Unfortunately, registering a company in the United States is not always an easy and quick process. Foreigners at this stage may encounter various difficulties. We have decided to warn you about them and offer advice on how to avoid delays in business registration.

Perhaps our main advice is to contact a specialized company. Lawyers familiar with all the intricacies of American law can spare you from unforeseen complexities and delays, which will help save the most valuable resources—time and money. But choosing such a company also requires careful consideration.

Working with incompetent lawyers

We have had cases where people who had already registered their business in the United States came to us. They complained about a variety of issues that, unfortunately, we could no longer help them with.

Here’s a simple and vivid example. A budding entrepreneur called us to complain that he couldn’t open a bank account. In response to his request for help, we had to refuse, as our company had nothing to do with his business. It’s impossible to just walk into a bank and open an account for any company. This is not possible in any country in the world, and the U.S. is no exception. The owner of a newly registered company also cannot do this just by making a call. Banks in the U.S. do not open accounts over the phone.

In addition, he did not have a federal tax number (EIN - Employer Identification Number). Moreover, the businessman didn’t even know what it was. Without a tax ID (EIN), financial institutions in the U.S. are not allowed to open bank accounts. Only those who permanently reside in the U.S. or are citizens of this country can obtain this number.

After our explanations, he assumed he had been deceived by the company that handled the registration. In fact, he wasn’t deceived; they simply didn’t offer or provide all the necessary services. He requested business registration, and they did so without informing him that registration alone is not enough for doing business.

The mistake many novice businessmen make is that they go to the first company they find, where employees promise to register the company at a lower cost than competitors. Clients are delighted to receive such an offer but later face various difficulties. As a result, they end up paying extra to correct the mistakes made by careless lawyers. They technically have a company but cannot operate it. Often, they even have to register a new company again. Very cheap, isn’t it?

This error stems from the way registration companies operate. They aim to sell clients at least the minimum services. Their goal is to get the money and lure the client. The logic is simple: since they registered the business through us, they will still return for other services and pay again. They easily reconcile with the fact that this approach is unethical, as well as with the negative feedback about their work.

Let’s look at the work of such unscrupulous registrars with a simple example. At the very end of the 20th century, an electronics store operated in New York. Its storefront displayed very low prices—about two or even three times lower than similar retail outlets. Naturally, they had no shortage of customers. Here’s how they operated: a client agrees to buy, say, a super-cheap camcorder, only to be told they also need to purchase a case, battery, lens, and charger. The total amount eventually exceeded the cost of the same set, but with a single camera and all the components from competitors. However, the initial, very low price lingered in buyers' minds. The same camera, but in reality more expensive than anywhere else. Delighted by it, they didn’t bother much with calculating costs and willingly agreed to buy it. At checkout, they found that the final amount was very high, but some were too embarrassed to refuse, while others simply didn’t want to spend additional time searching for the needed items elsewhere.

The same happens with car dealerships. When you decide to buy a car, you’re likely to ask the consultant about the cheapest option. They will offer something affordable but omit that it’s a basic configuration. To make the car comfortable to use, you’ll have to buy many “extras.” In the end, you’ll pay more than you would for a good car with everything you need.

Thus, you can see that by purchasing a package of services (or a set of goods) right away, you save money.

Since we’ve started talking about bank accounts, let us reveal an unpleasant truth. Don’t think that American banks are eagerly waiting for you, no matter where you’re coming from. They work with foreigners, let’s say, reluctantly. Additionally, President Trump tightened the rules for opening corporate accounts, and this applies to all states. Now, two specialized bank employees ensure that the account holder is the actual future owner, not a representative or anyone else. To verify this, you need to present two identification documents. For foreign citizens, this includes a passport with a valid U.S. visa and another document, such as a driver’s license or a VISA / Master Card from any other bank. In addition, you must sign special electronic forms and have your image captured on the bank’s security cameras.

This measure aims to combat illegal immigration. Foreigners working in the U.S. without permission can only receive wages in cash and cannot use American cards or checks. In essence, they are not allowed to occupy American jobs, but this doesn’t stop undocumented immigrants. In the past, they could open companies and receive funds under a business entity. Today, opening a business account in the U.S. without a visa and proof of permanent residency in the country is impossible.

