You need to know that!
The USA is a highly interesting business location for company founders, especially for digital business fields. The United States not only offers the advantage of proximity to advantageous business contacts and potential investors, but also represents an ideal market for the corresponding products. And: The US bureaucracy keeps the door wide open for foreigners to start a business. But anyone wishing to set up a business in the USA should know exactly how.
Setting up a business in the USA: Some facts
The American economy is often clinging to the myth of the unbureaucratic. In fact, however, the restrictions on starting business in the US are considerable in some respects. Even the famous American entrepreneurial spirit itself is not as strong as its reputation. A study conducted in January 2015 found that only 42 percent of adult Americans dare to start a business. Surprisingly, it was the German participants in the study who, at 44 percent, came off as more entrepreneurial in this sense. However, 66 percent of the Germans surveyed considered setting up a business to be difficult, while only 57 percent of the Americans surveyed shared this view.
The two pairs of figures may symbolize two statements that are relevant to the topic: Firstly, it is not easy to become a successful entrepreneur, and secondly, the conditions for entrepreneurs in the USA are comparatively favorable. Just to mention a few aspects:
- The actual formalities for setting up a business in most US states are quick and uncomplicated.
- In many states the foundation is possible online
- A notarial certification of the deed of incorporation is not necessary
- Minimum start-up capital does not have to be submitted
- Overall, start-up costs are low compared to Germany
- In some states (e.g. Delaware and Florida) the corporate taxes are enormously favourable.
What corporate legal forms does the American economy offer to choose from?
The decision as to the legal form of the company to be founded depends on various factors that are of decisive importance:
- the amount of capital to be invested
- the liability
- the role of any co-partners
- the effect on the level of the tax burden for the founder
However, the federal structure of the United States allows its states to shape the forms of society in their own way. For this reason, company law in some states differs considerably from state to state in terms of details. The following is a brief list of possible forms of company.
The Sole Proprietorship is similar to the German partnership under civil law (GbR) and is the most common form of business in the USA. The company owner(s) is/are liable with his/her personal assets. As a rule, a local name registration or individual registration (license) is sufficient for the foundation, and of course a branch-related license, if necessary (real estate license, hotel license, etc.).
The following forms of partnership refer to forms of enterprise in which one or more natural or legal persons jointly operate an enterprise in order to make profits. They all differ from the US Corporation (see below) in a less complex corporate structure.
Limited Partnership (LP)
The Limited Partnership is comparable to the German Kommandit Gesellschaft (KG). The limited partner pays the capital subscribed by him into the company and is not personally liable as a result, while the general partner has unlimited liability with his assets.
General Partnership (GP)
Unlimited liability also applies in the case of a General Partnership, which is similar to the German oHk and GbR. The partners involved are personally liable.
Limited Liability Company (LLC, LC)
The Limited Liability Company is to a certain extent a hybrid of a corporation and a partnership, but its liability is limited. Unlike the German GmbH, which it otherwise resembles, it is not a corporation. The partners can be taxed as a corporation or as a partnership, and accordingly corporate tax liability arises or does not arise. Some federal states allow the formation of one-person LLCs.
Limited Liability Partnership (LLP)
Like the Limited Partnership (LP), the Limited Liability Partnership is a partnership and is similar to the German limited partnership without general partner. The partners are liable with their assets. The LLP is often chosen as a form by freelancers such as lawyers and tax advisors, and in some states it is reserved solely for such professions.
Limited Liability Limited Partnership (LLLP)
The Limited Liability Limited Partnership is a special form of the Limited Partnership (LP), in which the General Partner also has only limited liability. In contrast to the LLP, here all partners can directly exercise the management. The tax treatment is similar to that of the LLP.
Corporation (Corp., Inc.)
In a certain way, the corporation stands between the German forms Aktiengesellschaft and GmbH. However, here too the founders are not obliged to raise their own capital. The shareholders are not personally liable. Most large American companies are corporations. Special features of the corporation concern in particular the centralized management structure, the unlimited existence time and the uncomplicated transferability of business shares.
Which type of company is the most suitable?
Of the mentioned forms of business, sole proprietorship is certainly the easiest to implement, but more interesting for start-ups is usually the limited liability partnership, which is also possible in many states as an individual company. In addition to the limitation of personal liability, there are often tax advantages, depending on the state. This advantage also sets LLP apart from US corporations, whose focus on company shares is likely to be too complex for many founders anyway.
In view of the role of the states in the American economy, the type of company that actually offers the greatest advantages depends on the specific conditions offered in the individual states. The founder must find out in advance what these conditions are. After all, the USA consists of 50 states.
No foundation without a visa
No less important than the type of business is the visa that the future entrepreneur needs to set up in the US. You can use the online form to travel to the states for 90 days to set up a business. For a longer stay as well as for the status as a company owner you need a suitable visa. The American bureaucracy does not allow people who do not live in the USA to be foreign owners of an American company.
Which visa is required and how do I get it?
The point of contact for visas for German company founders in the USA is the US Consulate General in Frankfurt (Main). Here you have to apply for an investor visa E2 for the future owner of the company and, if applicable, especially qualified and leading employees.
The conditions attached to the issuance of an E2 investor visa reflect the goals of the United States to let foreign investors into the country to generate real jobs. As a result, the applicant must demonstrate that it will invest a substantial amount to make a profit in the United States that will not only feed itself or its family, but also create jobs in the states.
Exact figures are not defined by law. Any form of speculative transaction is rejected. Equally important is the conviction of the consulate official that the business has already been set up.
The written submission of an idea is not sufficient.
Neither does the proof of funds on accounts.
In addition to a detailed business plan, it is advisable to submit evidence of investments made specifically for the establishment of the company (e.g. in software or business cards).
Evidence must also be provided of the business process already in progress.
The examination of the application takes place within two to four weeks. If the assessment is generally positive, the applicant will be invited to an interview. If the founder makes a serious impression in the course of this interview, the visa will be issued to the applicant and, if applicable, to a spouse and unmarried children under the age of 21.