How to open a US eCommerce business using Shopify as a non-US resident

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This guide focuses on opening a business by founding a LLC. I changed my original plan on starting as a sole proprietor, due to different reasons. However, this guide might still provide enough information on how to start a business as a sole proprietor.


Please note that this is not a legal advice, but more of a story what worked best for me.

1. Before you get started

Check if your home country provides you with any help starting a business in the US. For German residents, contact one of the “German American Chambers of Commerce”: www.ahk-usa.com/en/ They help you with any issue and set up your company for free. (If only I had known that when I registered mine)

2. Choose a State for your business

This is a tricky one. It depends on the type of business you choose and other factors. Most ecommerce businesses will go with Wyoming or maybe Dalaware. Filing fees, annual fees, and taxes are very low. Also it is not necessary to list members of the LLC on a public database.

Things to consider/ read before you choose:

http://www.mynewcompany.com/whichstate.htm

http://www.nolo.com/legal-encyclopedia/wyoming-internet-sales-tax.html

If you can’t decide, just do what everyone does and go for Wyoming.

3. Get a US Phone number

This is a must. Don't even proceed if you don't have this yet. Mightycall is the one I use after I tested multiple ones over months. It's cheap, it has an amazing backend, let's you setup up smart phone call flows. You can route calls to your phone using mobile data and take them using their app, whatever country you're currently in. You can also use the app to call back people includig caller ID. Here is a PRO tipp: San Fernando numbers start with 818, San Diego is 858. If you have a choice, pick one of those, people will think it’s a toll free number which makes the business look bigger :)

There are various other options, with www.grasshopper.com being another big one, but less functionality in the backend and no app to use it on the smartphone.

Google Voice is only working in the US and Canada. But you'll need a bank account anyway any most likely you will fly there, so make sure to pick up a disposable local SIM Card and activate a Google Voice account using that number. You'll receive a NEW number, so even if the tourist si expries and will be deleted from your google account, since you will fail a later verification, you'll keep the google number.

For outbound calls to any country I am using skype. Get skype credit and call from your computer or smartphone over the app, it’s very cheap. The connection is very reliable, as long as the internet connection is stable. People you call will see the number you set as an outbound number.

4. Get a local US address

When registering a business in the United States, you are typically able to use any address in the world (with the exception of a P.O. Box) as the business address. This could be your personal or business address in your home country, or you could get a virtual office/ mailbox in the US and use that address as the registered business address as well. Still, having an additional address in the US might be smart. You can use this as an address on your website, look more trustworthy to customers/ suppliers and also it is better to have someone scan and collect all mails before sending it to your home country.

There are many service providers out there for such services:

USP Store address: this is probably the most mentioned option. Due to the fact, that all UPS stores are owner managed, the prices, service quality might vary from place to place. Some do scan your mail and forward it via email, others don’t. You might want to check with a local store or any store located, where you’d like to set your business address. I’ve seen prices for the business mailbox between $300 (Casper, Wyoming) and $500 (Ney York City) for a 12 months agreement.

USAMAIL1: www.usamail1.com/ definitely my favorite, I am using this service. You’ll receive a New York State address in Valley Cottage, that looks like this:

Jonathan Smith
555 Corporate Way, Suite x-xxxx
Valley Cottage, New York 10989

It is $9.99 per month, the only downside: you can’t choose another address in a different state. A fax number is also included in the offer, though every fax is $2 as far as I got that right. Of what I’ve heard, as long as your business is online, having a mailbox in NYC does not mean “nexus” in this state. So it should be fine using a NY address for a Wyoming company.

Mailbox Forwarding: does also seem like good option to me, but have not tried so far. www.mailboxforwarding.com

Here is a comprehensive overview over different address providers: https://www.myusacorporation.com/business-resources/us-business-address

Northwest Registered Agents: https://www.northwestregisteredagent.com/mail-forwarding-signup.html They offer addresses in Wyoming, Delaware and Montana for $50/month. Wyoming phone number included.

