
Ask HN: How to setup a company in U.S. without being there? - ahmedaly
Hi guys,
I am working on a startup, and I will need to charge users for my services.<p>I am in Egypt, and its not possible to have an international merchant account, or in other words, its very expensive..<p>So I would like to know, how can I setup a tax ID and EIN or whatever, so I can make a merchant account based in U.S.?<p>Is it possible to do that without having to be physically in the U.S.? Are there any companies that help do that?<p>Thanks so much in advance.
======
ari_
Ahmed, The issue is not setting up the company - what Maro describes below is
a long and unnecessary way for most small companies to start up an american
company. It can be done for 2 - 400 just to form the company. If you are
seriously contemplating VC, then you need lawyer. I would also agree with Maro
about accountants :)

Anyway, the issue is that no merchant account will accept your US company,
even if it has an EIN and a bank account, without a personal guarantee. And
they won't accept a personal guarantee unless they can either: 1\. Pull your
US credit report (which you don't have) 2\. Be assured you have some assets
that are within reach of the US judicial system or 3. take a huge rolling
reserve off of your payments.

I would strongly suggest using 2CO, Paypal to get started. Too often we get
involved in the paperwork and other stuff without proving the MVP.

Good luck from due east.

------
firearch
This might help

[http://blog.freshdesk.com/how-to-incorporate-a-us-
corporatio...](http://blog.freshdesk.com/how-to-incorporate-a-us-corporation-
from-outs/)

~~~
lfittl
Author notes "I have lived in the US and have a social security number." (in
the comments) - can you open up bank/merchant account without SSN?

~~~
garethsprice
If you don't qualify for an SSN you can get an ITIN (Individual Taxpayer
Identification Number) that can be used for some things in place of an SSN,
but it's not a "first class" identifier. I think an ITIN is fine for setting
up a bank account, but it's been a while since I did it.

------
Maro
Disclaimer: I'm not a lawyer or accountant, and this is not legal or
accounting advice.

I recently created a US company. Here's what I learned:

Most companies are set up in Delaware, because of Delaware's taxation and
advanced corporate legal system. Setting up (and shutting down) a company in
Delaware is very simple and streamlined, and most big US corporations are
technically Delaware corps.

If there's a chance of raising US VC capital in the future, you will want to
create a Delaware "C" Corporation, specifically. Many VCs will demand that you
create a "C" Co. and transfer IP/business if you had another Co. previously.
Ownership in a "C" Co. is based on shares, and the "C" Co. can later release
and sell new shares to VCs: that's how investment deals happen in a nutshell.

To set up the company, we used a lawyer. After shopping around, $300/hr is
what you should be prepared for, with about 10-20 hr to set up the "C" Co.,
another 10-20 if you want to transfer IP. Also, if your existing Co. is
located in say Egypt, you'll need Egyptian legal council to cover your ass on
that end (VCs will demand egyptian legal opinion for transfer of IP).

Once you have the company, you will need an EIN. That is simple and can be
completed using a website for a Delaware Co. Then you need to open a bank
account. In our case a US based partner did that at his local bank. There's an
outfit called Bank of Silicon Valley who seem to be helpful in cases like
yours and you can open an account with them, over the phone. Then you will
need a virtual office and mail forwarding services, such services exist for
Delaware Co's for a low yearly fee (~$50/mo), your lawyer will set you up.
You'll also need a US accountant. Btw. your US lawyer will give you all this
information. Overall you should expect to spend $10-20K on this.

In practice, the whole thing is pretty simple, and can be managed through
email (scans for signatures), and US businesses are used to this. The whole
thing can be completed in 1-2 weeks from the point of making initial contact
with the US lawyer. Although lawyers have a bad reputation, I found that most
lawyers are usually very professional and upfront about what they will charge
and what the process will be, what to expect. If you need a contact try
<http://wsglegal.com> is who we were recommended, used, and were very happy
with. (I'm not affiliated).