Some entrepreneurs include friends and relatives who are already U.S. citizens in their new companies. Naturally, they are appointed as directors or presidents of the companies, and accounts are opened in their names. But this solution may end up costing significantly more than coming to us. The fact is, a relative or friend is unlikely to agree to remain the responsible person in your enterprise for free. Why would they agree to be accountable to the state and clients in case of your problems? The only incentive, besides trust in you and a desire to help, is financial support. In other words, you will have to pay them a salary. Such regular payments will eventually far exceed the amount you would have paid us for actual work.

Another drawback of involving a friend or relative is the high likelihood that they will refuse altogether. In this case, your relationship with them could suffer.

In Kazakhstan, Ukraine, Belarus, and Kazakhstan, shares in a company are distributed among founders before registration. The charter, directors, everything is registered during the company registration process. The U.S. follows different principles, where company registration is only the first stage of formation, when it officially has no owners, no charter, no shareholder agreement, etc. This all needs to be done step by step. Initially, the company is registered, and only after that are shares distributed among shareholders, company management appointed, and the charter and shareholder agreements adopted. Unscrupulous “registrars” don’t warn you about this. You pay them to register a company, thinking that your registration ends there, but later, you’ll have to pay more and more. As a result, you’ll give them much more money than you expected. And you’ll have no choice—you’ve already paid.

Taxes for your company after registration

Each U.S. state has its own tax rates and payment rules, along with penalties for late payments. Some states don’t have state income taxes, so you only pay federal taxes of 21% on net profit. In some states, there are additional state and local taxes on top of the federal tax. The highest taxes are in New York. There are also penalties (fines) for non-payment of local taxes, regulated by local authorities.

But the U.S. has one of the most lenient tax laws and the lowest taxes among all highly developed countries.

Annual re-registration of your companies in the state.

You may be surprised, but in all states, a company must be re-registered every year. Simply filing a tax return isn’t enough. You have to pay for the company’s re-registration in the state. For example, in Iowa, all major shareholders must personally be present in the state for a meeting. Do you want to fly to Iowa every year? In small states, there may be “surprises” even we don’t know about.

Deception or Oversight?

We occasionally receive inquiries from company owners with documents in various stages of processing, expressing sentiments like “we were misled,” “we weren’t warned,” or “we weren’t told about the tax amounts,” etc. In reality, no one deceived them, nor was anyone obliged to warn them about every intricacy. Clients requested certain services, and those services were provided. Since no consultation was requested, it’s possible that the registration company’s staff assumed you were familiar with the legal nuances of the chosen country and state.

However, deception can occur in some cases. For instance, a clear example of deception is the promise to register an offshore company in the U.S. The country has long been combatting offshore practices, which means there is no realistic chance of establishing such a company. Even former President Obama promised to repatriate billions from offshore accounts. President Trump, a businessman well-acquainted with offshore tax evasion, only intensified this global campaign to prosecute offshore practices and recover (or confiscate) funds held in such accounts. The question is, would the country most actively fighting against offshores create offshore opportunities itself? Of course not, regardless of what some “consultants” might tell you.

The myth of an offshore zone in Delaware is also popular. Let’s clarify: there are no offshore practices in Delaware, and state taxes are substantial. Companies pay 21% in federal taxes on profits and an additional 8.7% locally. Those who registered a business in Delaware without full understanding find themselves paying nearly 30% in taxes or re-registering in another state.

In Conclusion

These days, any market works on the principle of “supply meets demand.” Registrars operate like retail stores. A customer arrives, requests a particular service, and it is provided in exchange for payment. If the client does not ask questions, no seller will volunteer information.

When you register a business, you are purchasing a package of services; think of it as another product. Wouldn’t you suspect low quality if a product is suspiciously cheap? So why consider offers for suspiciously inexpensive services?

Before approaching a company to register your business, determine what you need for your operations. This is called a “turnkey” service. Find out what documents and legal services are required, etc. Clarify all stages of the process to avoid having to request additional services later.

What We Can Do for You

By contacting us, you will receive comprehensive advice on the tax and financial laws governing companies in your business area. We will answer all your questions about the registration process, and if none are raised, we’ll proactively inform you of potential challenges. We will also help you select the state that best suits your business type.

For the amount we quote, we provide a complete package of services for registering your company and preparing it for the U.S. market. Your only task will be to start operations, as we will handle all registration and document preparation details on your behalf.