Wyoming Virtual Office: https://wyomingvirtualoffice.business/wyoming-virtual-office/ $49/month incl. phone number

5. Sole Proprietor vs. LLC

Those are the most common types of businesses, of course there are also other options.

Basically a sole proprietor is a type of business entity that is owned and run by one natural person and in which there is no legal distinction between the owner and the business. The owner is in direct control of all elements and is legally accountable for the finances of such business and this may include debts, loans, loss etc. There is no limited liability though, meaning: when the company goes bankrupt, you go bankrupt.

An LLC (Limited Liability Company) on the other hand is form of a private limited company. An LLC is not a corporation; it is a legal form of a company that provides limited liability to its owners in many jurisdictions.

The clear upside of a sole prop is the easy and fast set up and its lower running cost, i.e. there is no “registered agent service” needed. I was planning on starting as a sole prop, as transforming the business to an LLC later can easily be done.

Getting reliable information on how to start as a sole proprietor was almost impossible. For an LLC it was easy to find this how setting up the LLC works, as people try to sell you services (registered agent) for this and are willing to share information. Since an LLC is a good was to show better reputation for non US citizens anyway, I decided to choose that option.

Resources:

https://en.wikipedia.org/wiki/Sole_proprietorship

https://en.wikipedia.org/wiki/Limited_liability_company

6. Setting up the LLC

You can do this completely on your own, or you get an expert to do all the paperwork. This is completely up to you, but don’t waste too much time here. It’s not expensive to get it done! You will need a registered agent service as a non-resident, which is basically a legal contact of your company. So compare all offers for one time and recurring costs.

Here are some options:

www.mynewcompany.com This is the company I choose. I went with the full service package. Here’s a trick: put your preferred package in the shopping card. Make sure you enter all your personal information such as email, but don’t pay. Close the browser and wait one day. They’ll send a 15% discount code. I paid a total of $391.90 including a rushed fulfillment. They also offer a virtual office option.

www.wyomingagents.com The cheapest one I could find. Haven't used it myself, but heard that people were quite happy with them. They don't provide you with any further help or sample Articles of Organization etc. though. Update 2018: I use this one for their registered agent service now and they are great!

www.myusacorporattion.com This is another option which has proven to be reliable. This is the most recommended option from the Dropshiplifestyle Forum.

www.legalzoom.com Often recommended by US residents, seems like a valid and well known option but kind of pricy.

7. Get a US bank account

If you're not a US citizen or don't have a long term visa or greencard, you won't get a social security number (SSN). And if you don't have a social security number, most banks will not give you a bank account. Not because it is illegal, but because a person’s credit history is linked to the SSN and if you don't have one, they can't check your background. This is why it is probably impossible to get a Credit Card and also hard to get a Debit Card. But I found out that Capital One bank and Bank of America are fine with opening accounts on a Debit basis for non US residents. A debit card looks just like a credit card, just you have to transfer money on the account before you can use it. Capital One was a bit easier to set up and it's cheaper, long term you will want to have a second account option, since this account won't allow you to do any online wire transfers (SSN needed for verification).

EDIT: The 2018 Shortcut

This wasn't available when I published this article. There is an awesome new shortcut: open a free account with Transferwise. I set up a personal and business account in one profile with them. After this setup and verification, go to the "Borderless Account" Section and add any bank account in any currency you need! You get a US bank account with your own account number, the account is under your name! Downside: there is no credit card linked to the account, you will have to try to use a personal/ business card from home, i.e. to pay your suppliers.

Business Bank Account

If you choose to start as an LLC, a business bank account is almost a MUST. Almost, because it is not required by law. By law you only need a separate bank account for your LLC that is not used in any personal way. So it SHOULD be possible, using a personal bank account for an LLC. The downside is, that the name of the LLC will not be linked to the account. So if you’re paying your suppliers, your name instead of the LLC’s name will appear on the statement. Also I am not sure if the banks will let you use your personal account for your business. This might work, but probably not worth the hassle and the outcome is unsure. So let’s focus on getting a business account.

