When US banks receive an application to open a business bank account, they have to comply with a list of requirements provided by US regulations. Indeed, in order to keep their license, US banks must demonstrate impeccable processes for countering risks of money laundering and terrorism.
It has a direct impact on both selecting a bank and managing processes to open an account.
Why does this affect foreign-based companies in particular?
In order to comply with the US regulator’s requirements, US banks have implemented a full range of very expensive controls and processes, the cost of which can be lowered through the use of historical business data (accessible through companies’ credit scores and US Tax ID numbers).
When a foreign-based parent company sets up a subsidiary in the USA, US banks do not have any historical data available, meaning that they need to conduct additional research.
Because this additional research might be too costly for banks given the expected returns on a small US structure, the major US banks have clearly decided not to ease the process. In other words, those banks will require the US subsidiary to demonstrate around 10, 15, or even 20 million dollars (USD) of revenue generated in the USA.
1. Overall Process
Step 1: A list of documents and information related to both the foreign parent company and the US subsidiary will have to be provided to the bank (by email and original documents by mail).
Step 2: Once these documents have been validated by the bank, the application can be submitted.
Step 3: The bank will open a bank account for the US subsidiary as well as online access.
Step 4: The authorized signers and users will have to activate their PIN codes along with their tokens to gain access.
2. Minimum Requirements
A US subsidiary will have to be created with the Formation Documents and the Tax ID Number (see more details in section 3 below).
The parent company will have to provide a List of Authorized Signers who do not necessarily need to be US citizens, nor have a US Social Security Number, nor live in the USA.
The ultimate owners will have to provide their Names, Addresses, and Passport Copies.
The companies that own more than 25% of the parent company will have to provide a Certificate of Registration from their home country.
A US Address different from the registered agents’ will have to be provided (e.g. business office, administrative or mailing address).
3. Application & Documents/Information to Compile
List of authorized signers and users including their respective roles (full control or banking transactions only)
Forms and a questionnaire provided by the bank will have to be filled out and signed by the authorized signers
An organizational chart including the US subsidiary and the ultimate owners will have to be provided along with passport copies and/or a certificate of registration for companies owning more than 25% of the parent company
Passport copies from the authorized signers
For the Parent Company:
Certificate of registration from their home country
Letters of recommendation from the bank and the lawyer (template will be provided by the bank)
For the US Subsidiary:
Documents of formation (e.g. Certificate of Incorporation) – see US Entity Creation: Corp. versus LLC
W9 Form filled out and signed – see W9 & 1099 Forms: Why You Need to Comply
Notice CP575A: an official letter that confirms reception of the SS4 Form and the US company’s Tax ID Number (also called EIN – Employer Identification Number or FEIN – Federal Employer Identification Number)
A list of full services along with fees will be provided later by the bank.
On average, the bank service fees amount to $30/month during the first months of operations.
Once the application is received and validated by the bank, the bank account along with online access is available within 10-15 business days.
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Disclaimer: The materials provided in this US Toolbox are for general information purposes only and are not intended to constitute comprehensive or specific legal, accounting, tax, marketing, or other advice. These materials may not reflect recent developments in the law, may not be complete, and may not pertain to your specific situation and circumstances.TradeSherpa, Inc. assumes no responsibility for errors or omissions in the materials, or for any losses that may arise from reliance upon the information contained these materials. Because these materials are intended to provide only general advice, specific advice should be taken from qualified professionals when dealing with specific situations and circumstances.