How can I setup a dropshipping business in the USA as a non-resident – another question we often get from you.
Well, this article (and the video below) is about all that. We gathered all the necessary steps you need to take to open a dropshipping business in the USA.
If you prefer to watch the video, then go ahead and click play on the video above instead.
Now, this content is for you if:
- You are a non-USA citizen and want to work with USA dropshippers
- You are a non-USA citizen and want to get USA payment processing
- You are a non-USA citizen and want to have a presence in the USA
- You are overseas and want to start dropshipping in the USA
First of all, why do you need to incorporate your company? Why not just start selling right away in the USA?
Most of the time, beginners think they just need a store and some products to start selling. Dropshipping is easy but not that easy. Before anything else, you need your business to be legal and compliant so you can start receiving payments, pay taxes, and so on.
Here are the 3 main reasons you need to incorporate your company:
1. You need to receive payments from customers and for that, you need to work with payment processors like Stripe, PayPal, Adyen, Square, etc. These companies don’t work with random individuals, they all require you to have an incorporated company and be compliant with their terms and conditions.
How strange would it be for someone to send you money to your personal PayPal or Bank Account? Would you trust an online store that has a PayPal email account [email protected]? We don’t think so.
2. Top suppliers work only with companies. All these suppliers don’t work with random individuals. Sure you can dropship from a website like AliExpress where the “suppliers” don’t care who is buying their products and the service quality is very low, but that’s not the type of dropshipping we are promoting here.
Real wholesale and dropshipping suppliers that offer huge discounts and high-quality products require you to have a Company and a Sales License, a Tax ID or an EIN number (more about that later).
So, if you want to work with the best suppliers from the USA and dropship only high-quality products, you need to incorporate a company in the USA.
3. If you want to be on the legal side and build a 100% sustainable and scalable business, you need to register as a company in order to pay your taxes. That’s the right way to do it, especially if you are a NON-US citizen and you want to dropship in the USA. You don’t want to get sued or get into legal/financial issues with the IRS overnight, right?
Now, let’s see what steps you need to follow in order to incorporate a company in the USA as a non-USA citizen.
And at the end of this article, we will also give you some recommendations about how to setup your company with no struggle by using a 3rd party company that does everything for you.
Choose the right USA legal entity
If you want to open a dropshipping business in the USA as a non-resident, you can choose between having an LLC or a C-Corporation.
Read more on the differences between an LLC and a C-corporation
LLC (Limited Liability Company) is the preferred choice because it’s easy to setup, it’s flexible, has no corporate taxes or limitations on the people involved, and it can be run by its members.
In the end, it all comes down to how you want to be taxed and an LLC is the most convenient way to go.
Not sure which way to go? Then we recommend that you take your time and read on the subject on Google and consult a USA tax specialist.
Throughout this article, we will be showing how to setup an LLC in the USA, as is the most common choice for dropshippers who want to start a business in the USA
Select your state
As your dropshipping business won’t have a physical location anywhere in the USA, you have the freedom to open an LLC in any state. Most companies that provide this type of service recommend forming a company in Delaware or Wyoming, as they are the incorporation-friendly states in the USA. These can mean 0% income taxes on profits, among other things.
Here’s a comparison between Delaware, Wyoming and Nevada
Typically, Delaware is often the choice for larger companies and Wyoming is the go-to place for startups and small businesses.
Name your LLC
Choosing a name for your LLC company is an important step. Your company’s name must be unique, represent your business and describe what you do.
Once you choose a few options for your LLC name, remember to check if other companies aren’t already using those names. Check on Google, social media, and the business database of the state you chose.
Appoint a registered agent
You need to have a registered agent to receive important documents from the state, such as tax forms or other government correspondence. Your registered agent can be a person or a registered agent service. Essentially, a registered agent acts as a reliable point of contact for your LLC.
You can’t be your registered agent as you don’t have a physical street address in the USA, so you will need to choose a specialized third-party business as your registered agent.
In the last part of this article, we will also direct you to a few popular companies that can help set up an LLC company in the USA.
