1 – Understanding the logic
At first sight, preparing a visa application and creating a US entity are 2 different processes that can be completed separately and that are not a condition for doing business in the USA. Indeed:
- You do not need a visa* to create a US entity
- You do not need a visa* to sell in the USA
- You do not need a US entity to sell in the USA
* By visa, we mean a visa allowing you to work in the USA, not a tourist visa.
Besides, obtaining a US visa can take months while creating a US entity usually takes ~10 days, so why bother trying to connect these processes?
Well, actually, you do need to connect them:
Why do you need to think well ahead of time about the US visa – US entity couple?
First, you need to consider that, “at some point”, your prospects or your clients will ask you to create a US entity. Situations may vary: sometimes, they will ask you to create the entity before even placing their first order, sometimes they will ask you to create the entity once you have completed a successful market test (meaning after a few orders), and some other times, they will pay attention to your sales thresholds (e.g. asking you to create the entity once you have attained $ 1M sales). They are doing that for 2 reasons: one is that they will have to comply with administrative, legal, and tax requirements, and the other one is that they will want a proof that you are serious about your business in the USA and that you won’t vanish in the air.
Second, your focus is on sales, and you will need a great deal of flexibility to adjust your business according to your growth (that we hope will be fast) and your business partners’ requirements. It would be too bad to lose contracts because you do not have the appropriate structure in place: entity, valuable employees, etc. We insist: it is necessary to plan each step so that you just need to press the “start” button when you need both the US entity and US business visas for yourself or your employees.
Third, creating a US entity has 3 consequences:
- The good thing is that it will give you an “American” status: your business partners will value that, and it will provide a significant boost for your company.
- Creating a US entity also means that you will have to comply with new administrative, legal, and tax requirements: there will be field work, and you will have to allocate resources and build processes ahead of time to make sure that you will be compliant.
- There is a direct impact on visas for the US entity’s officers and their non-US employees. Officers (CEO, CFO, etc.) will need a business visa as soon as the entity has been created if they often travel to the USA. It is often assumed that they can make a series of trips to the USA on a tourist visa, only spending 1 or 2 days in another country every time they hit the maximum authorized length of stay in the USA, but in practice, immigration officers have full leeway to deny their re-entry to the USA. In the case the company hires an employee who is not a US citizen, a visa is needed for that employee.
Finally, some visas and recruitment strategies will require that you create a US entity quite quickly. You need to be clear about the human resources you need to build your timeline.
2 – So, how do I plan for getting US visas and for creating a US entity?
We suggest that you ask yourself the 3 questions listed below in order to build a relevant timeline for your company. Having a “decision-tree” approach is the only way to move forward effectively and to tailor your plans to your company’s specific situation.
QUESTION 1: What is my marketing & sales strategy? Who is going to implement it?
You can build your strategy and start selling. The idea is of course to understand how you will enter the US market, to secure your first partnerships and orders, and to gather enough insights to refine your tactical plan.
As you are doing that, you will get a good idea of whom you need to develop your business in the USA:
- You can resort to an US independent contractor, a US sales agent, and / or US service providers to complete the various tasks at hand (sales, counsel, administration, etc.). They won’t need any visa of course, and you don’t need a US entity.
- *Company’s officers (e.g. CEO) and other employees can travel to the USA for business development purposes as long as they abide by immigration requirements for tourists. You may start gathering information about business visas and the process for creating a US entity, but you may not need these business visas and the entity right away (see Question 3 below).
- If you need a full-time, non-US employee, please note that you cannot recruit such an employee until you have created a US entity. The visa application can only be filed once you have created the US entity. In such a case, and unless you want to have an employment contract between your employee and the parent company, you will need both the visa and the US entity.
QUESTION 2: When will my prospects or clients ask me to create a US entity?
If you already have clients in the USA, or connections in your industry, you should be able to assess whether the US entity creation process will show up early or late in the expansion process.
Some considerations should be taken into account: standard expectations in your industry, compliance requirements for your specific activity, strategic decisions made by your HQ, etc.
QUESTION 3: When will I hire employees? Will they be US citizens or non-US citizens?
If you want to hire US citizens, you can of course do that without a US entity, but keep in mind that most US employees expect to work for an American company, under the American laws, and with typical American benefits. It’s a matter of diffidence towards cultural difference, fear that they might lose their job quickly if US activities are shut down by the HQ, and expectations in terms of employee treatment. You may consider setting up a US entity quite quickly. For more information about hiring a US employee, please refer to Hiring a US Employee in the USA [Checklist].
If you want to hire NON-US citizens, you need to contact an immigration lawyer as soon as you can. This is indeed the lawyer who will help you understand how long it will take to get a visa, and when you will need to create a US entity to obtain the visa. For more information about hiring a US employee, please refer to Hiring a Non-US Employee in the USA [Checklist]. Below are the 4 important key facts that you must keep in mind:
Obtaining a US visa is very difficult, and you need a robust visa strategy and a strong case to optimize your chances of obtaining it. To that respect, a good immigration lawyer will advise you regarding the type of visa you need for your company depending on your activity, your development plans, and your recruitment strategy.
Not all visas have been created equal, and you should not assume that you already know the type of visa you will apply for (nor should you presume on the timeline and requirements that will apply to your specific situation).
Obtaining a visa is a rather long process, and it takes months (some executives choke when they realize that their employee, whom they expected to arrive in the USA within 2 months, will not be allowed to work in the USA before a 6-month period). The lawyer will be able to estimate the timeline depending on the visa that suits your company’s needs = time to build the case + time between submitting the application and obtaining the visa.
The visa application can only be filed once you have created your US entity, so you should plan for creating a US entity at the time you need the application to be submitted (knowing that your employee will only be allowed to work in the USA a few months later).
Some visas do require a significant investment in the USA (e.g. $70K) from a US entity (and not the HQ). If you need to apply for such visas, you will have to create a US entity soon enough to proceed to expenses and meet the specific investment requirements.
For further information on the various visas and their requirements, please check Visas in the USA: How do You Choose?
Some lawyers will be very flexible regarding requirements for filing a visa application, while some other will list a lot of requirements that might be hard to meet for SMBs. For instance, applying for an E-2 visa of course requires a significant investment in the USA that is specified in the administration’s guidelines. However, some lawyers may also ask the company to have a commercial lease and / or to already have an employee on the payroll.
Quite often, the number of requirements set by lawyers decreases as their fees increase. It is indeed more difficult for them to build a strong case for the administration when they have fewer “proofs” at hand. As you can see, your budget may also impact your timeline for creating a US entity.
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.