Payment Processing in the United States for Non-Residents: an Ideal Structure for your Business

What does an ideal payment processing structure in the US look like?

Well, it would be nice if it could meet these criteria: 

• it is easily integrated into your platform for the sale of goods/services
• your customers find it easy to use
• it ensures a high level of security
• it effectively makes payments and charges them to a bank account
• it ensures minimal account closure risks and creates a low tax burden for your company

Looks unbelievable? Chin up: you can have it all by using the right strategy on your way from company registration to the first payments from clients. Just read on and pick a suitable one for your business.

Benefits of Payment Processing in the US

• Attract US customers and boost sales by proposing the payment methods they prefer
• Access American platforms: Amazon, Etsy, Ebay
• Access American advertising platforms that have fewer restrictions
• Process payments from US cards with less risk (they can be considered high-risk ones in Europe)
• USD transactions can be processed at low rates
• Gain access to USD payments
• No conversion fee charged (for operations in US dollars)
• Simple and affordable corporate structure registration and maintenance in the USA
• There is no need for physical presence in the US
• Low or zero taxation if your company is incorporated in the American offshore zone (Nevada, Wyoming)

Typical Mistakes in Payment Processing in the United States

Despite incredible prospects that American banks and payment systems offer, it can be difficult to open an account. The problem often lies in the mistakes that entrepreneurs make before they start using the American payment infrastructure.

Where can the worst mistakes be made? At one of three main stages:

• Business formation stage: selection of structure, bank, payment solution
• Payment account opening stage, including preparation and application
• Maintenance stage: active operation after opening the payment account (merchant account/payment processor)

Let’s look at the each of them in detail.

Business Formation Stage: Choosing the Right Business Structure

Most of the problems start at the stage of company formation. For example, you want to open an account with a US bank or use a payment system in the States for your needs (PayPal, Stripe, 2Checkout, and others). However, you chose to register a company in Russia or Andorra, and here we are: you will not be able to open a payment account in Stripe.

Why is it? Well, simply because these countries are not serviced. Stripe currently accepts companies from 47 countries only (and 3 more by invitation).

Next, you will need to open a bank account. Now it is very popular to open accounts in various payment systems and we actively offer them to readers and customers as well – just because opening a bank account abroad can be quite a long and difficult procedure! But in some cases, you will not be able to use the payment infrastructure in the United States if you have an account in a payment system: some processors (companies that accept cards and payments) do not send money to virtual banks.

Not to mention that the structure you select may turn out to be inappropriate: an example of that is an LLC in the United States owned by an offshore company in Nevis, which in turn belongs to a company from Burkina Faso. With such parameters, the customer immediately enters a high-risk zone and cannot get any services from American banks or payment systems.

And all this needs to be taken into account in advance!

Be careful when buying a “profitable company” in the offshore or other jurisdiction. Always check which banks, payment systems, payment gateways, and processors will agree to open accounts for you. Otherwise, you will have a useless, money-eating company that does not bring any profit.

Here are a few mistakes that may prevent you from opening an account in the US:

• Poorly selected company structure in the USA and abroad that will be rejected
• Inappropriate bank for payments processing (banking solutions that are not accepted by virtual banks or require high minimums)
• Inability to provide all documents required by the payment processor in the USA 
• The company, its representative and/or beneficial owner cannot provide proof of US address or tax number

Payment Account Opening Stage

At this stage, we are talking about opening a merchant account or arrangements for accepting customer cards from all over the world. Issues may arise at the stage of its opening, as in the case of a regular bank account. Most of them may look like minor flaws, but they turn into real problems when payments fail.

Things that can go wrong:

• The payment processor requires the bank account and the payout method to be in the same jurisdiction, for example, in the United States
• The processor believes your website contains high-risk content or is engaged in suspicious activity
• The company conducts high-risk activities that are not served by the payment gateway or card system
• The description of your goods and services does not match the content on your website
• The company fails to provide proof of its local address
• The owner cannot provide proof of his American address, local tax number, and has no alternative solutions available
• The owner did not receive an ITIN to avoid taxes
• The company has an account with a bank that is not accepted by the payment processor
• There is no website describing the company’s activities and products
• There is no US telephone number to verify your account

Maintenance Stage: Active Operation after Opening the Payment Account

If you have successfully coped with the first stage, you will easily get over the second one: to be honest, only completely unprepared people or outright swindlers fail it!

However, problems start later – when you get the first money on the account. While almost everyone can open an account in a US processing company, only those who are really ready to work seriously can keep it operational.

The fact is that any dubious transactions, suspiciously changed patterns of customer behavior, or instantly increasing amounts can lead to immediate freezes and additional questions being asked.

The most frequent triggers that payment processors in the United States pay attention to:

• Monthly turnover increased sharply, for example, from $500 to $20,000
• Most of the transactions were made by non-US residents
• Payments made by customers from too many different countries or high-risk jurisdictions
• The prices of your products or services are not in line with average market values: for example, a simple pencil for USD 500
• Your business has reached a certain threshold (most often 10,000 USD per month), which results in additional questions being asked
• Refunds have exceeded 1% and the processor has frozen funds until the reasons are clarified (no one likes refunds)

An example from practice is a small online business connecting a payment processing system from the United States. In the first six months, test amounts of $2-20 were going through it, while the business was being adjusted. After 6 months, the monthly turnover sharply exceeded $1,500 and the security service demanded explanations (needless to say, the funds were frozen). The technical service did not like the description of your business (the entrepreneur did not engage a specialist and decided to manage on his own). As a result, the account was closed and the money was frozen for 90 days with an extension for another 90 days if at least one customer requests a refund. That’s the experience none of us wishes to have, so let’s look to see how to avoid it.

