An Immigrant’s Guide to Funding and Starting a Business

Starting a business in the US is no easy feat, especially if you’re an immigrant. From overcoming language barriers to obtaining the right to legally open and operate a business on American soil, immigrant entrepreneurs certainly face their share of hardship.

Despite these obstacles, immigrants still do very well in the US as business owners. According to a report by Fiscal Policy, immigrant small business owners accounted for 30% of overall small business owner growth in America between 1990 and 2010.

Given the fact that immigrant business owners seem to thrive in the US, just how difficult is it for one to start and fund a business in America today?

Although the US is notorious for its strict immigration policies, legally obtaining passage into the country and starting a new life as an entrepreneur is not impossible.

To help you figure out what you need to start a business in America as an immigrant, we’ve covered all the steps for you below.

Table of Contents:

• Choosing a Company Structure
• Choosing a State to Register Your Company
• Funding Your Business
• Obtaining an Entrepreneurship VISA in the US
• Additional Resources

Choosing a Company Structure

The first step to starting your business as a foreign business owner is to choose a company structure. For immigrants, your choice boils down to two different models: a C Corporation or a Limited Liability Company (LLC).

Both of these business structures are advantageous to foreign business owners because they can be run outside of the US and do not require residency or citizenship at any point.

Benefits of a C Corporation

C Corporations are ideal for foreign business owners because of their tax and legal benefits. The major advantages include:

• Separate legal identity: The corporation has its own rights and responsibilities under the eyes of the law.
• Limited liability for shareholders: As a shareholder, you cannot be sued or held liable for your company’s debts or obligations.
• Perpetual existence: If you pass away or declare bankruptcy, your corporation will live on.

One disadvantage of a C Corporation is double taxation. As a shareholder, you must first pay a corporate level tax for owning a company that turns a profit. You must then pay income tax on your dividend earnings. There are ways to reduce or avoid double taxation, but you should consult a tax advisor to do so.

Benefits of an LLC

LLCs are a hybrid company structure, meaning they combine elements of both limited partnerships and corporations. Under an LLC, members of the company are not held personally liable for the company’s debts or liabilities, a key feature of corporations.

Advantages unique to an LLC include:

• Pass-through taxation: As the business owner of a “flow-through entity,” profits go directly to you, and you pay your business’s taxes with your personal tax return.
• More flexibility: As a partnership, you and any other co-owners determine how profits are split.
• Less administrative hassle: LLCs involve less paperwork because they do not require a board of directors or shareholder meetings.

If you do plan to run a US-based business in your home country, then you should check your native country’s tax laws to see which model would be most advantageous to you.

Choosing a State to Register Your Company

Once you’ve figured out the type of business structure you want, you need to find the best place to locate your business. States like Delaware, Nevada, Montana, South Dakota, Wyoming, and New York are famously known for their accessible and lenient policies towards foreign business owners, making them popular states for immigrant-owned businesses. However, if a specific state dominates your market, then you should consider locating there.

So, what should you look for in a location? Here are some considerations to keep in mind:

• No state taxes: This includes sales tax, state corporate income tax on goods and services sold, personal property tax, value-added taxes (VATs), taxes on business transactions, or capital shares or stock transfer taxes.
• Low franchise and LLC tax: Many states require an annual franchise and LLC tax based on your earned income, while other states (like Delaware) offer a low cost, flat-rate fee.
• Corporate privacy: This varies from state to state, but each state offers laws that protect the identities and personal information of corporate shareholders or LLC owners. Delaware specifically protects the names and addresses of LLC members and managers by not making them public.

Again, if you do not require a specific location to establish your business, it’s in your best interest to register your business in states like Delaware of Nevada, both of which are considered tax shelters for national- and immigrant-owned businesses alike.

Register Your Business

Once you’ve found an ideal state for your business, you need to register it. Here are the steps you need to follow:

Choose a Name

If you do not use your own name for your business, then you must register it as a trade name, or a “doing business as” (DBA) name, with your state. When it comes to naming your business, the only thing to be aware of is trademark infringement. Do your research to see what’s available so you do not incur a lawsuit.

Obtain Your Individual Taxpayer Identification Number (ITIN)

Each business requires a taxpayer number. As an immigrant, you must obtain an ITIN to satisfy this requirement. ITINs are issued by the I.R.S. to anyone that must pay US taxes but does not have a Social Security number. To apply for one, you need to fill out a W-7 form.

Apply for Your Employer Identification Number (EIN)

Once you’ve obtained your ITIN number, you can also apply for your EIN. An EIN is necessary to identify your business for tax purposes. You need an EIN to open a bank account, file tax returns, and apply for business licenses. To obtain your EIN, you can simply apply online.

Register as a Legal Entity

When you register your business as a legal entity, you’ll need to file documents known as “articles of incorporation” with your state. To do this, you need to select a state registered agent to handle all legal documents for your company.

If your company has a physical US address, it can substitute as the agent; otherwise, you need to elect someone registered in your state of choice to act on your behalf. There are services to find registered agents, but they are state-specific. If you do not have any connections in your desired location willing to act as your agent, then you should search for online services in your area.

Funding Your Business

Securing funding for your business can be tricky as a foreign business owner. You may not be able to secure funding at all if you cannot legally work within the US. If you are here on a working visa or are a Green Card holder, though, there are many options available.