So far so good, what sucks is the accounting / tax issues. That's where you
will waste most of your time, esp. if you are based in Egypt. In our
experiences, while lawyers are pretty professional about what they do,
accountants are less so, and accounting/tax issues are the worst offenders for
wasting valuable time. That's where you should be prepared for shit to hit the
fan initially, esp. for international issues where neither side (US/Egypt)
will have complete legal/accounting/tax knowledge. Your cheap plain vanilla
local accountant will be useless.

Finally, you should know that the USA is a very litigious country, meaning
people are more likely to sue you if they feel you owe them or you've wronged
them. So once you have a US presence (a US Co.), customers and business
partners, sooner of later shit _will hit the fan_ and you will probably get
sued. It's the cost of doing business.

Overall, in my experience, if you don't want to raise US capital, I would
suggest you do _not_ set up a US Corp. Staying local, and having to only deal
with local legal/accounting/tax issues is _much_ simpler for you. Also, if
your company is based in Egypt it's probably harder to sue you. I would invest
major energies is trying to figure out how to take payments as an Egyptian
entity, although admittedly I don't have much experience in this. You could
also look into setting up a UK Co., I know people who did that to take
payments.

The EverWrite guys have a nice writeup here:

[http://everwrite.com/opening-a-delaware-corporation-an-
incor...](http://everwrite.com/opening-a-delaware-corporation-an-
incorporation-guide-for-foreigners/)

~~~
mickeyp
Sounds very complicated compared to the UK. You can set up a company (limited
liability), here, over the internet, for about £15. If you're in Europe that's
usually the preferred approach for a lot of small businesses; indeed, it is
the most tax efficient way of operating for businesses that're in the UK as it
shelters your person from creditors and liabilities compared with a simple
sole trader arrangement. A lot of accountants will do a monthly package deal
to manage your company's books and the accounts for you if it is simple, which
it invariably is for most IT shops.

~~~
diego
It's not that different in the US. OP explained the case in which you're
setting up a company for VC investment. It is only slightly more complicated
than an LLC. In fact the time consumed by the whole process of setting up a
company is negligible compared with the time spent fundraising.

~~~
syedkarim
Actually, OP is not interested in setting up a US company for fundraising
purposes--the purpose of the US-entity is to easily process credit card
payments.

------
cmer
This article from my blog might help.
[http://blog.carlmercier.com/2011/08/29/us-incorporation-
for-...](http://blog.carlmercier.com/2011/08/29/us-incorporation-for-canadian-
startups/)

It's more geared towards Canadians but I'm sure many things apply.

------
gte910h
You'll be eaten alive by taxes if you're not careful, but yes, you can do it.

Law firms help do this. A few grand you can get someone like
<http://www.grellas.com/> do it 100% venture capital ready in Delaware.

If you're really just looking for a merchant account, make an LLC and get one
in the name of that. Far cheaper, but will require the redo when/if you want
investment.

Make sure you file the paperwork to do it's taxes like a C corp instead of a
disregarded entity (Form 2553)<http://www.irs.gov/pub/irs-pdf/f8832.pdf>

------
Dystopian
If I was to look for creating an offshore corp I'd look at Hong Kong as
opposed to Delaware, mostly for litigation reasons, to a lesser extent tax
reasons. corps are pretty standard in both jurisdictions though. You'll be
looking at around 10K-15K for setup and around 1K-2K a year in management /
accounting fees. If you can find a lawyer / accountant in your jurisdiction
that specializes in this they usually have preferred agents they work through
to get you set up.

