Can a Foreigner Buy a Business in the USA?

Can a Foreigner Buy a Business in the USA? Yes. However, we have to state that before you strike a business deal you need to consider the key requirements and limitations.

Why Should a Foreigner Buy Business in the USA?

The USA is seen by many foreigners as an attractive jurisdiction for doing business. Startups and businessmen trust the American Dream. The USA ranks as the number 1 state in terms of Gross Domestic Product, the easiest access to capital, and the inward foreign direct investment (the FDI index). And yes, this country is the world leader in the number of HNWIs: 39.1% of the world’s millionaires reside in the USA, and they make up 8.8% of the US working adults. Elon Musk, Jeff Bezos, Bill Gates – these famous billionaires started their business ventures and made their fortune in the USA. 

Reasons for a Foreigner to Buy a Business in the USA

Among the key reasons for a foreigner to buy a business in the USA or a specific low-tax US state are the following ones:

• Strong Economy as a reason to buy a business in the USA. As evidenced by the rapid recovery from the COVID-19 pandemic, the USA remains the strongest of the top advanced economies. In 2022, the GDP of the USA was 26 trillion dollars, i.e. about 24.1% of the global GDP (according to IMF).
• Ease of Doing Business in the USA. The USA ranked 6th out of 190 countries in the 2022 Ease of Doing Business ranking. The USA also ranked 10th by IMD 2022 Global Competitiveness Index and has remained one of the top 10 economies for the past 5 years.
• The skilled labor force as a great business drive. The USA is a huge state with a growing population of over 333 million people. The USA is home to some of the best colleges and universities in the world. A foreigner intending to buy a business will get easy access to graduate talents.
• The entrepreneurial spirit driving small business in the USA. The USA. is often called the nation of entrepreneurs, and for good reason. 7 out of 10 today’s top industrialists, business magnates, and investors in the world started their business entities and earned their wealth in the USA: Elon Musk, Jeff Bezos, Bill Gates, Larry Ellison, Warren Buffett, Larry Page, Sergey Brin.
• Small business support as a magnet for foreigners wishing to buy a business in the USA. The USA supports small business development and encourages large corporations. Government agencies in the USA, such as the Small Business Administration (SBA), provide counseling as well as grants. During the COVID-19 pandemic, the USA government provided many benefits and resources to help small business entities stay afloat, from tax holidays to the Paycheck Protection Program (PPP).
• Reasonable taxes as a key incentive to buy a business in the USA. The tax system in the USA is very sophisticated. However, the state-specific fiscal burden on business is often lower than in many countries. A small business pays an estimated average federal tax rate of 19.8%. 

Please note that you should also consider offshore business incentives available to a qualifying foreigner wishing to start or buy a business in a low-tax state in the USA. You will find in our articles much food for thought about perks provided in the state of Florida, the state of Delaware, the state of Wyoming, and any other state encouraging business investors.  

Advantages of Foreigners Who Buy a Readymade Business in the USA

If a foreigner has decided to create or buy a business in the USA (especially in a low-tax state like Florida), this can be a very lucrative idea. There are two options – to start the business from scratch or to buy an off-the-rack business. Each has its own pros and cons. However, in most cases, it is much more advantageous for a foreigner in the USA to buy an up-and-running business than to create a new business.

A successful off-the-shelf business will soon generate cash without all the hassle of managing a new startup. With a ready-made business, you won’t have to deal with building relationships with suppliers, hiring staff, purchasing equipment, or opening a business bank account and personal accounts. Besides, any business you buy has already established a customer base, so there isn’t much else to invest in by default. Finally, if you buy a business in a low-tax state, you will be entitled to investor benefits. 

Can a Foreigner Become a Business Owner in the USA? 

The USA allows a foreigner to buy a business in the United States, as long as he or she (and the business) meets certain criteria. Moreover, every state in the United States is interested in attracting investors. After all, investments create new jobs and are beneficial to the economy of the state.

There are two ways how a foreigner can manage one’s business in the USA:

• the business owner can take decisions and supervise the business from abroad, while a special on-site executive team is hired to work on the business premises in the USA
• the business owner can perform hands-on management of the business in the USA and actively participate in operational business matters.

The latter option is more challenging since if you buy a business in the USA it does not automatically entitle you to a work permit. Therefore, a foreigner needs to obtain the right type of visas required for business owners in the USA. 

For example, no visa is needed for a foreigner whose plan is to buy a catering business in the state of Florida, hire a local management team in the USA, and control the business from abroad. However, if a foreigner wants to buy a ranch in the state of Texas and run this business from within the USA, then a work permit is required. 

If you need to understand how a foreigner owning a business in the USA pays taxes, please read our topical article. 

What Business Visas Are Required If a Foreigner Intends to Work or Run a Business in the USA?

There are several types of visas a foreign business owner can receive to stay and work in the USA legally. 

Е-1 (Treaty Trader) Visa for Business Buyers

An E-1 holder is allowed to work or run a business only in the field for which his or her application was approved when the visa was issued. The visa is tied to a particular company/business. The main requirement is that the foreigner needs to be a national of a ‘treaty country’, i.e. a country with which the USA maintains a bilateral trading and shipping treaty. 

An E-1 holder is required to generate a significant value for his business: trade a substantive number of goods and services. The law does not specify the required volume of the actual trade. The officers pay more attention to the number of transactions than to the total value of the actual trade turnover. The E-1 visa also covers the foreigner’s next of kin (the legal spouse and unmarried children under 21). The spouses of the visa holder are allowed to work, but the children are not. An E-1 visa is granted usually for five years; the residence status is provided at the border for a maximum of 2 years. The foreigner can extend his stay for 2 years and renew the visa for 5 years.

