Incorporation in the US

As I wrote in my other blog, I registered Ishibashi, Larkin and Shibata Law LLP (ILS) at LA, Cal. last year and am currently preparing to start doing business. I’ve been talking about setting up an American company, and the detailed process may differ depending on the state, but I think the general outline is probably the same. I chose LLP, which is a Limited Liability Partnership, so it’s different from a pure corporation, but the tasks that need to be done to set up are roughly similar, so I’ll list some things that will be helpful in setting up an LLP, taking into account the differences.

1. Planning

First, decide in which state, with whom, what organization, and what you’ll do. Depending on what you’ll do, you may need a business license in the state where you plan to register, so check that as well. In California, only certified public accountants and attorneys can set up an LLP, so if you want to set up an LLP even at other states, check the requirements. Also, when you decide which state to incorporate in, it is a good idea to select an agent called a Designated Agent (in Delaware and CA, you can find a list on the Secretary of State’s page, and there is a link to the agent’s page where you can check the fees, etc.) to receive legal documents. In addition to the Designated Agent service, there are small business support companies such as Zen Business, Legal Zoom, Incfile, and Northwest that will handle the incorporation process, subsequent domain registration, website hosting services, and contract templates after incorporation at low cost, so it is a good idea to use them. There seem to be other companies that provide Japanese language support, but they are probably more expensive, so if you are okay with usual support in English, I recommend to use one of these above. Since the incorporation of an LLP is a special case, no company took it on, but ILS asks Northwest for the Designated Agent and other services.

2. Creating Entity’s Agreement

Unlike the Japanese registration process, the intra regulation preparing for the entity organization depends on the entity’s structure. Bylaws for companies, Operation Agreement (Member Managed, where all employees participate in management, or Manager Managed, where only executive members participate in management), and Partner Agreement, which describes the roles of participating partners for partnership, are required in various situations after registration. These templates are also prepared by state and organization on the website of the small business support company mentioned above. I also used Northwest’s template when filing a change of organization in Hawaii.

3. Securing and Contracting the head office location

The head office address is important when deciding on customer targets for the entity’s business. Of course, when it comes to the online businesses, it doesn’t matter where the headquarters is located, but even so, this location is important because local taxes will be paid in the county or state where the head office is located. ILS has determined that its main customers are entertainment and IT industries, so Los Angeles was the only place in California that met both criteria. In the preparation stage, we didn’t need a real office, so we wanted a virtual office where we could receive snail mails. One of our partners initially wanted to have an office in LA in Downtown, where most of the courts are located, so we decided to contract with Centrl Office in Downtown as virtual office because of the location and reasonable price. The only virtual address in Northwest was in Sacramento, Northern California, and it was inconvenient to go there to receive mail, so ILS did not use its virtual office function.

This overlaps with my another blog, but when renting a virtual office, I needed to submit USPS Form 1583 to the US Postal Services to prove that the virtual office will receive mails on behalf of the entity, and this form requires two American IDs (in addition to a passport, something like a driver’s license and billing for residential utilities) for submission, so Japanese people without an American address cannot submit this. This means that you cannot rent a virtual office if there are no Americans among your directors or partners. You have no choice but to rent a real office space from the beginning, even though it may be a risk taken from the beginning.

4. Registering an entity to the state

Registration in a state should be available by checking the Secretary of State of the applicable state. In most states, registration can be done via online. Unlike Japan incorporation process, the amount of capital does not need to be decided at the time of registration, and there is no need to deposit the amount of capital in the bank and prove it. I don’t know about other states, but in CA, there is an option for business purpose like “Everything you can do that is not illegal,” which I was surprised at how lenient it was, but it seems that the purpose of the company can be determined in the articles of incorporation and other agreements anyway. I think the purpose of registering is the evidence that you are doing business and to determine the jurisdiction in case the lawsuits happen after the establishment. (If that is not the right purpose, please feel free to comment.)