6 Proven Strategies to Secure Payments in the US

Below you will find a list of several strategies that you can use to gain access to the American payment infrastructure. Before you dive in, we recommend you to answer a few questions to rely on some specific information when choosing a solution:

• At what stage of the life cycle is your business?
• What is the expected volume of transactions?
• What types of products and services does your business provide?
• What documents can you easily and quickly provide?
• Does your company have a previous transaction/payment history?

Do not omit this stage: the more practical information you have, the easier it will be for you to move on.

Strategy #1: Payment Processors for a Company in the United States

There is a quick and easy way to secure payments in the United States: register a US company (corporation or LLC). This option is quite affordable, though it has its challenges as well.

If you have a company in the United States, here are the compliance-related requirements you should be able to meet:

• Have an ITIN
• Have a residence address in the US
• Have a legal address in the US (for your company)
• You are not MATCH listed (this is a black list for high-risk merchants; if you are on the list, you are unlikely to be able to open a US payment account for 5 years or more)

As for transactions, you are required to ensure the following:

• The number of transactions is increasing smoothly
• You do not deliver physical products to the US
• Order fulfilment takes too long
• Refund rate does not exceed 1% of transaction volume

Strategy #2: Payment Processors for a Company Via a Bank in the US

When you open an account with an American bank, check with your banker whether they have a partner service that allows connecting a payment processor for companies in the United States. This is especially important for non-US residents!

There are several banks that offer similar services to non-residents: you open an account, and you simultaneously submit documents to open an account with the payment processor. Thus, you will kill two birds with one stone.

Sometimes it will be a service of the bank itself, sometimes – a partner solution, but you will get your payment processor anyway.

The bonus in this case is that you have already passed a thorough KYC screening in the bank and it is easy for the banker to fill out one additional form for you. As a result, after the meeting with the banker, you will have not only a bank account but also a payment processor. If you open an account remotely, things look even better as there is no need to go anywhere.

Strategy #3: an LLC, a Bank and a Processor in the USA

A fast and reliable way to ensure that you can process payments in the United States is to register an LLC in the US, open an American bank account, and connect a payment processor like Stripe to it.

The advantage of this strategy is that an American LLC can be registered quickly, completely remotely, and at a quite affordable fee.

Non-residents derive the maximum benefit from such a company as they can secure zero taxation in the United States. 

We recommend that you register an LLC in Wyoming as it offers several advantages:

• Registration is cheaper than in Nevada and Delaware
• Data privacy is higher than in most countries as there is no requirement to publicly provide data about the company owners
• An LLC can be owned by 1 person
• The profit generated by an LLC is taxed under the partnership system: the owners pay taxes at the rates applicable in the country of their tax residence
• It is profitable and convenient for an LLC to work remotely without hiring local employees
• In absence of employees and sales in the USA, you are not required to pay social and sales taxes in the USA

Despite the last point, you need to get two identification (tax) numbers: ITIN and EIN.

After registration, you will need to open a US account for your LLC. You will need a personal visit in many cases, although we offer several solutions that allow you to open an account with a US bank remotely. Learn more about this option from portal experts.

After that, you can easily apply to the processing company you need and start processing payments.

Strategy #4: Want More? Connect PayPal

In the US and some other countries, consumers are very loyal to using PayPal. They may be so addicted that the absence of the habitual PayPal button makes them refuse to purchase in your store.

So if you focus your sales on the market in the US and other developed countries, be sure to give them the payment method they want.

However, PayPal’s requirements for companies are quite high as you need to provide a lot of information: an American company, an American bank account (or an alternative way to withdraw money), an American address for an LLC, EIN, and sometimes ITIN.

The only thing that can make you happy is that it looks scarier than it really is. If you make good preparations, everything will be solved quickly and at quite reasonable amounts.

In addition, there are alternative solutions where you connect a regular payment gateway, which means that you can receive PayPal payments without opening your PayPal account.

Strategy #5: Agree With the Bank!

We recommend this solution to those who expect monthly turnovers of $100,000 or more. In this case, it makes sense to negotiate directly with banks and use their merchant accounts. 

The higher the turnover, the lower the commissions, especially if we are not talking about a high-risk business. 

In the case of direct work with banks and the opening of a full merchant account, prepare for meticulous work with documents and a due diligence of your business by the bank. The procedure may take several weeks or months, depending on the type of your business in the United States.

Strategy #6: Find Yourself a Merchant Account for High-Risk Business

If your business is a high-risk one, monthly turnover is suspiciously high or you do not have a full set of documents, consider working with providers inside and outside the US that specifically cater to high-risk businesses.

Despite the fact that American merchant account providers are ready to welcome any client, it is still necessary to provide documents and confirm that you have an ITIN. They are also interested in your credit history. If it is not available, you will most likely need to make a deposit to cover refund fees or penalties.

Ideal US Structure for Non-Residents

Let’s make a brief summary of all points made above. To benefit and secure your US payments, you will need:

• An American company, in particular – an LLC in Wyoming
• A bank account in the United States (opened on the basis of a personal visit or remotely)
• A connected payment processor, which can be either a separate company or a banking service

If your goal is to avoid taxes in the United States, make sure that you do not have employees in the United States or sell goods/services there. In some cases, you can sell outside of Wyoming. Profits will be taxed after distribution, as in a partnership, at the rates of the country of tax residence.

Contact the portal experts for services of company registration, opening an account with a bank, and setting up a merchant account in the USA. We work all over the world – so our experts are just a click away!