If you are a U.S. resident without a U.S. Social Security Number (SSN) or if you are a non-U.S. foreign resident without a Social Security Number, you may be looking to incorporate and form your business.
The first question we need to answer is “Can you incorporate without a Social Security Number?”
And the answer is yes!
But first, we need to explain what “incorporate” means…
What Does Incorporate a Business Mean?
When creating a new business, you as the owner can form your business in a number of ways that best fits your business.
To incorporate a business means to turn your business into a Corporation entity recognized by states in United States. When a business owner decides to form a Corporation, that Corporation becomes a legal business structure independent of its owner or owners.
What is a Corporation?
Corporation is an independent business entity, separate from the people who own, control, and manage it.
Corporations can enter into contracts, incur debts, and pay taxes apart from its owners. In other words, the Corporation itself, not the shareholders who own it, is held legally liability for the actions and debs the business incurs.
Benefits of Incorporation
The biggest benefit to forming a Corporation is personal liability protection. Shareholders of a Corporation have limited liability protection, which means creditors can’t come after an owner’s personal assets to collect a debt. The same applies if the business gets sued.
Also, Corporations can raise capital more easily through the sale of stock. Stock can come in different classes, can be used to reward employees in addition to compensation, and can even be publicly traded.
Disadvantages of Incorporation
Corporations typically pay higher filing fees than other business entities when incorporating with the state.
Corporations must also keep more records, such as Articles of Incorporation, bylaws, resolutions, minutes and annual meeting minutes, communication to shareholders, and annual reports.
How to Incorporate Without a Social Security Number (SSN)
If you are a U.S. resident or non-U.S. resident without a Social Security Number (SSN), you can still incorporate your business.
You first must determine what state for incorporate your business in. If you are a U.S. resident, I would suggest incorporating in the state where you currently reside and where you will be conducting business.
Form your Corporation in Delaware
If you are a non-U.S. resident, I would highly recommend incorporating your business in Delaware. Delaware is considered to be the most business-friendly state for incorporating. In fact, Delaware is America’s most popular state to incorporate.
Delaware offers flexible favorable laws for businesses, privacy (Delaware does not require members, directors or officers to be listed on the formation documents), and cheaper filing fees (Delaware’s filing fee is currently $90).
Form a C Corporation
Once you determine where to incorporate your business, you would have to determine whether to incorporate your business as a C Corporation or S Corporation.
A C Corporation is the most common entity. It is a separately taxable entity. Tax is paid on the corporate level and at the individual level on dividends.
On the other hand, an S Corporation is considered a pass-through tax entity. What that means is that it pays no corporate income tax. Instead, the profits and losses of the business are “passed through” the business and reported on the owners’ personal income tax returns.
Although C Corporations have no restrictions on ownership, an S Corporation is restricted to no more than 100 shareholders, whom MUST be United States citizens.
So if you do NOT have a Social Security Number (SSN), you should form a C Corporation, and NOT an S Corporation!
A business lawyer can help you organize, draft, and file the proper documentation with the Secretary of State to form your Corporation.
Once you form your C Corporation, you would need an Employer Identification Number (EIN)...
What is an Employer Identification Number (EIN)?
Employer Identification Number (EIN) is a number issued by the Internal Revenue Service (IRS) to identify a business.
An EIN is necessary for a Corporation to lawfully conduct business in United States.
EIN is used to start your business, open a U.S. bank account, hire employees, file taxes, obtain loans, and apply for permits and licenses.
If you do NOT have a Social Security Number (SSN), the following process should be followed to apply for an EIN:
- Get a business lawyer to act as a third-party designee for you
- The business lawyer will prepare your EIN application and contact the IRS
- The business lawyer will receive your EIN on your behalf
To guarantee completion of the EIN application process, it is highly recommended to have a business lawyer act as your third-party designee apply for your EIN on your behalf.
If you need to incorporate your business but do NOT have a Social Security Number, it is still possible to incorporate your business.
As discussed in detail above, incorporation means forming an independent business entity, typically a Corporation.
If you are a U.S. resident, I would suggest forming your Corporation in the state where you currently reside. However, if you are a non-U.S. resident, form your Corporation in Delaware.
Don't forget to form a C Corporation and not an S Corporation.
And also, don't forget to apply for an Employer Identification Number (EIN) which will allow you to legally operate your business in United States and comply with the IRS. Also EIN will allow you to open a U.S. bank account.
If you have any questions about incorporating your business without an SSN, please feel free to contact me. I'll be more than happy to help!
Mollaei Law is a law firm specializing in business law serving businesses and entrepreneurs. We provide legal expertise in all stages of business development by drafting and reviewing contracts and agreements, assisting transactions and negotiating, forming LLC's and Corporations, registering trademarks and copyrights, business planning, and answering any legal questions you may have about your business.