This also overlaps with another blog, but when I set up an LLP, the California Business Online was not available in Japan, and the credit card payment is allowable when using online system, I needed a Money Order to send it by mail. Since there is no place to make a Money Order in Japan, I ended up not being able to do anything from Japan and was at a loss at that time. After that, I asked another partner in Hawaii to do it, but I had to rewrite all the application forms, which were quite troublesome. If they let me know that the system could not be accessed from overseas, I was aware that I could subscribe to VOD and obtain an American IP address in hindsight, but the help desk did not know tell, so there was nothing I could de. I always think that the staff of Japanese government offices and legal affairs bureaus are really good at providing service without making any mistakes, but the staff at the state level in the US have no such motivation. For example, when I called at 4:55pm, all I heard was an announcement that “The service has ended, please call between 9am-5pm (although before 5pm)”. Our partner in Hawaii also told me some incomprehensible things, and after calling several times, he was finally able to register. I already feel exhaustion in advance about having to submit a change of address notification to the state. It may be a good idea that I’ll mail it from Japan first, and call from Los Angeles when it arrives.

5. Obtaining an EIN number

Once you’ve registered, the next thing you should do is obtain an EIN number. An EIN number is an abbreviation for ‘Employment Identification Number’, and it is said that you should get one if you plan to hire employee, but it is also necessary for opening a corporate bank account, so you have to get one anyway if you establish a company. You can apply for an EIN number on the website of the IRS, an organization which is famous for chasing you all over the world if you don’t pay the federal taxes. If you fill out the necessary information online and apply, you will receive the number right after the submission. Once you apply, it seems that at the end of the year, I received two mails urging me to “fill out & submit your income if you have one,” though I applied online. It reminds me the harsh experience that though I never received a notice from the New York Tax Department, I once had $5,000 deducted from my NY bank account for unpaid tax returns from nearly 20 years ago. Therefore, just seeing an IRS envelope makes me feel scared, but fortunately or unfortunately, I hadn’t earned a single yen at the end of the year, so I left it alone. I’m sure I filled in the form that the accounting period would be in June and June will just two month ahead, so I need to consult with my accountant soon…

6. Obtaining a Business License

It depends on the state and the business of the company though, you may need to obtain a business license or register the business. A restaurant will need a license, and a recruitment agency, for example, in CA, does not need a license but needs to pay a bond every two years. Also, I don’t think it’s only in CA, but there are more detailed divisions, and licenses may be required in city or county as well, so you need to check the applicable city or county’s regulations.

In the case of ILS, all three partners are California lawyers, so we had to get the permission from State Bar of California that we had created an LLP. So, I sent the application and registration fee just like when we registered. The payment method is the same as the Secretary of State in CA, instead of credit card, I needed to send a money order, which cannot be made anywhere in Japan. However, I had gotten a little smarter, so I prepared dollars in cash and attached a letter saying, “I have no choice but to send cash because I cannot make a money order anywhere in Japan, but I would like you to consider the circumstances of countries other than the United States.” I sent another $50 when the form required $50 per three partners by EMS (even if I sent it by EMS, it would be 3,000 yen now, so it’s not a small amount). It took nearly two months, including corrections, and finally in April, I received the message that our LLP was approved. This process took about eight months after signing the virtual office contract.

7. Opening a Corporate Account

For many foreigners who have established a company in Japan, the most difficult part is opening a corporate account. Japanese banks are strict, so even if you have a residence card, many of them require you to obtain a My Number card, and since the initial expiration date for business management residence status is usually one year, by the time you obtain your My Number card, your residence period may be less than three months, so you will be notified to renew your residence card if you want to open an account. For this reason, once I receive a client’s capital in my office account, it may remain in the account for more than a year, and since I cannot charge a fee for keeping clients’ capital moneyu, I leave it in the account for free, so I feel that I cannot handle too much responsibility just for incorporation on behalf of the clients.

