Are you a business owner in Sri Lanka looking to expand your operations to the USA? Navigating compliance, legal, and beneficial ownership reporting requirements can be overwhelming, especially when operating in a foreign country. As a fellow Sri Lankan entrepreneur, I understand the challenges you may face in ensuring your business meets all necessary regulations and standards. In this blog, we will explore the key requirements and best practices for maintaining compliance and transparency in your cross-border business operations. Let’s work together to ensure your business thrives in both Sri Lanka and the USA.

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 Sri Lanka 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 Sri Lankan Company in the US

Even if none of the specific criteria apply, a Sri Lankan 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 Sri Lanka. 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, Sri Lankan 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 Sri Lankan 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 Sri Lanka 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 Sri Lankan Businesses:

Tax Treaties

The tax treaty between the United States and Sri Lanka offers significant advantages for businesses operating across both countries. This agreement helps prevent double taxation, ensuring that income is not taxed twice by both nations. It also provides clarity on tax rates and exemptions for various types of income, such as dividends, interest, and royalties. For more detailed information about the specific provisions and benefits of this tax treaty, click here to access the official IRS documents.

Trade Considerations

When conducting business with the USA, Sri Lankan companies should be aware of the Trade and Investment Framework Agreement (TIFA) signed between the two countries in 2002. This agreement provides a platform for bilateral discussions on trade and investment issues, but it’s not a comprehensive free trade agreement. Sri Lankan businesses should also familiarize themselves with the Generalized System of Preferences (GSP) program, which provides duty-free access to the US market for certain products from developing countries. However, it’s crucial to note that Sri Lanka’s GSP benefits were suspended in 2020 due to concerns about workers’ rights. Additionally, companies should research specific industry regulations, tariffs, and import requirements that may apply to their products or services. Consulting with trade experts or legal professionals specializing in US-Sri Lanka trade relations is advisable to ensure compliance with all relevant regulations and to maximize business opportunities.

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

Operating a Sri Lankan 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.