I work with international cannabis companies outside of the US and regularly request inquiries from others who want to enter the US market or who are already selling in the US market through an intermediary such as a broker or agent. In the United States, there are four main ways to enter the market to do business, each with different advantages and disadvantages.
Before I dive into these, I need to flag the US immigration issue for non-US citizens who are somehow involved or considering getting involved in a US cannabis marijuana business, be it from their home country or from while you are in the US. My colleague Akshat Divatia wrote a cautionary blog post that discussed how foreign involvement can create significant USCIS (US Citizenship and Immigration Services) and USCBP (US Customs and Border Protection) problems. In this post, Akshat wrote:
Even a foreigner who has never used marijuana could be declared inadmissible under the INA [Immigration and Nationality Act] based on his or her involvement in a [U.S.] legal cannabis [marijuana] Business, either as a “knowing helper, advocate, assistant, conspirator or collusion with others” or “illegal trafficker” of a controlled substance.
In short, if you are a non-US citizen and think you would like to get in some way in a US state-legal marijuana business and have plans to enter the US, you should contact us contact an immigration attorney In front You come to the USA
If, after examining the immigration impact for non-US people, you have made the decision that your non-US cannabis company should enter the US market, these are the top ways to do it:
1. Selling from abroad.
For companies that are unwilling to enter the US market with an established presence but want to test market appetite for their products, you can sell through a broker, agent, dealer, or online marketplace from overseas. None of these activities should require you to set up a US business unit, although many other aspects of doing business require you to be involved.
This includes the logistics of getting your product through US Customs and to your customers, receiving payments, paying some US taxes, and paying your intermediaries. You also need to make sure that you have strong contracts to protect your business interests and that you both comply with U.S. cannabis laws and regulations, which vary greatly from state to state.
2. Register a branch.
If you’ve determined that you want a US presence but are not ready to form a US entity, the first step is to register your existing foreign company in a US state. Most US states offer you this option, which is commonly referred to as establishing a “branch office”. Under US law, you qualify your overseas company to do business in one or more US states.
Initial registration fees vary from state to state (typically less than $ 500). All states require you to designate a registered agent in their state and pay an annual fee (usually less than $ 300) to maintain a good reputation. Along with this annual fee, you will need to submit additional company information that varies from state to state. Some states, such as B. Delaware, require minimal information, e.g. B. the name and address of your Delaware registered agent. Other states, such as Washington, require disclosure of at least some of the owners, directors and officers of a company that Washington refers to as “governing persons”.
It is unusual for a US state to require disclosure of a company’s underlying owners. The Internal Revenue Service (IRS) collects this information when they issue a U.S. TIN (tax identification number) to your business, but does not routinely share ownership information with U.S. states. Generally, if you don’t need a U.S. bank account and don’t need to register with a state tax agency, you don’t need to get a TIN.
3. Form a US corporation taxed as a pass-through business.
Once you’ve determined that you need or want to start a U.S. business rather than just qualifying your overseas company to do business in the U.S., you need to decide what type of tax related or how much you want to deal with subject the overseas owners of your US business to IRS scrutiny.
With a few exceptions, you can decide how your foreign company will be taxed at the US federal level. If you are incorporating a U.S. corporation and check the box on the IRS form to be taxed as a passthrough business (a wholly owned subsidiary for a single owner or a partnership for a company that is a partnership or LLC (limited company) Liability), then the overseas parent companies are responsible for all tax obligations that arise from the US company.
As with registering your overseas company in the US above, when you start a US company, you still need to decide which state to register in. You select a single US state as the primary registry and then qualify your US company to do business in other US states as needed.
4. Forming a United States corporation taxed as a C Corporation.
If you’ve determined that you need or want a U.S. company but don’t want to expose its parent company or owner to U.S. tax obligations, then you should form a U.S. corporation (partnership, corporation, or LLC) and choose to do so taxed as a C corporation.
Most of the overseas companies I work with would rather deal with double taxation of a C company (on corporate profits and distributions from shareholders) than expose their owners to the IRS. This is especially true in the cannabis industry, where the IRS is more likely to scrutinize even law-abiding hemp companies that are not involved in marijuana, which remains illegal as a controlled substance under US federal law.
We expect significant changes in the way cannabis companies are treated by the federal government, though these conversations and hunt calls always pop up in election years and then step back without significant developments. Regardless, we will do our best to keep international companies informed to ensure that you can enter the US market on your own terms.
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