The United States is a major hub for entrepreneurial activity, with nearly 5.5 million new businesses formed in 2025, up 6.5% year over year. The U.S. also attracted USD 277 billion in foreign direct investment in 2025, more than any other country.
With a large business market and strong access to capital, the U.S. offers plenty of opportunities to reach new customers, build a local team, or raise funding.
For international companies ready to move beyond testing the U.S. market, establishing a U.S. entity may be the next logical step. To get started, this means making some key decisions about how the business will be set up, starting with the legal structure.
Types of Legal Entities in the United States
Companies establishing a U.S. entity can choose from several business structures, each with different implications for ownership, taxes, liability, and future growth. Some of the most common options include:
Limited Liability Company (LLC)
A limited liability company, or LLC, generally protects its owners from personal liability for business debts. It also offers flexibility in how the business is owned, managed, and taxed.
For federal tax purposes, the IRS may treat an LLC in different ways depending on the number of owners and any tax elections the company makes. A single-owner LLC, for example, is generally taxed as part of the owner’s tax return, while an LLC with multiple owners is generally taxed as a partnership. An LLC can also elect to be taxed as a corporation.
That combination of liability protection, flexibility, and fewer formalities than a corporation makes an LLC a popular choice.
Corporations (C-Corps and S-Corps)
Corporations are created under state law and exist separately from their shareholders. A C corporation is often the preferred structure for businesses that expect to bring in outside investors, issue equity, or build a substantial U.S. operation.
S corporations work differently. Rather than being a distinct entity type under state law, S-Corps are a federal tax election that an eligible corporation or LLC can make with the IRS.
For many internationally owned businesses, an S corporation won’t be an option because S-Corps can’t have nonresident alien shareholders and are subject to other ownership restrictions.
Branch Office
A branch office lets an international company conduct business in the United States without creating a separate legal entity. But it doesn’t receive the same legal separation as a subsidiary: The parent company remains responsible for the branch's liabilities. The foreign corporation may also be required to pay U.S. tax on income connected with its U.S. business.
Choosing a State to Form the Company
The best state to incorporate depends on where a company plans to operate and what it needs from its legal structure.
Delaware is a common choice, particularly for venture-backed and larger companies. This is largely due to its long history of corporate case law and the Delaware Court of Chancery, a court built specifically to hear business disputes.
But it’s not the right option for every business. A company incorporated in Delaware but conducting business in another state may be required to register in both, a process commonly known as foreign qualification. That means a company could be responsible for filings, taxes, fees, or licenses in both jurisdictions.
For companies planning to base their people and operations in one state, forming the business there can help avoid extra paperwork and costs.
A Step-by-Step Guide to Creating a Legal Entity in the United States
Exact requirements to open a company in the United States differ by state and entity type, but most companies follow a similar path.
Step 1: Choose the Appropriate Business Structure
Choose the legal structure that best fits the company’s needs, taking any cross-border tax implications into account before filing.
Step 2: Choose a State of Formation
Based on where the business plans to operate and any additional legal or tax considerations, choose the state where the company will be formed. Keep in mind that operating in other states may require additional registrations.
Step 3: Choose a Company Name
Before filing, the business needs a legal name that meets the naming requirements of the state where it’s forming.
The name must be sufficiently different from businesses already registered in the state. Companies can check availability through the Secretary of State’s office or the equivalent agency.
Step 4: Appoint a Registered Agent
Most companies appoint a registered agent before filing. The agent receives official documents on the company’s behalf and must be located in the state where the business is registered.
Step 5: File the Formation Documents
The business officially creates the entity by submitting the required documents to the appropriate state office.
An LLC typically files Articles of Organization, while a corporation files Articles of Incorporation or a Certificate of Incorporation, depending on the state.
Filing requirements and terminology vary by state, so companies should follow the instructions from the applicable state agency. The U.S. Small Business Administration provides an overview of each state’s registration process.
Step 6: Apply for an Employer Identification Number
Once the entity is established, the business will need an Employer Identification Number (EIN), which is used for federal tax purposes and is generally necessary for payroll, bank accounts, and other business registrations.
Businesses with a principal place of business in the U.S. may be eligible to apply for an EIN online. International applicants who don’t qualify for the online application can apply by phone, fax, or mail.
Step 7: Complete State and Local Registrations
Depending on the company’s activities and location, it may also need state tax accounts, sales tax registration, professional or industry licenses, city or county permits, or authority to operate in additional states.
Businesses should research requirements on the appropriate state and local government websites to confirm which U.S. company registrations apply.
Step 8: Open a U.S. Business Bank Account
Next, the company typically opens a dedicated bank account to keep its business funds separate from personal funds or those of a parent company.
Banks each set their own onboarding requirements, but often require formation documents, an EIN, ownership information, and identification for company principals.
Businesses with international ownership should expect to submit extra documentation to verify who owns and controls the company, which may take longer than the state incorporation process.
Step 9: Register as an Employer
Once the company begins hiring employees, the right payroll processes and employer registrations must be in place.
At the federal level, employers must withhold and deposit income and employment taxes, such as Social Security and Medicare taxes, and pay federal unemployment tax.
State requirements can include payroll withholding accounts, unemployment insurance registration, workers’ compensation coverage, and new-hire reporting.
Employers must also complete Form I-9 to verify each employee’s identity and authorization to work in the U.S. Additional federal, state, and local employment laws may also apply.
How Long Does It Take to Form a U.S. Entity?
Timelines vary by state and entity type, but most companies can expect:
- State filing: Roughly 2–4 weeks for standard processing (2–3 weeks online, 3–4 weeks by mail), though some states, including Delaware, offer expedited options for an added fee, sometimes as fast as same-day or 24-hour turnaround.
