International founders can form and own a U.S. company without U.S. citizenship or residency, but they need to make several decisions carefully: which entity to form (most venture-backed startups use a Delaware C corporation), how the company and its owners will be taxed, how to obtain an EIN and open a bank account, how to protect intellectual property, and whether the founders have immigration status that allows them to work in the United States. Owning a U.S. company does not by itself authorize anyone to work here.
The U.S. offers a large market and deep pools of venture capital, but its legal system is layered. Federal law governs areas such as securities, immigration and federal tax, while each state has its own corporate, employment and tax rules. Below is an overview of the main issues international founders face.
Choosing a Business Entity
Delaware C corporation
Most U.S. venture investors expect to invest in a Delaware C corporation because Delaware corporate law is well developed and widely understood, and because the corporation can issue preferred stock and stock options in a familiar way. A C corporation pays U.S. corporate income tax on its profits, and its shareholders are taxed on dividends. Foreign shareholders may be subject to U.S. withholding on dividends, often reduced by an applicable tax treaty.
Limited liability company
An LLC offers liability protection and flexible tax treatment. A single-member LLC owned by a foreign person is generally treated as a disregarded entity for U.S. income tax purposes unless it elects to be taxed as a corporation, but it still has U.S. reporting obligations, including an information return for transactions with its foreign owner. A multi-member LLC is generally taxed as a partnership by default, which can create U.S. tax filing obligations and withholding for foreign members. Many investors will not invest in an LLC, so founders planning to raise venture capital usually choose a C corporation from the start.
Our business formation page covers entity choice in more detail.
Foreign parent or U.S. parent
Founders who already have a company in their home country must decide whether to set up a U.S. subsidiary or to “flip” the structure so a new U.S. company becomes the parent. A flip can make the company more attractive to U.S. investors but may have tax consequences in both countries, so obtain advice in each jurisdiction before restructuring.
Getting Set Up: EIN, Banking and Registrations
- EIN. The company needs an Employer Identification Number from the IRS. Founders without a U.S. Social Security Number or ITIN can still apply, but the process for international applicants is often slower than online applications.
- Bank account. U.S. banks apply know-your-customer rules, and opening an account without a U.S. address or in-person visit can be difficult. Some banks and fintech providers serve international founders.
- State registrations. A Delaware corporation operating in California or another state generally must register there as a foreign corporation, pay state taxes and obtain local business licenses.
- Beneficial ownership reporting. Federal beneficial ownership reporting rules have changed significantly in recent years, with current rules focusing on entities formed outside the U.S. that register to do business here. Confirm current requirements when forming or registering.
Immigration: Ownership Is Not Work Authorization
Founders often assume that forming a U.S. company lets them live and work in the United States. It does not. Working for the company in the U.S., including as an unpaid founder, generally requires a visa or status that authorizes that work. Options that founders commonly explore include treaty investor, intracompany transferee, extraordinary ability and professional worker visas such as the H-1B, each with its own requirements. Immigration rules and policies change frequently, so consult an immigration attorney early.
Equity and Founder Tax Issues
Founder stock is typically issued subject to vesting. U.S. taxpayers commonly file an 83(b) election within 30 days of receiving restricted stock. Whether an international founder should file one depends on whether that founder has U.S. tax exposure, and home-country tax rules may treat founder equity differently. Coordinate U.S. and home-country tax advice before issuing stock.
Intellectual Property
Investors and acquirers expect the company to own its core IP. Founders should assign pre-formation IP to the company, and employees and contractors in every country should sign invention assignment agreements that are enforceable where they work. For trademarks, applicants domiciled outside the U.S. must generally be represented by a U.S.-licensed attorney before the USPTO. See Trademarks 101.
Employment and Contractors
Hiring in the U.S. means complying with federal and state wage, anti-discrimination and leave laws, which in California are especially protective of employees. Classifying workers as contractors carries risk under California’s ABC test. Hiring abroad raises local employment law questions; many startups use employer-of-record services or local subsidiaries. See our employment law and compliance page.
Fundraising and Securities Law
Selling stock, SAFEs or convertible notes is a securities offering. U.S. startups typically rely on exemptions such as Regulation D, and offerings to investors outside the U.S. may rely on Regulation S. Securities laws in the founder’s home country and investors’ countries may also apply.
The Takeaway
International founders can build U.S. companies successfully, but entity choice, tax, immigration, IP ownership and securities compliance all need attention at the start. Fixing structural mistakes later is usually more expensive than getting them right during formation.
Frequently Asked Questions
Can a non-U.S. citizen own a Delaware corporation?
Yes. There is no citizenship or residency requirement to form or own a Delaware corporation. The company will need a registered agent in Delaware, and the founders will need to address tax, banking and immigration issues separately.
Does owning a U.S. company give me a visa?
No. Ownership alone does not provide immigration status or authorization to work in the United States. Founders who want to work in the U.S. need an appropriate visa or status, which should be planned with an immigration attorney.
Should an international founder form an LLC or a C corporation?
Founders planning to raise venture capital usually choose a Delaware C corporation because most investors require it. An LLC can work for some businesses but may create complex U.S. tax filing and withholding obligations for foreign owners.
Can I get an EIN without a Social Security Number?
Yes. International applicants can obtain an EIN without a Social Security Number or ITIN, although the application process is typically slower than the online process available to applicants with U.S. tax identification numbers.
How Sutter Law Can Help
Sutter Law advises international founders on U.S. company formation, equity and fundraising as part of our startup law practice. Contact us for a free consultation.
This article is general information, not legal advice. Reading it does not create an attorney-client relationship.
