How to incorporate a U.S. corporation from outside the USA
When we started Freshdesk, we decided to incorporate in the USA because that seemed to be the best option for a SaaS company that wanted to handle recurring payments from international customers from day 1.
Our preferred payment gateway works only with U.S. bank accounts, and it is easier to get a U.S. bank account if you are a U.S. 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 U.S. payments.
Since there were not many resources available on the web for incorporating a U.S. corp from abroad, I thought I would share our story for the benefit of future entrepreneurs.
Of course, 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: $1,278. Broken down:
Lawyer fees: $1,005 (Ryan Roberts at Startup Lawyer). I would highly recommend Ryan. He was very professional and knowledgeable and very easy to work with through email and Skype. He charged us a flat fee for the full-service startup incorporation package, and this included a 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 (Bloomberg Excelsior Business Services). This is a yearly fee. 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 U.S. needs an EIN (also known as tax ID number). After incorporation docs are ready, fill out form SS-4 and call the IRS Philadelphia center directly at (800) 829-4933. (This is the only office in the U.S. that processes EINs for U.S. businesses 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 SS-4 form to them so that you don’t have to spell out all the details on the phone.
3. U.S. physical address
You need a physical U.S. 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 that seemed to be miles ahead of others in what seems to be a very traditional industry. I chose the $20 plan.
They scan mail and send you 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 mail on your (and your company's) behalf.
4. U.S. bank account
You need a business checking account with a U.S. bank. If you already have a personal bank account with a U.S. 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 to Delaware 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 U.S. bank account but you are visiting the U.S. in the near-future, you can just walk into a bank with the incorporation documents of your company and open an account.
I posted a question regarding this on Quora and a very nice gentleman who was an advisor to many startups contacted me and referred me to Silicon Valley Bank (which is considered very startup-friendly) and I was able to open the account from India itself.
Initially, I found it amusing that I was asked to pitch my business idea or send a presentation of my business plan in order to open a business checking account. I guess Silicon Valley Bank offers so many other services to startups, but our needs were pretty simple. 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 FeeFighters (note: They were acquired by Groupon in 2013) 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 would 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. U.S. phone numbers
We have a free Google Voice number and a Skype number, which is $50 per year. The Google Voice number forwards 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 U.S. and return it to Amazon.
That’s pretty much all you need to get the business side of things set up. 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, okay. Maybe for some of you that's not a requirement for a successful startup! :))
In either case, good luck on your startup! And when you need an online helpdesk software, do remember to drop us a mail. And while you are at it, try the product! We’ll be glad to give you a startup discount on Freshdesk.