Can you incorporate your tech startup in the U.S. from Pakistan?
Yes, you can.
Incorporation takes place at the State level, and there are 50 states to choose from. Some states have restrictions on residency, but the one State that matters doesn’t — Delaware.
Most U.S. corporations are incorporated in Delaware due to its “business friendly” legal environment. All YC startups are incorporated in Delaware even though they all operate in California during their time at Y.C. I will not get into the specific benefits of incorporating in Delaware because they are well documented.
Before I talk about how to incorporate, let’s ensure we are on the same page — who should incorporate?
As a Pakistani tech startup, you should incorporate in the U.S. if you:
- Are planning to raise money, specifically from the U.S. or foreign investors.
- Want to open up a U.S. bank account.
- Need to sign a contract with a U.S.-based vendor, partner, or customer. (not that important)
My Assumptions about your startup:
- You don’t have any U.S. presence and don’t know anyone in the U.S.
- You have a credit card.
- You have a reliable mailing address, home, or business.
Step 1: Pick a name
Lately, I am coming across many generic names, and for incorporation purposes, I suggest you think hard before you pick a name for your startup. Changing the name later is a hassle, so do it right the first time.
Delaware allows a few endings, such as Association, Corporation, Incorporated, Company, Limited, and of course, Inc.
Naming resources:
- Wordoid: A useful tool for inspiration and coming up with made-up names. Bonus: tells you if the .com/.net is available.
- Namechk: Once you have a name, find out if it’s available across major social networks.
Now that you have a name let’s ensure it’s not someone else’s Trademark (this is important).
Trademark search resources:
- Delaware Business Search: This will let you search registered names of all Delaware entities.
- Trademarkia: Worldwide search for trademarks.
Step 2: Incorporation
The incorporation process involves filing a Certificate of Incorporation with the Delaware Secretary of State. There are two ways of doing this; do it yourself or go through an intermediary (incorporation service).
D.I.Y. is complicated, and I wouldn’t recommend it unless you have a lot of time and patience. Intermediary services are reliable, straightforward, and cost-effective.
All incorporation services are similar in what they offer; basic Certificate of Incorporation, Filing Request, and 1-year of Registered Agent service (Step 3). Of course, with any intermediary, there’s a cost associated.
Incorporation Services:
- Harvard Business Services: Basic filing fee $80, State fee $89, and Registered Agent fee (1-year) $50. Total Cost: $219.
- StartupDocuments: Basic filing fee $79, State fee $89, Processing fee $82, and Registered Agent fee (1-year) $50. Total Cost: $300.
- MyNewCompany: Basic filing fee $79, State fee $89, Registered Agent fee (1-year) $99, and International Shipping $80. Total Cost: $347.
- Clerky: Basic filing fee $99, State fee $148, Filing Agent fee $35, and Registered Agent fee $125 (1-year). Total Cost: $407.
A simple Google search will yield many more incorporation services. I am listing a few I have used personally (MyNewCompany) and heard about from other entrepreneurs and startups. You will notice that pricing is quite varied, so it’s a good idea to shop around. E.g., Clerky is popular with Silicon Valley startups because it exclusively caters to tech startups and, for that reason, is a little on the expensive side.
Please keep in mind that to complete all requirements for incorporation at the state level, all you need to pay for is the basic package—nothing more, nothing less.
You will need to answer one question during the incorporation process: “How many shares of Common Stock should be authorized at incorporation?” This is subjective. There’s no correct answer, just recommendations.
Top recommendation: 10 Million shares authorized at $0.00001 par value, about 9 million issued to the founder(s), and the rest remain in the option pool for employees. (source)
Step 3: Registered Agent
Delaware doesn’t require your business to be physically in the State. But then, what if you get sued? How can one serve you the Service of Process or notice of lawsuit? For that reason, as a Delaware corporation, you must have a registered agent in the State. In case of legal proceedings, this person/business will receive the official legal notice. This requirement is for all corporations registered in Delaware, not just foreign corporations.
Please note, Registered Agent is not a mail forwarding service. Only official mail from the State will be forwarded, such as legal and tax notices. Regular mail should never be addressed to the Registered Agent.
The first year of Registered Agent fee is included in the total cost of incorporation. For renewals, you can shop around. MyNewCompany charges $99, and Harvard Business Services charges $50. The minimum you will ever pay is $50.
As far as incorporation goes, that is it. But let’s recap what just happened:
- You picked a unique and slick name for your startup.
- You made sure that your name is not already someone else’s Trademark.
- You Googled incorporation services, picked out 4–5 different ones, and made a side-by-side comparison.
- You emailed customer support and asked questions to your satisfaction.
Congratulations, you just incorporated your tech startup. Believe it or not, that was the easy part.
In my next post, I will discuss applying for and obtaining an Employer Identification Number (EIN). It is required to open up a bank account and file tax returns.
In the meantime, you can contact me anytime if you have questions about anything mentioned above (or not).
P.S. Please don’t pay a third party to obtain E.I.N. on your behalf. The issuing agency, I.R.S., charges no fees.
P.P.S. Consult a lawyer before incorporating if you have already raised a financing round and have investors.
Legal Disclaimer: I am not a lawyer, and the above information is not legal advice and should not be used as such. I am not associated with any of the above-mentioned services. I am providing a resource, not an endorsement, by suggesting the services.