As soon as you received all your LLC paperwork and you have your LLC EIN, get your bank account. If the LLC filing company doesn’t provide you with an EIN, go to “6. Get an EIN” first before continuing.

www.capitalone.com Easiest and safest way is just to walk into one of their branches in the US. Check their website for banking costs and conditions. It is around $15/months unless you leave a certain amount ($2000) on the bank account to waive the fees. This option worked for me. Bought a plane ticket to New York, stayed two days, went to one of the branches and voila. Paperwork you need to bring: Passport, second foto ID, LLC documentation (Articles of Organization, LLC EIN confirmation). Amount of money in cash you want to deposit. Just to be sure, be also prepared to show: contract/ confirmation of US address, proof of address in your home country (in case your LLC is registered to that address, i.e. gas/ internet/ electricity bill)

Any other bank: Yes - if you're present IN the US pretty much ANY other bank should work. Call before going there and ask them, which paperwork they'll need.

If you have NO chance to go to the US in person, here are some options:

1. I found another way, that should have worked, but did not for me due to technical issues, and after having called the hotline several times they just gave me a general NO. Still - here it is: go to the capital one website, click on Business > Scroll half way down to “Spark Business is available in your area” > click on it and change the ZIP to “56301”. This gives you the cheapest available online offer with no monthly fees. If you go for any other local zip code, fees will vary. Same applies to local branches. Fill out the online form as far as possible, insert all 8 or 9’s for the SSN. Submit the form and be ready to be called back. I HAVE NOT TRIED THIS YET, BUT IT COULD WORK!

2. Call Citibank. They told me, they would open the account on another person's name that is legal part of the company. So basically you give a friend 1% of the company, he opens the account for you and lists yourself as a second account member for account access. After the account is set up, your friend is removed from the account, ownership of the company transfered back to you. NOTE: this is highly theoretical. I have not tried this.

3. I) Get a transferwise account. Transferwise let's you send money to US bank accounts. Note that Payoneer does not seem to be an option here as they told me sending money to bank accounts is only for private accounts unless the other person does use Payoneer, too. I talked to Transferwise, they seem to be more open and entrepreneur-friendly. Basically they said, you could use their money transferring solution, open it under your companies name and link it to either your personal or business HOME bank account. Just sign in, then enter your business information, provide some business documents - very basic and simple. Fees are about $2 per money transfer up to $400 or 0.5% for transfers over $400. Downside: the manufacturer will see on the bank statement, that you're using this service (same as with Payoneer). Transferwise is for SENDING money only, not for receiving. II) Register a bank account in YOUR HOMECOUNRTY to your LLC's name or if not possible, just to your personal name. Whether this account is personal or business doesn't matter. Just don't mix it up with any personal spending. Link this account to your transferwise account. third) Getting paid just use Amazon/ Shopify payments or paypal. Please see chapter 11. III) In case of a refund, let the manufacturer refund it to paypal/stripe or any other payment provider. Downside: Fees will apply. For more information, read the thread under this post, starting on page 3.

Personal Bank Account:

If you want a US bank account for personal purpose or if you start your business as a sole proprietor, this is how you get a personal bank account:

www.capitalone.com I went into a Capital One branch in New York. All I needed to show was my passport and any second photo ID, also any credit card with my name on it. I could choose between a personal or a business account. As I don't have the business set up yet, I decided to go with the personal account and use that for business. No problem at all. I got a Debit Account and I also opened a savings account, which is just a second account with no access to with the card. I received a temporary Debit Card, the actual one will be in my mail soon. Important: you have to have $300 on your account all the time in order to get the account for free. Otherwise there will be a small fee every month, I think it was around $10 or something. I did use the Debit Card already, it works fine. I received a call a few days later after having opened the account, they asked for a copy of my VISA. I told them I don't have one and never heard from them again. I opened this account before I decided to go for an LLC. So I’ll need another one.