File your LLC with the state
Often called Articles of Organization, its purpose is to have the state formally recognize your company. You will need to provide some basic information about your business and its owners. To find out the exact details of what you need to fill in, you need to check the Secretary of State’s website.
Most of the time, you need to fill in the basic information about the LLC and its members, such as the LLC name and mailing address and the registered agent’s name and address. You might also be asked to state the purpose of the LLC and list any current LLC members and/or managers, among other things.
Create an LLC operating agreement
You are not required to have an operating agreement in every state, but it’s always a smart move to have one. A legally binding document, an operating agreement defines key operational aspects of your LLC, such as ownership percentages, responsibilities, voting power, and a succession plan if an owner decides to leave the business.
An operating agreement can prevent any future miscommunication and ownership disputes as it clearly explains how the LLC should be run.
Get an EIN
The last step is registering your LLC with the federal government by applying for an Employer Identification Number (or EIN). You should know it’s free to apply for it and is required to have one if your LLC has multiple partners or employees.
Essentially, the EIN is a federal tax ID number that functions as a Social Security number for your business. Having an EIN allows your business to open a bank account and apply for bank loans, hire employees, pay taxes, and more.
Now as we mentioned at the beginning of this article, there are many 3rd party companies that can help you incorporate a company in the USA as a non-US citizen.
Top companies for setting up a dropshipping business in the USA
Many companies are offering this type of service, making it as easy as possible for you to setup a USA business from the comfort of your home.
Choosing one of the following companies to setup your LLC means you don’t need to worry about traveling to the USA and presenting official documents.
You can do everything online, even submitting all your corporate information. You don’t need to have a Social Security Number, a US address or even a national phone number.
Keep in mind that the process can take around one to three weeks and can cost between $200 and $1,000 depending on the US state you register, and what additional options you may choose.
Here are some of the top companies that provide this type of LLC formation service.
Is probable the best LLC service for small businesses you can find out there. The company offers LLC formation packages starting at $39 per year (plus a state filing fee).
Northwest incorporation service is $39 plus state fees, and it includes LLC filing, premium registered agent services, customer privacy protection, an online account to access business documents, and more.
They provide full service of forming your company, which includes everything from drafting and filing the Articles with the state for your choice, providing a registered agent in any of the 50 states and DC, obtaining EIN for non-U.S. owners, and more.
Incfile offers a full year of registered agent service for free in all its packages and a user-friendly, online dashboard to help you track important deadlines and compliance reminders.
MyLLC.com provides leading document filing services that cater to individuals, small businesses, as well as the legal and financial industries throughout the United States and abroad.
More on the companies that can help you setup your dropshipping business in the USA
How much will all these cost you?
First of all, you will need to pay a mandatory filing fee that will go to the state you choose (Delaware, Wyoming, etc.).
The state filling fee is currently:
- Delaware $140
- Wyoming $100
Usually, the processing time is 10-15 days, but if you want it faster you have to pay an additional fee, $50 for 4-9 days, and approx. $100 for 1-3 days processing time.
On top of that, every LLC formation company charges a preparation and filing fee that usually is between $100-150.
If you also want an EIN number (Employer Identification Number) the cost is around $50-80. You can also get it for yourself online via Live Chat directly on the IRS website. But in order to do that, you need to have an existing SSN, ITIN or EIN and you probably don’t have any of that as you are not a USA citizen.
One last thing that you will need to pay, which is also mandatory, is the Registered Agent Service which costs around $100-150 a year.
Here’s an example of how your total cost may look like:
$140 (filing fee in Delaware) + $100 (LLC formation company) + $100 (1-3 days processing time) + $80 (EIN number) + $150 (Registered Agent Service) = $570
As you can see, the total cost to incorporate an LLC company can be around $600-700, and that probably doesn’t include any add-ons, like mail forwarding. So, we can probably even say that the total cost can reach $1000.
We hope this article helped you understand why it’s important to incorporate a company before launching your dropshipping business in the USA and also what steps you need to follow to make that happen.