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We are currently a LLC from Uruguay, and we've been requested by a potential customer in the US to provide employer identification number (EIN). So we are evaluating the possibility of incorporating there, as an S, or C type Inc, possibly in Delaware, but any advice is welcome.

My question at the moment is how much would this cost me over a year taking into account everything? I need to understand if the potential money I will make off US sales, will first pay the costs it will create, and second be worth the hassle?

thanks in advance

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3 Answers

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Why would you want to incorporate in the US? You would have to pay US sales taxes and all the fees associated with incorporation.

If a U.S. company wants your EIN number you simply tell them you are based in Uruguay. You can fill out a U.S. W8 form for them to prove you are not subject to US withholding.

W8 Form

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Most likely for "credibility" reasons and customer peace of mind. Rational or not, US-based customers may be more trusting of a company that has a US entity they can sue rather than an international entity they can't touch (of course the US entity may not have assets, but like I said, it's a perception issue). – Henry the Hengineer Jan 26 '11 at 21:48
Agreed (see dana.sh/bJHvPl). – Dana Shultz Jan 26 '11 at 23:44
We know in theory it's not required, but this client has a policy which requires an EIN & W9 form, and won't buy otherwise :( – Gabriel Lopez Jan 28 '11 at 9:36
Tell this client to get a social security number in your country or get lost. – NetTecture Dec 11 '11 at 10:20
up vote 5 down vote

Depends on a number of factors, including the state you incorporate in, type of entity, the number of authorized shares, and your business income.

For Delaware, the minimum cost is $89 for incorporation (corporation, S Corp is just a fax filing to the IRS (free)), $75 minimum franchise tax (5000 max auto shares, any higher and you pay more) + $25 annual report fee paid in March. You will also need a registered agent in DE (avg is $50/year) and a business bank account (varies). You can get an EIN online on the IRS.gov website for free, though there are some restrictions as to who can apply.

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In 2010, the minimum franchise tax increased to $350 (see dana.sh/cMdPhV). Online EIN is available only if a principal officer has a U.S. social security number (see dana.sh/bRsAnI). – Dana Shultz Jan 26 '11 at 23:43
Yes, many factors. In California, the last I checked the minimum franchise tax was $800 per year. – Bob Murphy Jan 27 '11 at 2:49
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@Dana Thanks for bringing that up; however, the minimum franchise tax in DE is still $75 (for 5000 authorized shares or fewer as mentioned above REGARDLESS OF PAR VALUE): corp.delaware.gov/frtax.shtml. The $350 minimum applies to those who use the Assumed Par Value Capital Method. If anyone has questions about the Assumed Par Value Capital method, let me know. – Henry the Hengineer Jan 27 '11 at 7:39
up vote 3 down vote

Many US companies now deem that an EIN is required on W8-BEN forms even for non-US companies with no presence in the US. However, it is possible to get an EIN over the phone for such companies, it took me about 30 minutes. We are UK based and have no presence/employees/tax liability in the US.

Firstly, here are the instructions. At the bottom of the first page of the actual instructions is the "How to apply" section. The line to note:

International applicants must call 1-267-941-1099

When you can they will expect you to have filled out a SS-4 form and read out your answers to it. That form is here.

Note in the second section "Do I need an EIN?":

  • Is a foreign person needing an EIN to comply with IRS withholding regulation.
  • Needs an EIN to complete a Form W-8 (other than Form W-8ECI), avoid withholding on portfolio assets, or claim tax treaty benefits

This line notes which lines of the form you need to complete. Of course, when I rang up the lady asked me for the entry for every line, so be prepared to give an answer to every line.

She gave me the EIN over the phone and that was it. I did have to wait about 20 minutes for the call to be answered, but compared to creating a US company I would try this route first.

EDIT: Having obtained an EIN the IRS is now asking us, a UK company with no presence or employees in the US, to file annual tax returns with them. So be very, very careful about obtaining a US EIN, clearly either their rules or employees are idiotic.

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