I’ve jumped ahead a bit, but I often read articles saying that you can’t open a corporate account in the US unless you have a visa. However, in the case of ILS, there is one American partner, so I thought it would be possible even before I have gotton a visa. When I asked Grok, my favorite AI, “Which bank account is best for corporate transactions between Japan and the US?”, in addition to major banks like “Chase” and “Bank of America,” the names “Mercury” and “Wise” came up. Wise is fast and convenient for small transfers, so I have a personal account and recommend it to my clients when transferring money, but I didn’t expect it to come up as a corporate account. Mercury is not a bank like Wise, but it seems to be convenient for transactions. Considering that Mercury was created to eliminate the complexity of banking transactions, I thought it was a pretty good system. Applications for these two services can be made online. Wise said that I needed to have the Partner Agreement notarized, but I don’t understand what it means, so I’m putting it on hold, and Mercury’s ID verification was fine with just my passport and a camera photo taken online, and Mercury is checking the applicability now. Chase required a US phone number to make an appointment, so I went to a branch and asked about the necessary information, but they gave me a cold response that “all partners must be present when applying.” Then, I emailed the rep and she ignored me. Chase is a big bank, so you can expect that. I was able to make an appointment with Bank of America, and the rep said that “two management partners must be present.” They were unexpectedly kind, saying that ILS could open an account on the same day if I brought another management partner. It looks like I can open an account here. I will update this as soon as I find out more.

8. Miscellaneous

a. American mobile phone

In the US, many government offices and personal mobile phone cannot receive international calls, and the CA Bar only permits American phone numbers for contact information in the profile. I wanted to buy an American SIM or device for work, but I had half given up on this idea because I thought it would be impossible without a living place in the US. However, I found out by chance that I could purchase a service called Hana Cell with my company address, and after checking with the help desk, I found out that if I had an address in CA, I could get a local number, so I bought it right away. The phone was an inexpensive version of the Galaxy. Although I’ve been a long time iPhone user and I wondered if it would be okay, but surprisingly, just by placing the iPhone next to it, I could send contact data from my iPhone to Gaalxy (although it’s scary to realize how easy it is to absorb data), and other things are quite convenient. It is a great improvement over the Galaxy I used a long time ago, so I’m having fun trying out various things every day.

b. E-mail and office URL

The server hosting entity’s URL of my legal office in Japan is a Japanese service called ConoHa, and I don’t know if it’s because Japanese technology is bad or because it’s cheap, but the emails I wrote don’t reach the recipient or are my clients’ mail did not reach me, and inquiry emails sent from both Japan and abroad end up in the spam folder, so I decided that purchasing this additional service would be insufficient for business in the US and Japan. Since some AI engineer recommended gmail workspace, it was easy to work and talk with the two partners later on by driving and chatting, and they both wanted it, so the ILS purchased a gmail workspace. My domain is on Northwest, and a web designer helped me to link it to the domain. Once I started using it, I found it very convenient and liked it. So I changed my office email address in Japan to Google, and I work on my PC with all three screens open on one browser,Google Chrome. On Windows, each window opens, but on Mac, I don’t have to do that, so my work efficiency is much better. I bought five accounts in total, which is a bit of a burden, but the security is solid, so I think this cost is unavoidable for accounts used for business purposes.

I initially thought of hosting the URL on Google Cloud, but I asked the designer to use Northwest, which has domain registration and free SSL. I will update this when it is completed.

9. Summary

I tell people that the process of incorporation is easy, but when they point out that this is because I have helped many of my clients start companies, I think they are right. I think the difficult parts of starting a company in Japan and the United States are different, but I can help both. Still, working without any support feels lonely. I thought the photos I chose for this blog really captured the loneliness of doing almost all the processes by myself. Selection. In my case, I’m a professional when it comes to starting a company, so I’m determined to do it by myself, but if you’re not a professional, don’t worry about it by yourself, please feel free to contact me. Please fill out the form and submit it.