When a foreign company wants to set up a “start up” company in the U.S., I advise my clients to create a separate corporation here in California or another U.S. state so that obligations and liabilities will not flow back to the overseas parent firm. To get started, the new U.S. corporation will need an EIN (a federal Employer Identification Number) to open a U.S. bank account.
The Internal Revenue Service (IRS) has made it more difficult in recent years for foreign companies to obtain an EIN by use of Nominees in the EIN Application Process.
To obtain an Employer Identification Number, the new corporation will typically provide the SSN (Social Security Number) of a “principal officer.” In years past, the IRS was somewhat vague as to what “principal officer” meant stating that it could be a corporate “president, vice president, or other corporate officer.” In the case of a foreign company setting up a presence here in America, if corporation’s overseas president did not have an U.S. SSN because he or she had never lived or worked here in the U.S., the new corporation could temporarily appoint a local individual with a valid SSN living here as vice president in the application for an EIN.
Nowadays, the IRS now clearly states that it “does not authorize” a local “stand in” because the corporation, in the eyes of the IRS because it “facilitates tax non-compliance.” To comply with the new, stricter requirements, the principal officer on the EIN application must be a person who: “controls, manages, or directs the applicant entity and the disposition of its funds and assets.”
The IRS implemented a new procedure, January 6, 2014, that extends the time that required to obtain an EIN for Foreign clients by several days:
- by fax after one week rather than by telephone in real time.
- Retain a lawyer, or another qualified individual, to act as the third party designee for the corporation.
- The designee should prepare Form SS-4 (Application for Employer Identification Number), and
- The designee should prepare Form 8821 (Tax Information Authorization)for the corporation’s president to sign and return.
- The designee faxes the signed Forms SS-4 and 8821 to the Internal Revenue Service at +1 859-669-5760.
If all is acceptable to the IRS review, in approximately one week, the IRS will FAX an EIN confirmation letter to the designee.
Applying and qualifying for an EIN (Employer Identification Number) is just one of the many issues you will face when starting your new business endeavor in the United States as a foreign national. If you are a foreign national wanting to your business to the U.S. or start a new business in the U.S. you will benefit from and experienced lawyer with multi-national experience.
If you need helpful Legal assistance with Business Law, International Business Transactions, Commercial matters, Immigration, or Employment matters, or Wills, Trusts & Estate Planning, you will greatly benefit from an experienced Lawyer with Local and Multi-National experience. Please feel free to contact Charles at [email protected]
or call Attorney Charles Nellari, Esq. at +1.925.415.3335
