The Complete Guide to Setting Up a US Entity as an International Founder

LLC vs C-Corp: The Decision Framework

The choice between an LLC and a C-Corporation depends on three factors: your fundraising plans, your tax situation, and your operational complexity.

If you plan to raise venture capital from US investors, you need a Delaware C-Corporation. US venture funds have standard investment documents designed for Delaware C-Corps, and asking a VC to invest in an LLC or a foreign entity adds legal complexity that most funds will not accept.

If you are not raising venture capital in the next 12 months, a Texas LLC is simpler, cheaper, and more flexible. Texas has no state income tax, formation costs approximately $300, and the annual franchise tax is minimal for small companies. The LLC structure also allows pass-through taxation, which simplifies your personal tax situation.

The Bank Account Problem

Opening a US bank account as a foreign national is the most common operational obstacle for international founders. US banks are required to comply with Bank Secrecy Act and Know Your Customer regulations, which means they require extensive documentation from foreign nationals — and many branches simply refuse to open accounts for non-residents.

The practical solution is to use a bank with a dedicated international business programme. Silicon Valley Bank (now part of First Citizens Bank), Mercury, and Relay all have programmes designed for international founders. Startup Runway's banking partners have streamlined processes for companies in the Richardson IQ® programme, with account opening timelines of 2–4 weeks rather than the 2–3 months that cold applicants typically experience.

Visa Options for Founders

The visa question is the most anxiety-producing aspect of US market entry for international founders — and the most misunderstood.

The O-1A visa is the most appropriate visa for founders with documented extraordinary achievement: patents, publications, media coverage, or evidence of a high salary relative to peers in their field. The O-1A does not require a job offer and can be self-sponsored through your US entity. Approval timelines are 90–120 days with premium processing.

The EB-1A (Einstein visa) is the permanent residency equivalent of the O-1A. It is appropriate for founders who have already established extraordinary achievement and want a direct path to a green card without an employer sponsor.

The E-2 investor visa is available to nationals of countries with E-2 treaties with the US (India is not on this list; UAE, Singapore, and Israel are). It requires a substantial investment in a US business and is appropriate for founders who are establishing a US manufacturing or service operation.

The Delaware vs Texas Decision

The conventional advice for international founders is to incorporate in Delaware — because Delaware has the most developed corporate law in the US, the most experienced corporate courts, and the most investor-friendly legal framework. This advice is correct if you plan to raise venture capital from US investors.

However, for international founders who are not planning to raise venture capital in the first 12-18 months, incorporating in Texas has significant operational advantages. Texas has no state income tax, a business-friendly regulatory environment, and a growing ecosystem of corporate law firms that specialise in international business. The cost of incorporating and maintaining a Texas entity is 30-40% lower than a Delaware entity on an annual basis.

The practical recommendation: if you have a term sheet from a US VC firm, incorporate in Delaware. If you do not have a term sheet and are not actively fundraising, incorporate in Texas and re-domicile to Delaware when the fundraising process begins. Re-domiciliation takes 2-4 weeks and costs $2,000-$5,000 in legal fees.

The First 90 Days of US Entity Operations

Setting up the entity is the beginning, not the end. The first 90 days of US entity operations involve a series of compliance and operational tasks that most international founders are not aware of until they encounter them.

Month 1: Entity registration, EIN application (typically 1-2 weeks), bank account opening — which requires an in-person visit at most banks — and registered agent appointment. The registered agent is a legal requirement in all US states: it is the person or company that receives official legal and government correspondence on behalf of your entity.

Month 2: State and local business license applications, sales tax registration if you are selling physical goods or certain digital services, and payroll setup if you are hiring US employees. Payroll setup requires a separate EIN registration with the IRS and state tax authorities.

Month 3: First quarterly estimated tax payment if your entity expects to owe more than $1,000 in federal taxes for the year, annual report filing in your state of incorporation, and the first compliance review with your US attorney and accountant.

The total cost of the first 90 days of US entity operations — including legal fees, accounting fees, registration fees, and bank account minimums — is typically $3,000-$8,000 depending on the complexity of your business and the states in which you operate.

Common Mistakes International Founders Make with US Entities

After working with 24 companies through the US entity setup process, Startup Runway has identified five mistakes that international founders make consistently.

Mistake 1: Using a virtual mailbox as the registered address. Enterprise buyers and government agencies will verify your business address. A virtual mailbox at a UPS Store will raise questions in procurement reviews. Use a real office address — Richardson IQ® provides this for landed companies.

Mistake 2: Opening a personal bank account instead of a business account. This creates tax complications and signals to enterprise procurement teams that the company is not operationally established in the US.

Mistake 3: Incorporating in Delaware without understanding the ongoing compliance costs. Delaware requires an annual franchise tax that is calculated based on authorised shares — a company with 10 million authorised shares will owe $50,000 or more in annual franchise tax if the calculation method is not optimised. This is a well-known trap that catches international founders who incorporated in Delaware on the advice of a US accelerator without understanding the ongoing cost structure.

Mistake 4: Not appointing a US-based registered agent. This is a legal requirement, not an option. Failure to maintain a registered agent can result in the entity being dissolved by the state.

Mistake 5: Treating the entity setup as a one-time task. US entity maintenance is an ongoing compliance obligation. Annual reports, tax filings, and registered agent renewals must be completed on schedule or the entity will lose its good standing — which will disqualify it from enterprise contracts and government procurement.