You can start your business from scratch or buy a ready-made one that is quite successful and brings good profit. Which option to choose? Well, each opportunity has its advantages and disadvantages. However, if we are talking about the USA, buying an up-and-running business may be a better idea. First of all, managing a new company and setting up all the processes involves quite a lot of hassle, while an off-the-shelf business will bring profit very soon. You will not need to find customers or suppliers, hire staff, open a bank account, or buy equipment, which takes a lot of time and effort. In this post, we will look at the peculiarities of buying a company in the USA.
We would like to invite you to our portal where you will find a more detailed article on purchasing businesses in the United States. You can also look through our sections to discover different destinations for business, banking, asset protection, relocation, tax optimization, and so on. We have excellent specialists, and you can book an initial free session to get professional advice on any issues you would like to discuss. If you want to delegate all the administrative steps and legal issues to us, we will help you buy an American company (or set up a new one) at an affordable fee. Save your time for business and loved ones!
Why Buy a US Business?
Let’s look at the main reasons why it is a good idea for a non-resident to buy a business in the United States:
- Ease of doing business. You probably know about the Ease of Doing Business ranking, and the USA scored 6th in 2022. It remains among the top ten economies in the past 5 years.
- Strong economy. The country recovered from the pandemic-driven recession quite quickly, which testifies to the fact that its economy is very strong. In 2022, its GDP made up 24.1% of the global one according to the IMF.
- Entrepreneurial spirit. The US is truly considered the nation of entrepreneurs, and 70% of the world’s top investors and magnates started here (Elon Musk, Warren Buffett, Sergey Brin, etc.).
- Highly qualified workforce. The US is home to the world’s best universities and colleges, and its population is growing. You can hire young talents at any time if you need to!
- Small business support. The US is a nation of entrepreneurs, as we said before, and the government is very responsive to this fact. It provides a lot of support to small and medium businesses, and you can benefit from it, too.
- Affordable taxes. The US tax system is hard to understand, but if you choose a suitable state, you will not have many deductions (the average federal tax rate is 19.8%).
As a non-resident, you will be able to take advantage of perks provided to foreign investors, and we will tell you all about them at a consultation as they are state-specific.
Foreign Business Owners: Requirements
Each state is interested in foreign capital attraction, so you should know that you are welcome! However, you will still have to meet certain criteria.
There are two ways of managing your US business if you are a foreigner:
- You can run your business on-site and actively participate in operational matters.
- You can control your business from another country, and your decisions will be realized by an executive team working in the USA.
The first option may be challenging as you will have to obtain a visa. The fact of owning a US business does not automatically mean that you can obtain a work permit, so this obstacle should be taken into account.
If you want to know what visas may be required to work in the USA, please click on the above link and see the list in the longer article.
Special Procedures for Non-Resident Business Buyers
Let’s see the main details a foreigner should know before starting a business in the USA.
Permits & Licenses
There are business fields where foreign ownership is restricted:
- Defense industry
- Banks
- Insurance
- Radio and television broadcasting
- Electricity and gas supply
- Utilities
- Mineral leasing and resources
- Aviation
- Sea transportation and fishing
- Use of farmland
If you have a certain business in mind, please find out in advance which permits and licenses you may need, and remember that each state may set its own rules in this respect.
Letter of Intent (LOI)
This is a document received from the seller (by the foreigner wishing to buy a business) which sets out the purchase price, as well as the assets and liabilities.
As soon as this letter has been received, the non-resident may request other important documents from the seller to be verified:
- Intellectual property related to business
- A list of inventory, equipment, furniture, and so on
- Customer base
- Lease agreements (scans)
- A detailed organizational chart of the company
If your intent to buy is not yet clear, the seller may be reluctant to provide these documents, of course.
How to Close the Purchase Deal
Buying a US business requires more steps than just signing a contract. Let’s look at some other things to be done depending on the business and its assets/liabilities:
- If the company assets include vehicles, they need to be re-registered in the foreigner’s name.
- If there is a leased property, it also has to be re-registered in the new owner’s name.
- If you want to buy a franchise, you will need to request extra documents from the parent company.
- The non-resident owner will have to complete IRS form 8594 to specify the assets bought.
- The foreigner and the seller will have to sign a non-competition agreement to prevent the seller from starting a competitive business (with a period and location set).
- You will also need to get in touch with the state, federal, and local tax authorities and inform them about company acquisition.
This list is not complete as it depends on the particular business assets to be taken care of and local business regulations.
Conclusion
Buying a US business may sound a little bit complicated unless you delegate all procedures to competent experts. The good news is that they are one click away! Please follow the above link to get in touch with them and discuss the details.