Peculiarities of doing business in the USA

For entrepreneurs worldwide, the USA embodies boundless opportunities: a massive consumer market, developed infrastructure, access to capital, and a culture that worships innovation. However, navigating this competitive landscape requires deep understanding of local rules. This article is your compass to the US business world, covering key stages, advantages, and pitfalls for foreign founders.

Business Climate Overview

The US business climate features high entrepreneurial freedom, transparent (though complex) regulations, strong property rights protection, and an advanced financial system. Competition is exceptionally fierce, but rewards for success can be global. The federal system means many business aspects are state-regulated, creating both optimization opportunities (e.g., choosing tax-friendly jurisdictions) and compliance complexities. Direct communication, results-driven focus, and risk tolerance are integral to the local business culture. Over 5.5 million US businesses with foreign ownership attest to the market's appeal.

Business Registration: Entity Types and Step-by-Step Process

Choosing the right legal structure is fundamental – it impacts taxes, reporting, and liability.

Primary Entity Types:

• LLC (Limited Liability Company): Most popular among SMEs and foreigners. Combines member liability protection (like corporations) with tax flexibility (profits default to owners' personal taxes – "pass-through taxation"). Simpler administration than corporations.
• C-Corporation: Standard corporation. Provides strong liability protection. Profits taxed at corporate level, then shareholder dividends taxed personally (double taxation). Mandatory for venture-backed companies or IPOs.
• S-Corporation: Special tax status for corporations (≤100 shareholders, US residents only) avoiding double taxation (profits "pass-through" to shareholders). Unavailable to foreign owners.

US Company Registration Process (LLC/C-Corp):

• State Selection: Delaware, Wyoming, Nevada popular for flexible corporate laws, but register where operations occur. Registration state determines governing law.
• Name Availability Check: Verify uniqueness via Secretary of State's online portal.
• Appoint Registered Agent: Required physical/legal entity instate for official documents. Many specialized providers offer this service.

File Formation Documents:

• LLC: Certificate of Formation (or state-equivalent)
• C-Corp: Certificate of Incorporation
  Filed with Secretary of State + fee payment.

Create Governing Documents:

• LLC: Operating Agreement (regulates member relations/management/profit distribution – critical!)

• C-Corp: Bylaws (internal rules) + stock issuance

• Obtain EIN (Employer Identification Number): Company tax ID. Free from IRS online/fax/mail. Essential for bank accounts, hiring, tax filings.

• Register with State Tax Agencies: For sales tax, payroll tax, and local taxes.

• Acquire Licenses/Permits: Federal/state/local levels (city/county), vary by industry (see below).

Corporate Taxation Basics

The US has a multi-tiered (federal/state/local) and complex tax system. Understanding fundamentals is critical.

Federal Taxes:

• Corporate Income Tax: Applies to C-Corps (21% since 2018). LLC/S-Corp profits default to owners' personal tax rates (up to 37%).
• Payroll Taxes: Mandatory withholdings – Social Security (6.2% employee + 6.2% employer, capped) and Medicare (1.45% + 1.45%, uncapped). Employer responsible for remittance.

State Taxes:

• State Income Tax: Rates/existence vary widely (0% in TX/FL/SD to 11.5% in NJ). Some states levy Gross Receipts Tax instead of/supplementing income tax.
• Sales Tax: Charged on retail goods/some services. Rate = state + local (city/county). Company collects from buyers.

Key Requirements:

• Quarterly Estimates: Prepay federal income tax and payroll taxes.
• Annual Filings: Federal (Form 1120 C-Corp, 1120-S S-Corp, 1065 partnerships/multi-member LLC) + state returns.

Foreign Owners: US-sourced income taxable. Reporting rules apply (e.g., Form 5472 for foreign-owned LLCs/corps). Consultation with international CPA essential.

Banking, Accounting, Licensing

Banking: Opening a business account is critical. Foreigners without SSN/ITIN/US address face challenges. Major banks often require owner's physical presence. Fintechs/international-specialist banks offer flexibility – verify reliability/fees. Prepare: incorporation docs, EIN, Operating Agreement/Bylaws, beneficiary passports.

Accounting: Strict bookkeeping/reporting standards. Engage qualified bookkeeper + CPA (especially internationally experienced) from day one. Professional software (QuickBooks/Xero) is standard. CPA assists with tax planning/filings.

Licensing/Permits: Vastly depend on state/city/industry (food service, construction, finance, healthcare, alcohol/tobacco sales, etc.). Research requirements via:

• Federal agencies (FDA/FAA/ATF if applicable)
• State business/licensing department
• City/county clerk's office
• Professional licensing boards

Operating without required licenses risks heavy fines/business closure.