During my research in the internet I found, that this also works if you don't open the account in person in one of their branches, but over their website instead. I don't know, if this is correct. If anyone tries that, please LET ME KNOW if it works! For the SSN just enter all eight or nines.

Important: you can use ANY other bank, too! If you found a different bank, that lets you open an account as a non-resident, please let me know so I can include this option here!

http://info.legalzoom.com/llc-required-separate-bank-account-3228.html

Edit 2018: I got a second personal bank account at Bank of America with no issues at all last year. Its a bit more expensive but their online backend is better and the limits are higher.

8. Get an EIN (Employer Identification Number)

If you choose to start your LLC using a professional filing company, they should have done this for you. Either way – ask them! If you have to do it by your own, here’s how it works:

https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/How-to-Apply-for-an-EIN

Call the IRS and get an EIN over the telephone. This is super easy and takes about 10-15 minutes. Note, that the option off calling the IRS applies to non US residents only. Expect the line to be very busy, I called very early at their local time as one of the first customers and came through after a few minutes. Have all your business information available, basically that is your name, business name, address, phone. Check the form SS-4 before you call so you know what they’ll ask. This looks more complicated than it is. Trust me.

Resources:

SS-4: https://www.irs.gov/pub/irs-pdf/fss4.pdf

Additional Info: http://smallbusiness.chron.com/obtain-tax-id-number-foreign-entity-58171.html

9. DBA

A DBA is a “Doing Business As” to do business under a different name. It applies to any kind of business type. As a sole prop this is required I think. In example using a DBA gives you the option to sell under and accept payments to the store’s name Johnsbakery.com instead of the personal name Jonathan Smith or your company’s name John Smith LLC.

It is optional for sole proprietorships, so not a MUST.

In other words:

If you will be doing business under the Corporate or LLC name then a fictitious name or DBA is not required. However, if you wish your company to operate under a different name, then you will have to file.

To learn more about DBA's and order online, please visit: http://www.mynewcompany.com/dba.htm

Please note: a DBA might be known under a different name in some states. (i.e. “assumed name” or “fictitious name”)

10. Reseller’s permit / Use Tax Permit / Sales Tax Permit / Reseller's Certificate

Some states use a different name, in Wyoming it's called Use Tax and Sales Tax. https://www.myusacorporation.com/reseller-permit

You can apply for a Use / Sales tax license online: https://excise-wyifs.wy.gov/

I attached document called "Lessons learned Sales & Use Tax". It contains further information and a manual. I ran into technical issues here using my foreign address when registering, but find the solution attached. It's a word document, that contains 4 pdf docs.

11. Set up payment in your store

Note that the options are limited here for US stores, for non-US based stores you might have more options.

Shopify payments: Shopify promotes their own payment option "Shopify payments" which is based on stripe. I recommend Shopify payments as this is the cheapest option and often recommended by everyone else. Unfortunately they now enforce giving this payment option to businesses with physical presence in the US, only. You can still try, this is what worked so far: When you set this up, they'll ask for an SSN (again). Enter the last 4 digits of your EIN.

Stripe: Probably the one you'll end up using, if available in your country. It's great, I have multiple accounts and charged hundred thousands of USD using them, never had an issue. The do request account verifications if volumes get higher, but even when I was honest about my remote location they let me proceed using their service.

Paypal: Can be added to the store in addition to Shopify Payments or as only option. You will run into trouble setting this up again, if you don't have a SSN. Contact support and ask them to set it up with your EIN/ ITIN instead.

Amazon Payments: Haven't tried this but should also work.

As of today (April 16th 2016) Shopify gives the following other options: BitPay, Dwolla, Coinbase, GoCoin, Affirm, MultiSafePay, FuturePay, LayBuy