtain, among other things, certain licenses, permits, etc. before you can conduct your business. Foreign nationals may encounter certain barriers to obtaining such additional documentation and requirements, but a corporate legal attorney can help you identify your business’s requirements and help you assess how to best navigate and potentially overcome such barriers.
And as a BONUS, here are a few additional facts to know as it relates to ITINs and Illinois business ownership:
1. As mentioned above, having an ITIN does not grant an undocumented immigrant any
work authorization in the United States. That means that such individual cannot "work
for their business" meaning they cannot:
Actively manage the business
Be employed by the business
Provide services for the business
Work for the business
2. ITIN holders may be able to work as 1099 independent contractors for a busienss, but
anyone considering this option should consult with a tax expert and employment
attorney to ensure they are doing so in a legally compliant manner.
3. Some lenders have programs offering loans to ITIN holders, including businesses
owned by ITIN holders. If you are considering this option, be sure to speak to your
banking partner to assess your options.
4. The IRS generally does not share information about ITIN holders with other
government agencies (including immigration enforcement agencies), so undocumented
immigrants should not be concerned that their ITIN application will be shared with
immigration enforcement agencies.
Please contact Serna Legal Services at (312) 601-9859 or firstname.lastname@example.org if you’d like to learn more about why and how to incorporate your business and whether that option is right for you. Remember that with Serna Legal Services, your business will ¡Celebra! Legal Services!
This content is published by Serna Legal Services, LLC and is available for informational purposes only and is not considered legal advice on any subject matter. By viewing this content, the reader understands there is no attorney-client relationship between the reader and the publisher. The content should not be used as a substitute for legal advice from a licensed professional attorney, and readers are urged to consult their own legal counsel on any specific legal questions concerning a specific situation.