The American Dream is alive and well for immigrants to the United States, who play an important role in creating jobs and contributing to the economy. In 2017, more than 3 million immigrant entrepreneurs employed 8 million people and produced $1.3 trillion in total sales.
Immigrants in California account for 27 percent of the state’s population — and almost 39 percent of its entrepreneurs. In New Jersey, immigrants make up more than 23 percent of the population and account for more than 35 percent of small business owners. It’s the same story in Florida — 21 percent vs. 35 percent. And in New York — 22 percent vs. 33 percent. And in Texas, Nevada, Maryland, Massachusetts, Illinois — the list goes on.
From small landscaping companies and local restaurants to Fortune 500 companies, businesses across the U.S. are increasingly owned by immigrants — many of them with less than a bachelor’s degree. In fact, less-skilled immigrants start businesses at a higher rate than both immigrants with a bachelor’s degree and the U.S.-born population.
Recently, the United States Joint Economic Committee pointed out that immigrants are vital to the U.S. economy and are, in fact, driving the post-pandemic economic recovery. If you’re an immigrant considering starting a business, we’ve gathered essential information to help you understand what’s involved.
If you aren’t sure where to begin, this guide is for you. Here, we provide an overview of the steps you’ll need to take to get your business off the ground — from coming up with an idea and a name to getting your first customer.
Decide what kind of business is right for you
What kind of business you have will impact many other decisions you’ll need to make along the way. You may already have a clear vision for your business, but if you don’t, that’s okay. Many entrepreneurs start off without a specific idea in mind, but with a little thought, you can come up with an idea for using your talents, skills, or knowledge to make a living.
First, think about your business as a way to solve a problem or create value for potential customers. Find something you’re passionate about — after all, nearly 50 percent of small business owners say they work 50 hours per week or more, so doing work that you enjoy will make it easier to stay committed to success.
Apply for an ITIN
Before starting a business, you’ll need to be able to pay taxes. If you have a Social Security number, you’re already set. But if your immigration status means you aren’t yet eligible for Social Security, you’ll need to get an Individual Taxpayer Identification Number, or ITIN.
This nine-digit number is assigned by the Internal Revenue Service (IRS) to people who work in the U.S. but don’t have a social security number. The IRS can take up to 7 weeks to issue a new number, so apply as soon as you decide what kind of business to start.
Create a business plan
Once you have a vision for your new company, it’s time to focus on the details and create a business plan. This document gives you a roadmap to success, and it’s an important step in starting a business. A business plan includes:
- Your mission statement
- Details about the leadership, employees, operation, and location
- What products and services you will sell
- An analysis of the current market conditions in your industry
- A strategy for marketing your business
- Financial planning, such as balance sheets and projections
- Budget to help you manage costs
Determine how much funding you need
All new businesses require capital to get off the ground. How much money you’ll need to fund your venture depends on your line of business, what financial resources you already have available, and what assets you own. Having a realistic picture of the cost for opening your business allows you to secure the right amount of funding.
Find the funding
Once you have a funding goal in mind, you need to decide how to raise the money you need. Here are some of your options:
Business loans for immigrants
With an immigrant business loan, a financial institution agrees to give you a lump sum of money, and you repay the amount plus interest over time, on a set schedule. Once the loan is paid off, you can apply for a new one if you want to build or expand your business.
Immigrant-owned small companies may also qualify for business lines of credit. With a line of credit, a lender makes a certain amount of money available to you. When you need money, you can draw from the line. Then, you make monthly payments only on the amount you used. The bank only assesses interest on what you use. As you make payments, the money goes back to the line of credit. You can draw from it again in the future if you need more money.
Although you may need to complete more steps than a U.S. citizen to gain approval for a loan, it’s not too difficult to get a loan from a bank as long as you have good credit. Our list of some of the best banks for non-residents in the U.S. is a good place to start finding a financial institution to borrow from.
Grants for immigrant entrepreneurs
A grant is a lump sum of money that you can use to fund your business. Unlike a loan, a grant doesn’t require repayment. Federal and state agencies and nonprofit organizations are good sources for immigrant business grants — and while competition for grant funding is high, a solid business plan and a good credit history increase your chances of securing one.
Other ways to find money
Loans and grants are among the most common sources of immigrant small business funding, but they’re not your only options. In fact, more and more people from all backgrounds are using non-traditional funding to get their small business off the ground.
Alternative financing sources can make it possible for immigrants with no established credit history to achieve their dreams of owning their own business. The U.S. Small Business Administration (SBA) reports that entrepreneurs who successfully raise revenue through crowdfunding and other non-traditional sources are more likely to get approved for business loans in the future.
Decide on your business structure
The next step to starting a small business is to choose your business structure, or how you will organize your company. The business structure you choose affects how much you pay in taxes, who is financially and legally responsible for your business, and what paperwork you need to file as you move through the next steps.
Sole proprietorships, limited partnerships, and limited liability partnerships are the most common business structures for immigrant-owned small businesses. Each has its own benefits and drawbacks, so understanding your business structure options and how they impact your taxes is important for selecting the one that will work best for you and your business type.
