¡Hola! If you are a business owner based in El Salvador but operating in the USA, you may be familiar with the unique challenges that come with navigating compliance, legal, and beneficial ownership reporting requirements in both countries. From understanding the intricacies of the Ley de Lavado de Dinero (Money Laundering Law) in El Salvador to complying with the Foreign Account Tax Compliance Act (FATCA) in the USA, staying on top of these regulations is crucial for the success of your business. In this blog, we will explore how to effectively manage these requirements and ensure that your business remains in good standing in both countries. ¡Vamos a empezar!

Registration Requirements

The United States consists of 50 states and 5 territories, each with its own set of business regulations. To operate legally, businesses must adhere to both state-specific rules and federal laws.

State-Level Registration:

When establishing a business presence in the United States, businesses from El Salvador must complete state-level registration in any state where significant business activities occur. This requirement typically applies if your company:

• Has a physical presence in the state
• Frequently meets with clients in the state
• Derives a significant portion of revenue from the state
• Has employees working in the state

Incorporating your Salvadoran Company in the US

Even if none of the specific criteria apply, a Salvadoran company must still choose a home state for registration when conducting business in the US. This involves forming a U.S. entity, such as a corporation, LLC, or other business structure, in that state. This registration ensures that the company is officially recognized and compliant with US regulations, regardless of its level of business activity in any individual state.

The newly formed U.S. entity will operate as a subsidiary of the foreign company. This means that while the U.S. entity is legally independent, it remains under the ownership and control of the parent company based in El Salvador. This structure allows the company to conduct business in the US while maintaining its international headquarters.

We recommend using Northwest Registered Agent if your foreign company needs to incorporate. They offer expert guidance and can serve as a reliable registered agent for your business, ensuring compliance and smooth operations.

Federal Requirements

In addition to state requirements, Salvadoran companies must also comply with federal regulations:

• Federal Tax ID: Obtain an Employer Identification Number (EIN) from the IRS. This number is essential for tax reporting and opening U.S. bank accounts.
• Industry Regulations: Companies may need to follow specific federal regulations depending on the industry. For example:
• Import/Export Laws: If the company is involved in importing or exporting goods, it must meet U.S. customs regulations. This includes adhering to rules for tariffs, duties, and necessary documentation.

Beneficial Ownership Information Reporting Requirements

For Salvadoran businesses conducting operations in the U.S., adhering to Beneficial Ownership Information Reporting (BOIR) requirements is crucial. The Corporate Transparency Act mandates that companies disclose the individuals who own or control them. This applies to most entities, including those that are incorporated or registered in any U.S. state. The goal is to enhance transparency and combat illicit activities such as money laundering and terrorism financing.

A beneficial owner is an individual who controls the company or owns 25% or more of its shares, either directly or indirectly. For compliance with BOIR requirements, businesses must report information about these individuals, including their names, addresses, and identification details. Failure to file this report can result in significant penalties and legal consequences. Therefore, companies from El Salvador need to ensure they meet these reporting obligations promptly and accurately.

For your convenience, you can file your Beneficial Ownership Information Report directly on our website. Click here to complete the process in just a few minutes and ensure your business complies with U.S. regulations.

Additional Considerations for Salvadoran Businesses:

Tax Treaties

As a business operating from El Salvador, it’s crucial to understand that there is no tax treaty between your country and the United States. This absence of a tax treaty means that your company may face potential double taxation on income earned in the US. Without the protections and benefits typically provided by such agreements, your business could be subject to taxation in both El Salvador and the US on the same income. It’s essential to carefully consider the tax implications and seek professional advice to navigate this complex situation and minimize your tax burden.

Trade Considerations

El Salvador and the United States have a strong trade relationship under the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR). This agreement eliminates tariffs on most goods traded between the two countries, facilitating easier import and export processes. However, Salvadoran businesses should be aware that certain products may still be subject to specific regulations or restrictions. It’s crucial to consult the U.S. Customs and Border Protection website for up-to-date information on import requirements, including any necessary permits, licenses, or certifications. Additionally, Salvadoran exporters should familiarize themselves with U.S. food safety standards, labeling requirements, and other industry-specific regulations that may apply to their products. Staying informed about these trade agreements and regulations will help ensure smooth business operations with U.S. partners.

Your Path to Compliance: Key Takeaways for Salvadoran Businesses in the U.S.

Operating a Salvadoran business within the USA requires careful attention to legal obligations, from establishing your home state to incorporating and filing a beneficial ownership report. Meeting these requirements is essential for ensuring compliance and securing your business’s success in the American market. By understanding and adhering to these steps, you can confidently navigate the complexities of doing business in the U.S. and focus on growing your enterprise.

Ready to get started? Click here to file your BOIR in just a few short minutes. We make the process easy, fast, and secure so you can focus on what matters—your business.