~~~
galenward
No way should you have to pay 10k+ to setup a corporation in Delaware. That's
way too much.

~~~
Dystopian
It should be if you're coming from overseas. 2 sets of lawyers and
accountants. The hours rack up pretty quick.

It's also good to have at least one of the sets on hand via retainer for best
practices for tax and legal issues. That's if he's making enough to deal with
these costs.

(A company I was a co-founder in a couple of years ago did everything
bootstrapped - even our terms of service we kind of slapped together quickly
with sections of other company's terms that we re-wrote. We found out pretty
quickly you can get blindsided by legal trouble that you never thought was
possible.)

------
hackrocket
Can anybody recommend a good US CPA and an accountant with experience in
working with tech startups?

If you are looking for a lawyer I received good recommendations for:

\- Ryan Roberts @ <http://startuplawyer.com/contact>

\- Scott Edward Walker @ <http://walkercorporatelaw.com/>

\- Grellas Shah LLP @ <http://www.grellas.com/>

------
bernardoporto
You can find a lot of information here:

1) [http://everwrite.com/opening-a-delaware-corporation-an-
incor...](http://everwrite.com/opening-a-delaware-corporation-an-
incorporation-guide-for-foreigners/)

2) [http://everwrite.com/opening-a-us-corporation-an-
incorporati...](http://everwrite.com/opening-a-us-corporation-an-
incorporation-guide-for-foreigners-part-2/)

------
mynewcompany
Good info listed so far. We've written up a guide here:
<http://www.mynewcompany.com/international.htm>

A few things:

-Getting a US FEIN no longer requires a Social Security Number or ITIN, you can call a special phone # the IRS provides.

-As mentioned, you can form the company now (e.g. a Delaware Corporation) using an online service like ours (~$300) and the VC will require you to modify your articles of incorporation later anyway so I don't see the necessity of spending this much up front unless you are guaranteed getting financed.

-There ARE some banks that will open an account for you without a visit, we've listed a few at the link above but it usually depends on if they have a branch in your home country or if it's a "trusted" country (e.g. Singapore vs. Nigeria).

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speleding
If you just need a way to get paid then there are better ways than setting up
a company. You could easily waste a lot of time there.

The way I branched out my company into unknown territories is to find a
reseller there. Let them take care of the regulatory stuff. In this economy it
should be easy enough to find someone who already has the company in place and
needs some extra work on the side.

You can set up the contracts in such a way that you retain the option to buy
them out and set up your own company at some point in the future.

------
mmaunder
I did this before I became a citizen and before I had residency. Trust me: You
only have one minor problem right now and it's not having a merchant account.
Focus on solving that. Setting up a US corporation is a world of expense,
complexity and hurt you don't need. The issue goes beyond the obvious, for
example it's likely you'll be refused entry to the USA on a tourist visa if
you're a shareholder and director of your own USA C corp. [No it's not
documented anywhere so don't bother Googling]

~~~
rprasad
None of my non-US clients has ever been denied entry into the US on any visa
because they were a shareholder or director of a US corporation. If anything,
they have generally received visas faster than they did before becoming US
investors.

Denying entry to foreign investors would actively discourage foreign
investment in US industry, which is completely at odds with most of tax code.
Indeed, US law is _too_ generous to foreigners who own businesses in the US.

~~~
mmaunder
There are foreign investors or directors and then there are one man
corporations with no employees, zero capital and where the only shareholder is
a non-resident.

------
tszming
Is it really a good idea for a foreign startup to setup a US company just
because of handling recurring payments for international customers, even
including the factor of US tax?

~~~
l0gicpath
There are only 4 banks in Egypt that offer a payment service for online
merchants, none of which you'd be happy dealing with in terms of up front fees
and quality of the service offered. We steer away from 3rd party payment
service providers like Alertpay/Moneybookers because of the normal disruptive
UX (redirecting customers). But those 4 banks are a magnitude worse. Most of
MENA based startups that accept payments online have subsidiaries in UK, USA
or Canada.

~~~
handzhiev
Indeed can't you just user Paypal, Fastpring, Saasy and so on? If accepting
payments is the only reason to ask I don't think you need US company

~~~
ahmedaly
I have a surprise for you.. PayPal is not enabled in Egypt yet!

~~~
mmvvaa
I was hoping someone would point out this issue. It's not just Egypt. Colombia
suffers from the same luck. The real question is: What alternatives do non-
paypal countries have?