Apply for federal & state tax ID numbers
Once you have chosen a business structure, you need to apply for a business tax identification number. Your tax ID number enables you to register your business, pay business and sales taxes, open bank accounts, and more.
As an immigrant business owner, you will likely have to apply for two tax ID numbers:
- Employer Identification Number or EIN: This number is issued by the IRS, and you can apply for an EIN online by answering a few simple questions. There is no fee for applying, and you’ll receive your EIN as soon as you complete the application process.
- State Tax Identification Number: The Department of Revenue or tax division of the state where you establish your business will issue this number. Each state has its own process, so use this list of state tax agencies to learn what you need to do to obtain a tax ID number in your state.
Choose & register your business name
Now, it’s time to decide what you will call your business. Choose a business name that describes what you do, sparks interest, and sets you apart from other businesses in your field. As you consider names, search the database of the U.S. Patent and Trademark office to find out if the name has already been legally trademarked by someone else. You can also do a Google search of the business name to find out if others have the same or a similar one. This handy business name generator can help you come up with name ideas for your company.
Once you have a great name, you may need to register it. Most businesses don’t need to register their name with the federal government unless the business will be tax-exempt, or you want to trademark the name.
Depending on the laws where you live, though, you’ll likely need to register your business name with your state. This is especially true for limited liability companies (LLCs) and limited partnerships (LPs). The state agency or department that handles business name registration varies, but this handy search tool from USA.gov can help you easily connect with the right agency in your state.
Decide whether you need business insurance
Insurance helps to protect you and your business from financial liability. Federal laws require all businesses with employees to have:
- Worker’s compensation insurance: Pays the medical and personal expenses of employees who become injured or sick on the job.
- Unemployment insurance: Funds the unemployment system to provide payment for people laid off due to no fault of their own.
- Disability insurance: Pays expenses for employees who are unable to work due to an illness or injury
Depending on your business type and your state’s laws, you may need additional types of insurance. But even when the law doesn’t require it, you may wish to consider the following types of insurance:
- General liability insurance: Protects you from loss due to a number of causes, such as property damage, lawsuits, and medical expenses
- Product liability insurance: Protects you from loss if a product you sell injures or harms someone
- Professional liability insurance: Protects you from loss if you make an error, commit malpractice, or are negligent while providing services
- Commercial property insurance: Protects you from financial loss if your property or physical assets become damaged due to weather, fire, vandalism, or civil disobedience
With most insurance policies, you pay a premium on a regular basis, such as monthly or annually. Although the premium is an additional expense for your business, the cost can be much lower than the financial risk of not having insurance. In many cases, business insurance is often a good investment for a new immigrant-owned business.
Open a business bank account
For accounting and tax purposes, you must keep your business money separate from your personal money. To do so, you’ll need a business bank account. Banks will open a checking account for an immigrant-owned business, provided you bring the right documentation with you to the branch office. In some cases, you may also be able to open a new account online. Read our new arrival’s guide on how to open a U.S. bank account to find out what information you will need and how to complete the account opening process.
Get a business license and permits or certificates
State and local governments set rules that govern what licenses and permits you need to operate a business legally in a specific area. Depending on the type of business and where you live, you may need to obtain a license, permit, or certificate — or a combination of credentials before you can start operating your business.
Types of support you can find for starting a business
As you can see, opening a business as an immigrant is a lengthy, involved process. Fortunately, you don’t have to do it on your own. A number of federal and state programs for immigrant entrepreneurs can provide you with information and resources to help you through every step of the process of starting a business. Professionals like these can offer even more guidance and practical advice:
An accountant can assist you with bookkeeping and preparing financial statements. Some offer payroll and bill-paying services that allow you to focus on your business and leave key functions up to professionals.
Accountants also provide valuable advice for filing business taxes in the U.S. Our guide to immigrants and businesses taxes can help you understand the basics, and an accountant can provide you with specific guidance to help you minimize your tax bill.
Lawyers offer a variety of valuable services for an immigrant starting a new business. A lawyer with experience working with small businesses can help you make decisions like what type of business structure is best for you or what kind of insurance you might need.
They can also guide you through what permits, certificates and licenses you need and advise you about whether you need to register your business name with your state.
Business coaches help immigrant entrepreneurs succeed. Although the approaches they take vary, a business coach can help you set goals, create plans to achieve them, help hold you accountable, and motivate you to carry out the plans. They can also assist you with networking, referrals for service providers, and more.
Marketing your business helps you get more customers. Depending on the type of business you start, your marketing may take place entirely online, or it could involve mailers, TV commercials, radio spots, or advertising in local publications. A marketing professional can assist with market research, branding, creating a social media presence, advertising, and more. Marketing agencies can also help you complete your business plan.
Artists and graphic designers can help you design logos, signage, and artwork that will catch the eye of your ideal customer. Seek out photographers and videographers for website and social media content, advertising, and other tasks. You may also wish to hire writers to pen everything from written customer correspondence to employee handbooks to text for your website.
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