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America is known for its innovative spirit. For many years, the United States has been a place where anyone can follow their dreams and start their own business. That fact is reflected in economic data, where small businesses in the United States employed 58.9 million people in 2015. That’s over 47% of the entire private workforce.
For people coming from outside the United States, there are some additional obstacles when it comes to starting or buying your own small business. However, these obstacles are not insurmountable. In order to start your career as an entrepreneur in the United States, you’ll need to navigate the legal complexities of the immigration system and learn about the tools that are available to entrepreneurs.
In recent years, immigrants have found a lot of success in American small businesses. One study found that the percentage of self-employed workers who were born abroad more than doubled from 8.6 percent in 1994 to 19.5 percent in 2015.
The involvement of immigrants in the U.S. economy isn’t necessarily anything new, though. The inventor Alexander Graham Bell, who famously pioneered early telephone technology, was born in Scotland before coming to the U.S. to work. Andrew Carnegie, the great steel tycoon of the late 1800s, was also born in Scotland and later immigrated to the U.S.
Today, immigrants make up a sizable contribution to new business in the American economy. Thanks to permissive business laws in some states, immigrants are responsible for 25% of new businesses created each year. One study found that, while only 9% of American-born residents engage in entrepreneurship, 11.5% of immigrants are business owners. That number is even higher at 13% for refugees, or individuals who have immigrated to the U.S. as part of this country’s refugee program.
In the U.S., small business laws can vary from state to state. These laws can either be business-friendly — making it relatively easy to start and run your own business — or they can make it more difficult for entrepreneurs. Among the states, Delaware is the best for starting a business. At least, that’s what Fortune 500 companies seem to think, since more than 66% of them are incorporated in Delaware. This is due to the benefits of starting a business in Delaware, such as the low corporate tax rate, and the fact that it’s possible to form a business in Delaware as a non-resident.
For entrepreneurs who are coming to the U.S. from abroad, it’s important to find the right state for you to start a business in. Urban areas tend to do better than rural areas, so it’s a good idea to look at which cities are best for immigrant entrepreneurs.
According to one list, bigger cities tended to have more favorable options, with cities like Los Angeles, Seattle, New York, and San Francisco making the top ten. Some of these cities cite benefits like a $12 minimum wage (which is higher than the U.S. median) and universal preschool programs. Of course, these cities don’t always exist in the most business-friendly states, so it’s important to remember that it’s possible to live in one state or city, while incorporating your business in Delaware.
For immigrants who want to start a business in the U.S., the first step is to navigate the immigration system. There are a number of visas that a non-citizen entrepreneur could use to get a peek at the small business atmosphere and opportunities available in the U.S., before committing to a serious investment in the country. It’s important to understand what kinds of business visas are available or what non-business visas could be used to learn about business in America.
The U.S. government offers several visas that someone could use to learn more about small businesses in America.
The B-1 Temporary Business Visitor visa allows people to come into the U.S. from abroad for up to six months for certain business purposes, such as consulting with a U.S.-based company, negotiating a contract, participating in a short-term training program, along with many other reasons.
The H-1B program allows businesses to temporarily bring foreign laborers into the country and hire them. In order to make use of this program, you’ll need to have an arrangement with a U.S.-based business beforehand.
The J-1 visa allows a person to come to the U.S. from abroad for a work-and-study- based exchange program. It can be especially useful for individuals who want to work for a U.S.-based company while learning more about the trade. However, you will need to have at least a job interview lined up in the U.S. when you apply for the program.
The F-1 student visa allows individuals to enter the U.S. as a full-time student at an accredited educational institution or an English language training program. F-1 students can’t work off-campus during their first academic year, but they are eligible for certain on-campus jobs.
The M-1 student visa is specifically for vocational students who want to come to the U.S. to study. M-1 students can only engage in on-the-job training after they’ve completed their studies.
If you have a business idea and you’re ready to commit — either starting your own business in the U.S. or investing in an existing business — then you’ll want to get some kind of entrepreneur visa. These visas will enable you to stay in the U.S. and work or own a business, but they are typically only available to individuals who plan on investing, people with extraordinary abilities, or advanced degree holders.