~~~
handzhiev
What about FastSpring, Saasy, ShareIT? I think they work in most countries

------
alemhnan
I found that article here in HN some months ago:
[http://www.pluggd.in/incorporating-company-in-usa-from-
outsi...](http://www.pluggd.in/incorporating-company-in-usa-from-outside-297/)

There are some useful info on that article. Nevertheless if someone has more
info I would like to know different perspectives on that topic.

------
pajju
This is a good place to look: [https://www.usa-corporate.com/setting-up-a-us-
company-as-a-n...](https://www.usa-corporate.com/setting-up-a-us-company-as-a-
non-resident/)

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startupsdesigns
You might be able to find answer to your question by contacting these guys.
Hope it helps.

<http://www.ready2inc.com/outsideUS.asp>

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ahmedaly
Hi.. pls support my startup: eCompuCloud on IndieGoGo:
<http://www.indiegogo.com/ECompuCloud?a=742602>

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sathishmanohar
Lets say, I incorporate as LLC, and decide down the road to take investment,
can it be done? Can a LLC be changed to C-Corp, later?

~~~
X-Istence
Yes, you can always convert one business type to another. One thing I have
noticed though is that depending on the state this can be a royal pain in the
rear.

------
melvinmt
It's not possible to open a bank account without being here in person (due to
Patriot/Anti-Terrorism Acts). Other than that, there are many companies who
can help you to get incorporated just by e-mailing papers back and forth.

~~~
kareemm
That's not true. We opened a bank account using Harris Bank over the phone a
couple months ago, with no problems.

------
neya
Hi Ahmed, Here's my experience - I'm not a lawyer or anything, but I run one
(an American LLC).

1) Ask yourself WHY you need a company in the US. It might not be worth it.

I registered one so that 1)it would be easier to accept payments from the US
through their native gateways, because in my country, all of them suck.But if
I had known the pitfalls first, I would rather have integrated with Paypal.

2)An American company's products are always perceived to be better than the
rest.

I registered an LLC and every year, I'm required to pay an annual fee of $250
USD as Franchise tax. Mine is in Delaware so its just $250, if its in
California, its going to be approx. $800 or so. $250 might not sound like a
big deal, but for companies like mine, that are bootstrapping, it really is.

You are required to pay some more money as tax, apart from the Franchise tax
on your ECI. ECI is effectively connected income - ie, The income generated by
doing business with the US. This is going to get complex if you have an online
internet business model.

You are required to have a registered agent to represent your company in
Delaware. They charge anywhere from $50 to $200 a year.

The total tax you might end up paying for the same revenue stream is:

Franchise tax + tax for your ECI + registered agent fee + your local country's
tax.

The situation gets even more complex when you hire more people.

Also, the organization's taxation methods change depending on the number of
members (single/partnership/multi-member, etc.)

More on this:
[http://www.irs.gov/businesses/small/article/0,,id=98277,00.h...](http://www.irs.gov/businesses/small/article/0,,id=98277,00.html)

The worst part is, if someone decides to sue you, suddenly you are answerable
to the American government, which you were not before. Your liability is also
increased (unsure of this though).

Travelling to the US becomes a nightmare when you own an American company.
Visa officers think you have a higher probability of settling there, rather
than returning and it becomes increasingly difficult to get to the US, which
I'm pretty sure is not what you want.

FYI:

I registered through a known friend, but the best place to get it done, if you
ask me, is through Harvard business services (www.delawareinc.com). They have
a lot of benefits (total cost to set up an LLC is under 600-700$ USD) and MANY
of my friends have registered through them. They also are very transparent and
their registered agent fee is only $50 a year! (I'm not their salesman though,
for god's sake)

Anyway, If I had known these disadvantages first, I might as well have gone
with a local organizational structure. Just keep these in mind while
registering your new company... my 2 cents.

