FOREIGN BASED BUSINESS IN THE UNITED STATES
jahangirilawgroup
March 23, 2021

When starting a business in the United States it is important to understand federal and state business regulation. The United States follows a common law legal system where the federal constitution supersedes all other laws of the land. All states have their own respective laws, constitutions, and regional jurisdictions; this is conditional in that state regulations do not violate the federal constitution. It is beneficial to be well versed in the business laws of the respective states prior to investing.

Foreign investment in the United States is only restricted on investments in selected sectors including, but not limited to, defense contracting, banking, and mining. These sectors are typically reserved for United States citizens or entities. The most notable sectors for foreign direct investment (FDI) include wholesale trade, manufacturing, and real estate, accounting for hundreds of billions of U.S. dollars. Foreign employees and investors must obtain one of several visas that allow the individual to conduct business or seek employment in the United States. Once individuals become legal visa holder, they are permitted to work in the United States and will have to adapt the development of their business in accordance with their state’s legislature.

DELAWARE

Delaware has become well known for its business statutes which often attract foreign businesses searching for a state to launch their U.S. based venture. The procedure for creating a business in Delaware is efficient and simple, offering expedited processing of documents and electronic filing. To successfully start a business in Delaware, an entity must first file a Certificate of Incorporation with the Secretary of State of Delaware. A corporation in Delaware requires bylaws and meeting minutes of the board of directors – these do not have to be filed with the Secretary of State.

Other considerations when starting your Delaware based business:

  1. Share Capital: Delaware does not restrict a maximum share capital.
  2. Management Structure of the Corporation: Officers of the Board of Directors are responsible for managing the everyday operations of the corporation. Delaware does not have restrictions on foreign managers.
  3. Rights Associated with Shares: Restrictions can only be imposed by the Certificate of Incorporation, bylaws, or a shareholder’s agreement.
  4. Foreign Shareholders: There are no restriction on foreign shareholders except in specified sectors.
  5. Liability: A director of a corporation can be liable for any breach of fiduciary duties to the corporation and its shareholders.
  6. Reporting to the State: certificates of changes of name, registered office or agent must be declared with the Secretary of State.

CALIFORNIA

California is the one of the greatest recipients of FDI, along with New York and Texas, and offer foreign businesses a selection of forms, depending on the business structure, through the Secretary of State of California’s website (https://www.sos.ca.gov/business-programs/business-entities/forms). These forms must be filled out and filed with the Secretary of State of California and can be done so through the online filing service, by mail or in person, or through the new eForms Online Service.

In California, there are multiple steps to take to successfully start a business venture:

  1. Selecting a Business Structure:
    • Corporation: File a Statement and Designation by Foreign Corporation (Form S&DC–S/N [for foreign general stock or nonprofit corporations], Form S&DC-PC [for foreign professional law or accountancy corporations] or Form S&DC–INS [for foreign insurer corporations) and attach to the completed form a valid certificate of good standing by an authorized public official of the foreign jurisdiction under which the foreign corporation is incorporated.
    • Limited Liability Company: File an Application to Register (Form LLC–5) and attach to the completed form a valid certificate of good standing by an authorized public official of the foreign jurisdiction under which the foreign limited liability company is organized.
    • Limited Partnership: File an Application for Registration (Form LP–5) and attach to the completed form a valid certificate of good standing (or other record of similar import) by an authorized public official of the foreign jurisdiction under which the foreign limited partnership is organized.
    • Limited Liability Partnership: File an Application to Register a Limited Liability Partnership (Form LLP–1) and attach to the completed form a valid certificate of good standing (or other record of similar import) by an authorized public official of the foreign jurisdiction under which the foreign limited liability partnership is organized.
  2. Business Location: The California Business Investment Services unit of the Governor’s Office of Economic Development (GO-Biz) provides a site selection service for businesses, consultants, and real-estate investors. (https://business.ca.gov/calbis-sign-up/)
  3. Registration Process:
    • Check availability for business name under California rules.
    • File Articles of Incorporation with Secretary of State of California.
    • Meet/Create Board of Directors and develop company bylaws.
    • Retrieve your Federal Employer Identification Number (FEIN) and open a bank account for the new incorporation.
    • Retrieve the applicable business licenses from the city or county in which you will be conducting business.
    • Submit a Statement of Information within 90 days to the Secretary of State of California.

U.S. & STATE EMPLOYMENT LAW

Federal Employment Laws and Regulations

  1. Fair Labor Standards Act and the Occupational Safety and Health Act: these federal statutes regulate wages, child labor, and occupational health and safety.
  2. Title VII of the Civil Rights Act of 1964, including the Pregnancy Discrimination Act amendments; The Equal Pay Act; The Americans with Disabilities Act; The Age Discrimination in Employment Act of 1967; Genetic Information Nondiscrimination Act of 2008: these statutes prohibit the discrimination on the basis of, but not limited to, race or ethnicity, religion, sex, age, and disability.
  3. Employee Benefit Regulations: These federal laws regulate employee retirement plans, health benefits, availability of unpaid leave, job protection and insurance. These statutes include: Employee Retirement Income Security Act (ERISA); Consolidated Omnibus Budget Reform Act (COBRA), Family and Medical Leave Act.
  4. States may have statutory counterpart laws which can offer greater protection than federal regulations and should be assessed before starting your company in the United States.

 

JAHANGIRI LAW GROUP specializes in business, corporate, commercial, and real estate litigation and transactional law.  We are located in San Ramon, County of Contra Costa, California. We are open from 9:00 a.m. to 5 p.m., Monday to Friday. To make an appointment please call 925-574-0100.

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