There are a number of visas that you can use to enter the U.S. as an entrepreneur, although many of them will require you to work for an existing company in the country.
The E-2 visa allows foreign nationals to come to the U.S. as long as they invest a “substantial amount of capital in a U.S. business.” This visa is only available to countries with which the U.S. shares an E-2 treaty.
The EB-5 visa is specifically for investors who contribute to job creation through their investment in a U.S. business. It grants a preference to investors who invest in new businesses in designated economic regions, where job growth is deemed especially important.
The EB-2 visa enables individuals with an advanced degree or some other exceptional ability in the arts, sciences, or business to enter the U.S. and work in their field. Professionals applying for an EB-2 visa should expect to show some kind of proof of their ability and expertise, such as official academic records, documentation of at least 10 years of work experience, or membership in recognized professional associations.
The EB-1 visa is for exceptional individuals who want to conduct business in the U.S. People with an extraordinary ability in a number of fields are eligible for this visa, but so are multinational business managers and executives.
The L-1A visa allows for the intracompany transfer of executives or managers. It enables businesses to transfer managerial and executive talent-based abroad to a location in the U.S.
Visas typically allow you to enter the country and conduct a specific kind of business. The ultimate goal for any immigrant entrepreneur should be permanent residency status, also known as a green card. A green card will enable you to live and work in the country. It’s also the first step towards becoming a U.S. citizen. In order to get a green card, you will need to:
Unlike other immigrants, people coming to the U.S. with refugee status don’t necessarily have family or business arrangements in the country before they arrive. If you are a refugee in the U.S., you are eligible to apply for a work permit. However, after your first year in the country, you must apply for a green card and permanent residency.
Once you have permanent residency through a green card, the legal challenges of the immigration system have been cleared, as far as starting your own business. From here on out, it’s a matter of developing your business from the ground up, as any other entrepreneur must. Fortunately, there are tons of resources available to help entrepreneurs in the U.S., whether natural-born citizens or recent immigrants.
Mentor and professional organizations play an important role in almost any career. For immigrant entrepreneurs, these organizations can help you to navigate the difficulties of starting your own business.
Many immigrants and refugees in the U.S. have college degrees or other advanced job training from their home countries. However, when these credentials aren’t accepted by domestic employers, they end up working in jobs far below their skill level. Upwardly Global is an organization dedicated to helping skilled immigrants work in jobs that suit their abilities. They work to connect employers with diverse talent, making them ideal for small businesses run by immigrants.
The Immigrant and Refugee Community Organization (IRCO) is involved in the needs of immigrants and refugees across a wide range of domains and issues. They provide social services, such as education and language services, but they also help to connect immigrants and refugees with skills and training that they need to succeed.
Femigrants exists at the intersection of immigration and feminism. Its goal is to provide a professional network for female immigrants who are entrepreneurs, business owners, or leaders in the STEM and business fields. They provide mentorship services, professional development and training, as well as special events intended to help diverse professionals succeed in the workplace.
SCORE is a resource partner of the Small Business Administration (SBA). In that role, they provide mentoring, workshops, and educational resources to entrepreneurs from all backgrounds, including immigrants and refugees.
Starting capital is a big part of building your own business from the ground up. You’ll need it to purchase equipment, hire your first employees, and pay business expenses until your revenue stream kicks in. Grants and loans through government organizations, nonprofits that support entrepreneurs, and lenders can help you get the starting capital that you need to get your business moving.
If you’re currently in school, or considering going back to school in order to further your education related specifically to your business goals, there are available to you as well.
The Microenterprise Development Program is a service provided by the Department of Health and Human Services. This program provides training and technical assistance to refugees, helping to provide them with the skills necessary to start and operate a business. These skills include management, accounting, and marketing. The program also provides micro-loans of up to $15,000.
The Small Business Administration (SBA) providers lender matching services. Through these services, the SBA connects entrepreneurs and small businesses to lenders who can meet their needs. The SBA also guarantees the loans, allowing lenders to invest in entrepreneurs more freely.
The Targeted Assistance Program provides financial support to refugees. Specifically, the intention of this financial support is to help refugees find employment and become economically self-sufficient.