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samkhan13
ahmed,

among all these comments the one by ari_1 is the only one i would attest to.

i am not a u.s. citizen nor a resident but i was in u.s. as a graduate student
between 2007 and 2010. i formed my company <http://www.pratimaanllc.com> in
2009 and went through the situations that you are considering. i even have an
eVerify number so that i can hire persons with valid work permit in the u.s.
who are not u.s. citizens or residents.

my company was originally an industrial design firm but i found many people
interested in the basic questions that you are faced with.

i re-geared my company to provide start up services like the ones you require.

no matter what, a company in the u.s. needs to be bound to a human's Social
Security Number (SSN). A company can be formed by the Employer Identification
Number (EIN) of another company which, in itself can be tied to an EIN of
another and so on. but eventually there is a human's SSN tied to this
arrangement.

forming a foreign company's u.s. subsidary is common and easy in every state
due to the reforms in 2008 where practically every state adopted simpler
procedures and "Uniform Corporation Codes". it is so simple that many state
governments have a daily limit (15 or 20) on the number of companies that can
be created with the same SSN or EIN. yes, a daily limit means that there are
people registering more than 15 companies daily with the same SSN.

the most crucial component is a manager within the u.s. who carries out the
"fiduciary" obligations partnering to the company's daily operations. you
don't have to explain all these operations and the managers'complete role at
the time of incorporation. but you really ought to do thin in an "operating
agreement" which basically a document maintained at the company premise
explaining the company's bylaws, rules, regulations, roles etc.

depending on the state, registering a company can take between $50 to $300 as
a processing fee taken by the secretary of state's office. as a personal
observation, states on the west coast and the east coast are the most
expensive, the central ones are the cheapest.

i registered my company in iowa, another one in seattle and one ind washington
d.c. i'm operating them from india.

all these offices were merely to grab market share based on the services i am
providing and for giving my employees a sense of belonging and ownership. i'm
an industrial engineer and i believe that work must inculcate such a notion in
a worker.

but what you really ought to consider is, why do you actually need an office
and bank account in u.s.? do you expect more than 5 daily transactions? is you
plan to accumilate these daily transactions at the u.s account and transfer
them to yourself in egypt monthly to avoid transaction fees?

something like that does make sense but...

to start out, using paypal would be a valid and worthwhile advice. all the
paper work takes time, money and will remove you from the actual process of
dealing with your customers and providing them the service/product they need.
all the u.s. banks have weird hidden fees and shopping for banks is an arduous
task which, is also a very serious managerial decision.

if you want to chat more send me a hollar on my company's website. but as
ari_1 suggested, concentrate on proving Market Value Proposition before
dealing with the backend processes that companies eventually need to handle.

wish you all the best,

sam khan

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nirvana
Incorporating in the USA varies by the state, and there are implications based
on which state you incorporate in. For instance, some states have no corporate
income tax, others due (Which is completely separate from federal taxes.)
Various states have different amounts of regulation, licensing you might need
(depending on your business) and different burdens of bureaucracy to deal
with. Just something to be aware of. You'll need to at least file annual
reports and pay a fee each year to keep the corporation going, though there
may be other paperwork you have to keep up too.

The company corporation exists to provide most of the services you need. You
can find them at www.incorporate.com They are good about reminding you of
everything you need to file, and they also provide registered agent services.
Every company needs to have someone in the state where they are incorporated
who is there to receive process (e.g.: if someone sues you you have to have an
agent who is identified publicly so you can get the court papers.)

They provide registered agent services and will facilitate incorporating in
many of the states.

If you decide you need a mailbox in the USA, then there's earthclassmail.com
which will offer you addresses in many states. I'm not sure what they require
for non-american citizens to set up an account.

------
yashchandra
Since I own a small business (freelancer 1 man company), I can assure that if
the idea is just to save money on international merchant account etc, the OP
should do more research about cost and benefits. To setup any corporation in
the US, there are multiple steps which also include cost. Do not go for the
online ads that claim you can setup a company for $100. There are far more
things like state filing etc. that are usually not included in those. Not to
mention that you will be dealing with one of the most dreaded income tax
collectors (a.k.a IRS in the US). I say this having lived in 3 different
countries including the US. If you absolutely need a foregin company outside
Egypt, look into Asia (Hong Kong or Singapore preferably).