- EIN (if eligible to apply online): Issued immediately for businesses with a U.S. principal place of business.
- EIN (if applying by fax or mail): Required for most international applicants without a U.S. principal place of business. Fax applications are typically returned within about 4 business days when a return fax number is provided; mail applications take about 4 weeks, and longer for applicants mailing from outside the U.S.
- Bank account setup: Add another 1–4 weeks, especially for internationally owned businesses, since banks often request extra documentation to verify beneficial ownership.
Realistic total: A business that can complete its formation and EIN application online may be up and running in under three weeks. Companies that need to apply for an EIN by fax or mail should plan for a longer timeline, potentially four to eight weeks or more from start to finish.
How Much Does It Cost to Create a U.S. Legal Entity?
There’s no standard price for setting up a U.S. company. Costs depend on the business structure, state of formation, where the company will operate, and whether legal or tax support is needed.
State filing fees themselves can be relatively modest. For example, forming an LLC costs USD 70 in California and USD 100 in Wyoming.
But that’s only the starting point. Registered agent services, licenses, additional state registrations, and professional advice can push the total setup cost higher.
Formation Costs
Upfront expenses can include:
- State formation fees
- Registered agent services
- Name reservation fees, where applicable
- State or local business licenses
- Registration in additional states
- Legal and tax advice
Ongoing Operating Costs
The upfront costs are only part of the picture. Maintaining the company also comes with ongoing expenses.
These can include:
- Annual or periodic state reports
- State taxes
- Registered agent services
- Accounting and bookkeeping
- Federal and state tax preparation
- Payroll administration
- Business and employment insurance
- License renewals
- Compliance support
Some states also impose recurring fees or taxes. Delaware LLCs, for example, currently pay a USD 400 annual tax. Companies operating across several states may face additional recurring expenses in each one.
Ongoing Compliance Requirements
Once an entity is active, companies must keep up with tax, employment, and corporate obligations.
Tax Compliance
A company’s tax requirements depend on its entity classification, activities, and where it operates.
It may be subject to federal and state income taxes, employment taxes, franchise taxes, sales and use taxes, and local business taxes.
Operating across state lines can add responsibilities in multiple jurisdictions, while international ownership may bring additional reporting requirements and cross-border tax considerations.
Employment Compliance
Employing people in the U.S. comes with federal, state, and sometimes local requirements. These include payroll withholding, wages and hours, I-9 verification, unemployment insurance, workers’ compensation, paid leave, and other workplace protections.
The rules can vary considerably by location and don’t always align with federal law. For example, minimum wage rates can differ at the federal, state, and local levels, so employers should determine which rate applies to each employee.
Corporate Governance
Businesses also have ongoing administrative requirements in the states where they’re formed and operate. These can include keeping registered agent information up to date, filing periodic reports, recording major ownership or management changes, and maintaining company records.
Corporations may also need to maintain bylaws, board and shareholder records, and document major corporate decisions. LLCs commonly document ownership and operating rules through an operating agreement.
When Opening a U.S. Entity Makes Sense
Forming an entity tends to pay off when a business:
- Is building permanent U.S. operations
- Plans to employ a substantial local team
- Wants contracts to be executed by a U.S. company
- Intends to seek funding from U.S. investors
- Wants direct control over payroll and employment infrastructure
- Expects the U.S. market to become a major part of its growth strategy
Many companies make this decision after testing demand, hiring their first few U.S. workers, or reaching a point where the cost and administrative burden of maintaining a local company are justified.
Alternatives to Opening a Legal Entity
Opening a U.S. entity can make sense for companies planning a long-term presence, but it isn’t the only way to hire or work with people in the country.
For businesses employing a small team or not yet ready to take on the costs and administration of forming (and potentially closing) their own entity, other options exist that can help them test the waters.
Hiring Independent Contractors
Independent contractors can be a practical alternative when a business wants to work with people in the U.S. without employing them through its own entity. This can work well for project-based or short-term work where the individual is genuinely operating as an independent contractor.
The key consideration is classification. Different federal agencies can apply different tests to determine whether someone is an employee or independent contractor, and states may have their own requirements as well.
The IRS, for example, considers factors related to behavioral control, financial control, and the relationship between the parties. If the working relationship looks more like employment, misclassification can lead to back taxes, unpaid wages or benefits, penalties, and other liabilities.
Partnering With an Employer of Record
An Employer of Record (EOR) gives international companies a path to employing workers in the United States without opening their own entity. This can be useful when testing the U.S. market, building a small team, or hiring in the country before there’s a business case for establishing a permanent presence.
The EOR becomes the legal employer and handles HR responsibilities such as employment contracts, payroll, taxes, benefits administration, and other employment requirements. Meanwhile, the client company continues to manage the employee’s day-to-day work.
An EOR shouldn’t be confused with a Professional Employer Organization (PEO). While the two models handle some of the same HR and payroll functions, a PEO typically requires the company to have a U.S. entity already and enters into a co-employment relationship with that business. An EOR, on the other hand, can employ workers on behalf of a company that doesn’t have one.
Hire Employees in the United States With RemoFirst
Opening and maintaining a U.S. entity takes time, money, and ongoing administration. If you’re not ready to make that investment, you don’t have to put your U.S. hiring plans on hold.
With RemoFirst, you can employ U.S. talent without setting up your own entity first. That gives you the flexibility to build your team, test the market, and decide whether establishing a permanent presence makes sense as your business grows.
And with EOR pricing starting at USD 199 per employee/month, you can get started without the upfront and ongoing expenses of managing an entity yourself.
Book a demo to see how RemoFirst can help you start building your U.S. team.
