Explained: 7 Steps to Incorporate a Company in USA (from outside USA)
[Editorial Notes: A lot of Indian startups (especially SAAS players) have a common query related to incorporating their company in US. Girish, founder of Freshdesk shares all you need to do in order to incorporate your company in US.]
When we started Freshdesk,we decided to incorporate in the USA because that seemed to be best option for a SAAS company that wanted to handle recurring payments from international customers from day 1. Our preferred payment gateway will work only with US bank accounts and it is easier to get a US bank account if you are a USA corporation.We are based out of India and the options for accepting dollar payments with recurring billing were seriously limited and expensive.The only option seemed to be Paypal but again we were not sure if we could link Paypal with our Indian bank accounts for USA payments.
Since there were not many resources available on the web for incorporating a US corp from abroad I thought I will share our story for the benefit of future entrepreneurs.
Ofcourse there are many other ways to do this – but this is how we did it.
1. Incorporation – in the State of Delaware as a Delaware C Corp.
If you ask “Why Delaware” ? – We couldn’t find anything convincing for “Why not” ?
Total cost for incorporation – $1278
Lawyer Fees – $1005(Ryan Roberts at http://startuplawyer.com/) I would highly recommend Ryan. He was very professional and knowledgeable and very easy to work with thru email and skype. He charged us a flat fee for the full service startup incorporation package and this included
Memorandum of Association, Articles of Association, Restricted Stock Purchase agreements, Technology Transfer agreements, Proprietary Information agreements etc.
Incorporation fees – 148 (Delaware C Corp)
Registered Agent fees – $125 (This is a yearly fee) (Bloomberg Excelsior Business Services)
(A registered agent service is mandatory to incorporate a delaware corporation if you live outside Delaware)
2. Employer ID Number (EIN – TAX Number)
Every business in the US needs a EIN number. (also known as Tax ID number) After Incorporation docs are ready, fill form SS4 and call the IRS Philadelphia center directly at
(800) 829-4933. (This is the only office in the US that processes EIN for US business that are incorporated from foreign countries.
They will give you the EIN on the phone. It may be helpful if you have a fax nearby at the time of calling. (You can fax the filled SS4 form to them so that you don’t have to spell out all the details on the phone)
3. US Physical Address
You need a physical US address for receiving business documents .There are several mail service forwarding providers charging different rates.
My choice was Virtualpostmail.com – a web 2.0 company who seemed to be miles ahead of others in what seems to be a very traditional industry. I chose the $20 plan.
They scan mails and send an email, you can choose emails that needs to be opened and the contents scanned or just forward those mails to any other international address.
Before you can operate your account you need to submit a notarized form 1583 from USPS to authorize Virtual Post mail to open mails on your (and your companies behalf)
4. US Bank Account
You need a Business checking account with a US bank. If you already have a personal bank account with a US bank you can try calling them to open a business checking account. I think this is the best option. I tried calling Wells Fargo and the person on the phone told me that I cannot open a bank account with Wells Fargo and that I had to physically go toDelaware and try opening it from Wachovia. I am sure this person was wrong and I think it should be possible with Wells Fargo. I love the bank but somehow could not get my business account opened there.
If you do not have a US bank account but if you are visiting USA in the near future, you can just walk in to a bank with the incorporation documents of your company and open an account.
I posted a question regarding this in Quora and a very nice gentleman who was an advisor to many startups contacted me and referred me to Silicon Valley Bank (who are considered very startup friendly) and I was able to open the account from India itself.
Initially I found it amusing when I was asked to pitch my business idea or send a presentation of my business plan in order to open a business checking account. But I guess Silicon Valley bank offers so many other services to startups but our needs were pretty simple. But SVB has been great till now in terms of responsive support.
5. Merchant Account
The most popular alternatives are Paypal and Authorize.net (they have many resellers) You can go to http://feefighters.com/ to compare providers and choose one that works for you. I skipped the options provided by feefighters and went directly with Braintree Payment solutions even though they were slightly more expensive compared to others as I had read good things about them and I did not understand all the hidden fees etc.
Braintree provides me a merchant account, a payment gateway, a PCI compliant vault to store customer Credit card data and can process recurring subscription billing.
We thought we will worry about the fees when we are making millions of dollars and losing considerable money on fees :)
6. Business Credit Card
I applied for a mastercard credit card through Silicon Valley Bank – the card is secured with a money market account – basically secured with cash in my bank account.
7. US Phone Numbers
We have a free Google Voice number and a Skype Out number which is $50 per year. The google voice number forwards the calls to our skype number.
We are considering 1-800 numbers from Grasshopper after we launch.
We also got an iPevo skype phone for receiving skype calls wirelessly, but the phone has stopped working and I am too busy to send it to the US and return it on Amazon.
That’s pretty much all you need to get the business side of things setup. The only other thing you need is a good product for which customers are willing to open their wallets and swipe their credit cards. (Oh. Ok. maybe for some of you that’s not a requirement for a successful startup! :) In either case – Good luck on your startup!
[Reproduced from Freshdesk blog]