As a business owner in Ghana, venturing and growing your business entity to the United States is an exciting opportunity for growth.
A Limited Liability Company (LLC) is one of the more popular and flexible business structures available to foreign entrepreneurs wishing to do business in the US. An LLC is a business structure that stands in the middle of the line between a corporation and a partnership or sole proprietorship by providing them some liability protection and added operational flexibility.
Ghanaian business owners might consider LLC as an overwhelming setup cost for business but when compared to the advantages of global legal protection, lower taxation, and better accessibility to international markets it offers it might prove worthwhile to do so for establishing their business in the USA.
In this guide, we are going to look into the advantages of forming an LLC from Ghana and how to appreciate the step-by-step processes of getting this entity to enable you to enter the U.S. business market.
1. Choose the State for LLC Formation
State Selection: The first stage of creating an LLC in the United States is simply which state to create it in. You can create your LLC in any state that you wish to operate, even if a lot chooses Delaware, Nevada, and Wyoming due to their almost lax approach to business regulations.
The ultimate decision is made around the taxation structure of the state, the type of business one wishes to set up, and the operating physical location. For instance, you may decide to create your LLC in Delaware just because you do not want to operate your business in that state while it has a business-friendly legal environment.
Considerations: However, California and New York may evoke significant business taxes and regulations which might be a turnoff for other non-residents except if you have a business in that area.
2. Choose a Name for Your LLC
Name Availability: Changing your LLC name is not an option since it should not be the same as any other registered business in your filed state while available names may differ slightly. You can generally check the sovereignty of the name you are interested in by going to the Secretary of State to find out more about this particular state.
Requirements for Naming: The LLC name must either bear the label ‘Limited Liability Company’ or have its abbreviation in ‘LLC’ form. It also should not include in any way hints of illegal activities or professional fields that are licensed e.g. “law,” “insurance,” “bank.
3. Appoint a Registered Agent
Meaning: A legal document being received by the Registered Agent or tax forms, notices, and all other kinds of written communication becomes easy with the help of the registered agent who is a person or a business entity authorized to do all that on behalf of the LLC. Since you are a foreigner, you cannot act as your Registered Agent. This is why, a registered agent service located in the United States has to be obtained.
Considerations: A proper address and working hours would suffice since the Registered Agent is only required to be within the state where your LLC was registered on a stipulated time.
Providers: Free US addresses for foreign LLCs and other offered services are readily available since more than enough LLC formation sites are now offering registered agent services within their packages. An option that offers extra such as tax filing or forwarding of mail might be the best choice.
4. File Articles of Organization
Filing Requirements: To begin your LLC legally, you are supposed to send articles of organization also known as a certificate of formation to the secretary of state within the state of your preference. Such documents include one or more of the following basic information:
- LLC Name,
- Name and address of the registered agent,
- Address of the principal office,
- Reason for the existence of the LLC,
- The time frame for the LLC for the period it would last (which is generally indefinite but can be provided otherwise)
Filing Fees: The filing fees depend from one state to another, on average the fees are 50 dollars to 500 dollars. A few states offer fillings to be done with the help of extra charges for a faster processing time.
5. Create an Operating Agreement
Operating Agreement: Filing an LLC operating agreement is advisable but not a mandatory requirement of the law. It explains the Internal management structure, internal rules, and operational procedures of the LLC. It also explains how the members are structured, how the share of loss and profit is shared among the members, voting rights, and other management decisions relating to the business.
Importance: If there is more than one member in your LLC, having an Operating Agreement in place becomes paramount to avoid any problems or differences of opinion in the future. This document is an internal document and does not require state filing but it is an essential element of ensuring that the business can operate effectively.
6. Obtain an Employer Identification Number (EIN)
What is an EIN?: An Employer Identification Number (EIN), or a Federal Tax Identification Number, is a legal requirement for any LLC registered in the USA. This helps to identify your business in terms of tax obligations and helps in opening a business account, employing workers, and filing taxes.
How to apply for EIN: If you are a foreigner, you will have to fill out IRS Form SS-4 to request an EIN from sheer IRS. This can be done either online or by post. While residents of the United States can request an EIN through the Internet, non-residents normally use the telephone, post office, or online service to do this, or intermediary services that apply for foreign nationals who want to use this service.
Tax Considerations: Having an EIN is essential for your business in the number of documents filed with the Internal Revenue Service. Depending on the classification of your LLC (single-member or multi-member) there might also be additional compliance requirements in the United States. It is quite possible that the operations of your LLC, even though you reside outside the United States, may generate income subject to US taxation. It would be advisable to get a US tax consultation.
