After solving this problem with our own experience and work, we would like to share with future entrepreneurs who are in the same circumstances what we have learned. No matter if we are European, Latin American, Asian, etc.
If we are developing a technological start-up with global services and we want to do business with several countries at the same time, the best option, without any doubt, will be to legally establish our company in the United States because of the level of efficiency when billing international customers, added to the possibility of having access to a capital investment (angel investment, seed or venture capital) in a simpler way.
Type of incorporation
The first step is to incorporate our company. There are, mainly, two options.
If our goal is to look for an investment, the best option is to incorporate ourselves as a LLC, which is a company commonly known as one of limited liability. It’s a viable and simple option that the majority of the start-ups choose if they are looking for an investment, for example in Silicon Valley, since investors prefer working with this organization format.
On the other hand, as we were looking for a solution for our global billing mainly, and not necessarily looking for investors, we decided to incorporate ourselves as a C Corp (commonly known as a public corporation in other places of the world.)
For this, we used the services of Walker Corporate Law (WCL) which specializes in start-ups only and which was recommended by other founders. However, this is not the only firm that can help you; there are many other excellent options.
At the level of costs, to be able to incorporate our start-up MT we had an investment totaling about $1500 dollars (including a lawyer, taxes, duties, etc.)
Place of incorporation
It’s very important to have into account the fact that each state of USA has different laws, which means that each state would be like a different country. This is the reason why it’s not the same to incorporate ourselves in California, Miami, or Houston. The best option we recommend is to do it in Delaware.
Even 99% of the start-ups that work in Silicon Valley are incorporated in Delaware since the labor laws are friendlier, the costs are lower, and the corporative regulations are very flexible.
Time of incorporation
The time to start operating with a company established in the United States is of 24 hours in Delaware (from one day to another one.)
Employer ID number (EIN - Tax Number)
After the previous step of incorporation is ready, we need the EIN number that every business in the United States must have. For this, we first filled in the SS-4 form and then we communicated with the IRS Department of Philadelphia at the number +1 800 829 4933 since they are the only ones who process this information for foreign people.
Physical address in the United States
In order to receive printed physical documentation it’s necessary to have a well-known physical address in the US. In our case, we used the address of a relative who lives in California.
However, there are also services such as Earth Class Mail which solve this problem for $14.95 dollars per month.
Once the previous steps are done, it's time to open an account in the United States.
If we have the possibility of personally travelling there like it happened to us, it’s highly simple. With the documentation of the incorporation of the company we can go into any bank (from Bank of America to Chase, anywhere in the US) and ask for a checking account for your company.
In case you don't have that option, I recommend contacting the Silicon Valley Bank. This bank is totally focused on entrepreneurs on a global scale and together with your business plan and the documentation of your company, you can open an account without any inconvenient in 2 or 3 business days.
Methods of collection
In our case, we ended up using PayPal. After having analyzed other options such as Stripe, Braintree, Authorize.net, etc., we understood that PayPal has higher costs.
But the reality is that based on the context in which we work (at a global level but with a focus on Latin America), our clients feel more secure when entering their credit card information through PayPal than through any other means since here it’s the one most known and used.
I personally consider that there are several options to legally incorporate our start-up in the United States and work from there to the rest of the world as a main reference. The road previously mentioned is just one viable option. It’s essential to always work with and consult a lawyer to avoid mistakes.
Among the most important mistakes that our advisory lawyer highlighted were choosing wrongly the type of company, incorporating it in the wrong state, and lastly, the contract that we sign with our partners/employees. As we have previously seen, if we are looking for an investment, the best option is a LLC; if we are looking for billing, the best option is a C Corp, and always in the state of Delaware.
To conclude, I mention “the contract that we sign with our partners/co-founders/employees” because there's a system in the United States known as Vesting, which protects our company in case one of the founders decides to retire from the every-day activity and start a new path on their own. In this way, the founders and employees will get shares of the start-up only in relation to the time invested in it.
Furthermore, in case they want to sell these shares, there will be a preferential sale clause, by which the rest of the co-founders will be able to buy these shares for a lower price before a third party not related to the start-up buys them.
Author: Cristian Rennella, programmer analyst of the National University of Argentina. Co-founder of Cotizar Seguro for Mexico, Argentina, and Colombia. Currently, he is a Professor of Mathematical Analysis of postgraduate studies.