Business Visas/Immigration: Options for Entrepreneurs

Lack of permanent residency is the primary challenge. No dedicated "startup visa" exists. Main pathways:

• E-2 Investor Visa: For treaty country nationals (includes many European nations/Canada/Japan – excludes Russia/CIS). Requires substantial investment (no fixed amount, must be significant for business type/sufficient for launch) in active commercial venture. Visa holder must direct/develop business. Issued ≤5 years, renewable. Path to green card difficult.
• L-1 Intracompany Transfer: For establishing foreign company branch/subsidiary/new office. Requires applicant worked ≥1 year abroad in managerial (L-1A) or specialized (L-1B) role. L-1A offers clearer green card path (EB-1C).
• O-1 Extraordinary Ability Visa: For entrepreneurs with exceptional achievements (national/international recognition, major publications, prestigious memberships, high salaries, proven commercial success). Requires US company/agent sponsorship.
• EB-5 Investor Green Card: Requires $800k-$1.05M investment + ≥10 US jobs creation. Lengthy/expensive process with source-of-funds verification.
• H-1B for Founders: If company can hire you as specialist (typically requiring degree) and win H-1B lottery. Challenging for startups. Ownership control creates renewal risks.

Critical: US immigration law is complex and volatile. Consultation with experienced business immigration attorney is essential before incorporation/investment. Incorrect visa strategy may cause denial/investment loss.

Labor Market, Hiring, Payroll

US labor market is dynamic, but hiring entails significant responsibility/complex regulations.

• Hiring: Requires work authorization verification (Form I-9), anti-discrimination compliance, competitive wage setting (federal/state minimum wages differ).
• "At-Will" Employment: Most states follow "at-will" principle – employer/employee may terminate anytime without cause (except discriminatory dismissals). Clear contracts/job descriptions recommended.

Payroll Taxes & Withholdings:

• Withhold from employee: Federal income tax, state taxes (if applicable), Social Security, Medicare.
• Pay employer share: Social Security/Medicare (FICA), federal unemployment tax (FUTA), state unemployment tax (SUTA, rates vary).
• File reports (Form 941 quarterly, W-2 annually to employees, W-3 to IRS).

Health insurance isn't federally mandatory for all employers but often essential for talent attraction. Penalties exist for large non-compliant employers (ACA). Paid leave isn't federally required; governed by company policy. FMLA (family/medical leave) compliance mandatory for qualifying companies.

Risks/Limitations, Business Culture Nuances

Risks/Limitations:

• Intense competition: Market saturation demands unique value proposition/strong marketing.
• Litigious environment: Essential liability insurance (General Liability, E&O, D&O).
• Regulatory complexity/cost: Federal/state/local compliance requires resources. Violation fines can be massive.
• Financial risks: Business failure is common. Personal loan guarantees may risk assets (especially partnerships/sometimes LLCs if "corporate veil" pierced).
• Foreigner restrictions: Visa challenges, account opening difficulties, limited financing access (SBA loans usually require residency). Extra IRS/FinCEN reporting.
• Sanctions/export controls: Critical OFAC/BIS compliance for international operations.

Business Culture Traits:

• Directness: Clarity, specificity, and candor expected.
• Punctuality: Lateness perceived as disrespect.
• Results-driven: Achievements/efficiency prioritized.
• Networking: Relationship-building is key.
• Individualism/initiative: Self-reliance/proactivity valued.
• Legal foundation: Trust matters, but major agreements documented.
• Work-life balance: Increasingly important, but hustle culture persists.

Startup Recommendations: Key Considerations

Launching a US business as a foreign founder demands meticulous preparation. Start with comprehensive market research – never rely solely on home-country experience. Analyze target audience, competitors, pricing dynamics, and distribution channels in your operational region. Conduct surveys/MVP testing to validate demand.

Develop a detailed US-adapted business plan emphasizing financial modeling, marketing strategy, and competitive analysis. Treat this as a living document – refine it with market feedback.

Engage US specialists early: Invest in a corporate/international transactions attorney and CPA experienced with foreign clients. They'll advise on optimal structure (LLC/C-Corp), tax planning (federal/state nuances), and immigration pathways – crucial for non-resident founders.

Choose incorporation state strategically: Consider not just "tax haven" myths but practical factors: taxation variations, corporate law, administrative ease, registered agent access, and proximity to customers/partners.

Address immigration immediately: Without legal status, managing US operations is severely constrained. Discuss options (E-2/L-1/O-1/EB-5) with an immigration attorney – evaluate requirements, risks, and green card prospects based on your startup/citizenship.

Budget for compliance: Allocate funds for registration fees, registered agent, legal/CPA services, licenses/permits, and business insurance. Cutting corners risks greater future costs.

Build online presence: Develop a professional website, activate relevant social media, and launch basic marketing (SEO/SEM) to build brand awareness/test demand before physical US presence.

Master business culture: Understand direct communication norms, punctuality, results orientation, networking importance, contract sanctity, and work-life balance expectations. Cultural adaptation is as vital as legal compliance.

Conclusion

Doing business in America unlocks unique opportunities but demands thorough preparation, adaptation, and expert support. Understanding legal, tax, immigration, and cultural aspects isn't optional – it's essential. Approach your US startup as a marathon, not a sprint. Invest in learning the rules, build a trusted advisor team, stay flexible yet persistent. Remember: 5.5 million foreign-owned businesses began exactly where you start.