7. Open a U.S. Business Bank Account
To start your business, what’s crucial is the U.S. business bank account in the name of your LLC. This is necessary to maintain a clear distinction between your personal and business finances. Most of the banks will require the following:
- LLC formation documents (e.g., Articles of Organization)
- An EIN
- Operating Agreement if applicable
- A passport cover and proof of address from Ghana
Difficulty for Non-Residents: As a foreign resident, seeking to open a business bank account may prove hard. While some can be more restrictive than others and do not allow this without a physical meeting in the US, some are more lenient and allow business account opening through international means. For non-residents forming U.S. business accounts, Mercury or TransferWise (Wise) also serve as useful online banking system accounts.
Banking Services: To be able to manage your company effectively from a distance, search for a bank that has the following capabilities such as wire transfers, online access, and an interface with your accounting systems.
8. Comply with U.S. Tax Obligations
Tax Structure: In most instances, LLCs are taxed on a pass-through basis, whereby all profits or losses are distributed to members’ (owners’) respective tax returns. As a foreigner, you have to ensure that you fulfill your tax obligations in the U.S.; federal taxes, state taxes depending on the LLC location, and possibly employment tax where you have employees are some of them.
Tax Forms: Once the LLC has more than one member, non-resident owners must file Form 1065 (the Partnership Return). Owners of single-member LLCs are required to submit a Form 1040-NR Non-Resident Alien Income Tax Return.
U.S.-Ghana Tax Treaty: The alliance also has a tax treaty with Ghana that may be relevant regarding how the income of your LLC will be treated about tax. It is best to meet with a tax expert who would help you with what is required to follow U.S. laws while preventing taxation in both Ghana and America at the same time.
9. File Annual Reports and Pay Fees
Continued Existence: Some people own LLCs in states that have “good standing” requirements such as submitting yearly reports and paying fees. These reports should contain simple information about your company, like its primary business location and its members. Other states like Delaware and Nevada do require limited liability companies to pay a yearly franchise tax.
Consequences of Ignoring Our Guidelines: If the annual report is not filed, or if the necessary fees are not paid, a fine, a late fee, or even the cancellation of the LLC could be the consequences.
Conclusion
In light of how the international community yet wants to access the US market, forming a U.S LLC is a smart decision for most Ghanaian entrepreneurs. Following the above procedures, you will be able to register your LLC, comply with U.S. tax and other legal requirements, as well as create a business model that bridges Ghana and the U.S. market.
It is critical to partner with specialists who will help you with the intricate details of adhering to various requirements in the US and Ghana and also aid in the smooth flow of business processes.
Book a free consultation with Easyfiling to form an LLC in Ghana.
Frequently Asked Questions (FAQs)
What are the timeframes for registering an LLC in Ghana?
Registration processes of LLCs in Ghana take an average of 7-14 days as long as all the required documents and papers are ready for the registration process and no hitches emerge in the course of registration. This period incorporates reserving the company name, drawing incorporation documents, and registration of the pronouncement to the Registrar General Department.
Is it possible for an expat to own a limited company in Ghana?
An LLC can indeed be fully owned by foreigners in Ghana since there are no restrictions imposed on international citizens in terms of business. This means that any foreign entrepreneurs can establish their business in Ghana without needing to bring a local partner on board. On the other hand, if such LLCs operate in specific regulated areas such as broadcasting or mining, some provisions on the percentage of foreign shareholding may come into play.
How much does a limited liability company pay in taxes in Ghana?
An LLC would pay its corporate tax in bono, which is the corporate tax, in this case, Ghana. Of the total earnings and revenue earned by companies, most businesses will only be billed for a tax rate of 25 percent, even though it is considered standard.
But based on the structure type and location of a business such as special economic zones, some industries might enjoy a tax reduction rate or at best a tax break. In addition, if the LLC is organized in a certain manner, wherein profits and losses are allocated to the individual members, the pass-through taxation would be applicable.
Is it possible for a Limited Liability Company in Ghana to employ workers?
The owners are free to get employees since an LLC in Ghana can hire employees. In this case, the LLC is considered a corporate body distinct from its members enabling it to sign employment contracts, issue payments of salaries as well and make social security contributions.
Employers should also comply with their employment contracts and with the labor laws of Ghana from such laws which offer maternity leave and contributions to pensions to hours of work and minimum wages prescribed.
Nabin Adhikari