Refugee and Entrant Assistance provides financial assistance to refugees, for the purposes of improving self-sufficiency and early employment prospects. This program is available to refugees of Amerasian, Cuban, or Haitian descent, but also to victims of human trafficking.
Once you’ve secured funding, it’s time to determine your business structure. This will play a role in how you run your business, but also in how business laws affect you. There are several types of business structures to be aware of.
Corporations are structured in three tiers: at the top are shareholders, then directors, then officers. Any company that registers as a corporation has to respect this hierarchy. Among corporations, there are also three ways of being taxed. This gives rise to three subtypes of corporation:
C corporation is the default tax status for corporations. Companies in this category pay taxes on their profits each year and they may choose to distribute dividends to their shareholders. However, shareholders must go on to pay income tax on the dividends that they receive. When the shareholders are a small group who are closely involved with the business, as is the case for many small businesses, this can result in a double taxation of profits.
S corporations avoid paying taxes on their profits. Instead, they pass on the company’s tax responsibilities to their shareholders. However, only U.S. citizens can apply for S corporation status.
Nonprofits are tax exempt. Since they are explicitly organized not to make a profit, they do not pay income tax to the IRS. However, in order to qualify for nonprofit status, these corporations need to have some charitable cause and meet other requirements.
No matter their tax status, corporations are required to file an annual report by March 1st of every year, including the corporation’s address and information, as well as the information of all the directors and at least one officer.
In contrast to corporations, LLCs in Delaware are not required to disclose information about their members. This is why LLCs like Youtube are able to operate with no one but the company’s members knowing exactly who owns the LLC. In addition, unlike corporations, LLCs only have members and managers. They don’t have shareholders or well-defined hierarchies according to corporate law. Instead, the structure of an LLC is determined by agreement between all its members.
In an LLC, the tax liability is passed on to the LLC’s members. The company itself does not pay a tax on its profits.
A limited partnership is composed of general partners and limited partners. Unlike an LLC, whose members can manage the business but aren’t legally liable, general partners in an LP have personal liability for debts and obligations, while limited partners have no say in the day-to-day management of the business.
However, like an LLC, the LP itself is not liable for income tax. Instead, that tax burden is passed on to the partners in the LP, according to their responsibilities in the company.
For entrepreneurs who are starting from scratch, the business will be classified as a sole proprietorship until it is incorporated as another entity type. Under this structure, there is only one owner, who is responsible for every financial element of the business, including the tax burden as well as any debts and liabilities held by the business. Despite its simplicity, this structure is not recommended as it can create unnecessary risk for the business owner.
Once you’ve decided how you are going to incorporate your business, it’s time to come up with a name and register it.
Choosing a name may seem like a trivial task, but it’s actually very important. Depending on where you incorporate, there are likely to be requirements about how you name your business. For example, in Delaware, LLCs must contain “LLC,” “L.L.C.,”or “Limited Liability Company” at the end of their name. There are also restrictions regarding using the word “bank” or “university” in the name of a company. Finding a good name is a matter of picking one that represents your business well and that meets all the requirements for incorporation in your state of choice.
Once you’ve got the details figured out, you can register your business online. At this point, you can obtain a Tax ID number (EIN), which is like a social security number for your business. Depending on your situation, you may also be required to apply for an individual taxpayer identification number (ITIN), which is available to non-residents and resident aliens from the IRS.
THE AUTHOR OF THIS BLOG ARTICLE IS NOT A LAWYER AND HARVARD BUSINESS SERVICES, INC. IS NOT A LAW FIRM. THE ARTICLE ABOVE IS NOT INTENDED AS LEGAL ADVICE AND SHOULD NOT BE TAKEN AS LEGAL ADVICE. THIS SHORT ARTICLE IS STRICTLY TO MENTION SOME ASPECTS OF DELAWARE’S CORPORATION LAWS AND/OR LAWS RELATING TO OTHER FORMS OF ENTITIES WHICH YOU MAY NOT BE FAMILIAR WITH. WE RECOMMEND THAT YOU CONSULT WITH A LAWYER BEFORE FORMULATING A STRATEGY WHICH WILL BE SUITABLE FOR YOUR SPECIFIC CASE.