SBA Loans

Some of the most common loans for immigrants are Small Business Administration (SBA) loans. The SBA is a government agency that supports small businesses by providing them with the resources, connections, and assistance they need.

So, who can apply for funding? You qualify if you are a(n):

• Naturalized citizen
• Lawful permanent resident
• Lawful non-permanent citizen
• Asylee or refugee

SBA loan eligibility is complicated, so you may want to refer to the SBA’s eligibility requirements (start on page 110).

Term Loans

Term business loans are lump sums of cash given to you by a lender. When you take out the loan, you agree to pay back the loan over a predetermined period of time. Unfortunately, approval for term loans is more difficult for immigrants for various reasons.

To improve your chances of securing a term loan, it’s better to apply through a funding specialist from an online marketplace rather than at a brick-and-mortar bank.

Short-Term Loans

Short-term loans are just like term loans, only they come with a much shorter payment period, usually around 18 months or less. The appeal behind a short-term loan is the credit threshold: You do not always need to have a strong credit score to get approved, so the likelihood of getting approved for a short-term loan is greater.

Obtaining an Entrepreneurship Visa in the US

To clarify, you do not need to be a US citizen or even a Green Card holder to start a business in the US. In fact, the only reason you need to obtain a visa is if you plan on working in the US at some point in the future.

If working and living in the US is your goal, then there are many types of visas to choose from. The key is determining which visa best suits your needs. For the business-minded immigrant, we’ve listed several of the most common (and expedient) options below, and also included the standard requirements for each.

EB-1 Entrepreneur Visa

By far the most difficult visa to obtain, the EB-1 visa is reserved for individuals that exhibit “extraordinary ability” in their field. The EB-1 is so desirable because, unlike the other visas on this list, it grants you the ability to live and work indefinitely in the US as a permanent resident.

The US Citizenship and Immigration Services (USCIS) uses a point system to determine if an applicant measures up to their standards of extraordinary ability. To be accepted, applicants need to satisfy at least three of the following criteria:

• Proof of internationally or nationally recognized prizes or awards of excellence
• Proof of membership in associations in your field that require outstanding achievement for members
• Proof of published material about you in major trade publications or other major media
• Proof that you have been selected to judge the work of others individually or as part of a panel
• Proof of your original scientific, artistic, scholarly, athletic, or business-related contributions of significance in your field
• Proof of scholarly authored material in major trade publications or other media
• Proof that your work has been displayed at major exhibitions or trade shows
• Proof of your distinguished performance within a critical leading role for a major organization
• Proof of a high salary in your field relative to others in your field
• Proof of commercial success in the performing arts

With an EB-1 visa, you may:

• Bypass labor certification when applying for work
• Live indefinitely in the US with or without permanent employment
• Obtain a Green Card much faster than other visa holders

Basic requirements and/or documentation include:

• You must satisfy at least three of the criteria constituting extraordinary ability.

E-2 Treaty Investor Visa

The E-2 “Investor Visa” is available to immigrant investors that wish to live and work within the US To be considered, you must place a substantial investment into a bona fide enterprise, startup, or business that you intend to work for. Essentially, this means you plan to either purchase or establish your own business within the US The E2 visa lasts anywhere from three to five years and can only be granted to individuals that come from countries that fall under the Treaty of Trade and Commerce.

With an E2 visa, you may:

• Work legally for the company functioning as the investment vehicle
• Travel in and out of the US
• Remain in the US with unlimited two-year extensions so long as you maintain your E2 qualifications
• Bring along spouses or children under 21 years of age

Basic requirements and/or documentation include:

• You must be a national of a treaty country.
• You must have invested (or be in the process of investing) a substantial amount of capital in a US enterprise of some sort.
• You must be seeking to enter the US solely for the purpose of developing your investment. To prove this, you must demonstrate that you have at least 50% ownership of the investment.

E-1 Treaty Trader Visa

The E-1 Treaty Trader visa allows nationals of a treaty country (reference the Treaty of Trade and Commerce above) to work in the US for the purpose of engaging in international trade. According to USCIS, items of trade include (but are not limited to) the following:

• Goods
• Services
• International banking
• Insurance
• Transportation
• Tourism
• Technology
• Journalism or “news gathering activities”

However, you can’t just work in one of these fields and expect to qualify for the E-1 visa. You first need to share the same nationality as that of your company, and at least 50% of your company’s trade must be with the US.

With an E-1 visa, you may:

• Stay in the US for up to two years at a time
• Work only for your approved activity or company
• Travel in and out of the US
• Bring along spouses or children under 21 years of age

Basic requirements and/or documentation include:

• You must share common nationality with your company.
• Your company must actively be making substantial investments in the US
• Your company must be in a treaty country.

While this is not at all an exhaustive list of the types of entrepreneurial visas you can apply for to start a business in the US, it does give you an idea of what the process is like to live and work in the US as an immigrant business owner.

Additional Resources

National Immigration Forum
Immigrant Legal Resource Center
Informed Immigrant
National PTA
State Legal Resources for Immigrant Children and Families
The Immigrant Visa Process
Rights and Responsibilities of a Green Card Holder
Path to US Citizenship

Sources: FiscalPolicy | Travel.State.Gov 1, 2 | USCIS 1, 2, 3 | SBA 1, 2, 3 | IRS 1, 2 | Corp.Delaware.gov | DHS

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from Fundera Ledger https://www.fundera.com/blog/business-immigration-guide-usa/