Е-2 (Treaty Investor) Visa for Business Buyers

This visa allows the foreigner to cross the USA border freely and to work legally for some business that is a major ‘investment vehicle’. The E-2 investor visa also allows a foreigner to bring one’s relatives, spouse, and any dependents (children) under the age of 21. Compared to E-1 visas, the E-2 visas are granted to nationals of more countries. 

The main requirements for E-2 visa holders are:

• the foreigner intending to start or buy a business in the USA needs to keep track of the money invested into that business 
• the foreigner intending to start or buy a business in the USA needs to stay in the USA for the specific purpose of developing that specific business.

E-2 visas are valid for 5 years and may be renewed for 2 years if the foreigner meets the requirements.

L-1 (Intracompany Transferee) Visa for Business Buyers

This visa allows a foreign company’s internal staff transfers to management, executive, and technical positions in a subsidiary, branch, or affiliated company in the USA. But only if they have worked for at least one year for that business entity in another state or country. 

О-1 (Extraordinary Ability) Visa for Business Buyers

This visa can be obtained by a foreigner who has achieved significant success in business, sciences, education, athletics, arts, motion pictures, or the television industry. The O-1 visa entitles a foreigner to live and work in the USA with one’s family and apply for a green card. Initially, it allows a foreigner to stay in the USA for up to 3 years with the right to extend the stay for 1 year.

EB-5 (Immigrant Investor) Visa for Business Buyers

The main requirement for a foreigner applying for an EB-5 visa is to invest at least $1,800,000 in a business in the USA and to create at least 10 jobs for Americans within 2 years. Depending on the investment, the foreigner becomes eligible for a green card for oneself, one’s spouse, and children under the age of 21. The amount can be halved ($900,000) if the investment is in a business located in the Targeted Employment Area (TEA) in a particular state. EB-5 visa holders are allowed to apply for citizenship in the USA 90 days before the expiration of the 5-year period from the date of the visa.

ITIN Number for Business Buyers

A foreigner intending to buy or start a business in the USA can apply for an Individual Taxpayer Identification Number (ITIN) through the local Internal Revenue Service (IRS). A foreigner needs this ITIN number to open a business or personal bank account in the USA. With an ITIN number, a foreigner can apply for an Employer Identification Number (EIN) which is the Federal Tax Identification Number used to identify a business entity. Such a foreigner cannot have a Social Security Number (SSN) and will not be eligible to get one. 

Registered Agent for Business Buyers

When going to buy a business, a foreigner can list a location outside the USA as one’s business address. However, he will still have to appoint a registered agent who resides in the state where the company is purchased. His or her tasks will be to manage business correspondence and file reports.

To learn more about visas, you are welcome to read our relevant and further posts.

The Special Procedure/Rules for a Foreigner Intending to Buy a Business in the USA 

Any foreigner going to buy a business in any foreign state needs to learn in advance about the state-specific rules and procedures. Therefore, to avoid mistakes and issues during and after this process of business acquisition, you should seek help from professionals.

Here are a few things that a foreigner should definitely pay attention to.

The Permits and Licenses for a Foreigner Intending to Buy a Business in the USA 

Any foreigner is free to buy almost any business. Despite the relative ease of buying a business in the USA, a foreigner should pay attention to some imitations and details that can complicate the procedure. In some business sectors, federal laws restrict foreigners’ ownership of business entities. The list of such fields includes the following ones:

• banks
• radio and television broadcasters
• aviation
• maritime transportation and fishing
• insurance
• defense industry
• mineral leasing and resources
• supply of electricity, gas, and utilities
• use of farmland.

Depending on the business sector, a foreigner going to buy a business (whether focused on one field or operating in several business fields) may need certain licenses/permits obtainable from the state and/or federal authorities. Under the laws in the USA, any state, city, and municipality can also pass their local regulations for foreign investments and business.

Letter of Intent (LOI) 

After the foreigner has conducted a thorough check of the company on sale and negotiated to buy the business, he/she needs to receive the seller’s Letter of Intent (LOI). It specifies the agreed price, the assets, and the liabilities/encumbrances (e.g., outstanding mortgages on commercial property).

After receiving the LOI, the foreigner can request and perform verification of the additional documents and information provided by the seller. For example, when the business seller is 100% sure of the foreigner’s commitment to buy the business, he/she may be more willing to provide important documents such as:

• copies of lease agreements
• a detailed organizational chart of the business entity
• a complete list of retail inventory, furniture, equipment, etc.
• customer/subscriber base
• intellectual property (e.g., patents or copyrights) associated with the business.

How to Close the Deal to Buy a Business in the USA?

To buy a business in the USA and close the deal a foreigner needs more than just signing a contract. To complete the procedure, the foreigner will take several important steps, depending on the business he/she intends to buy and its assets and liabilities/encumbrances:

• If some business property is leased, the foreigner needs to re-register all leases in one’s name;
• If some business vehicles are part of the deal, the foreigner needs to re-register the ownership of the vehicle through the DMV;
• The foreigner and the business seller need to enter into a non-competition agreement: this will prevent the former business owner from opening a competitive business (specifying the period and/or a certain location);
• The franchise agreement: if a foreigner wants to buy a franchise, he/she will need to request additional documents from the parent company;
• Financial regulations: the foreigner needs to fill out IRS Form 8594, specifying the asset purchased.

Besides, the foreigner will need to contact the local, state, and federal fiscal authorities and notify them about the business acquisition.

The above-given list of requirements is not exhaustive and depends on the type and amount of business assets a foreigner wishes to buy, as well as on the local/state laws.

If you would like more information on how a foreigner can buy a business in the USA or its particular state, please contact us at: info@offshore-pro.info. Our experts will promptly provide feedback on all your questions.