How to Register a Business in the US from Lithuania

Step 1: Benefits of starting your US business from Lithuania

Starting a US business from Lithuania presents numerous advantages that can significantly contribute to entrepreneurial success. One of the most compelling benefits is the seamless integration into the global market. By establishing a business in the US, Lithuanian entrepreneurs gain access to one of the world's largest consumer bases, enabling them to reach a diverse and expansive audience. This opens up opportunities for growth and scalability that might be difficult to achieve within the smaller domestic market of Lithuania.

Furthermore, Lithuania offers a highly skilled and multilingual workforce, which is advantageous for businesses looking to collaborate with international partners or serve global customers. The cost of living and operational expenses in Lithuania are relatively lower compared to many other European countries, which allows for cost-effective business operations. Additionally, Lithuania's advanced digital infrastructure and favorable business environment make it an ideal hub for innovation, allowing entrepreneurs to leverage local resources while benefiting from the broad reach and credibility of being associated with the US market.

Step 2: How to start your US business from Lithuania

If you are in Lithuania and looking to start a business in the US, there are several key steps to follow. First, you need to determine the type of business structure you want to establish, such as a Corporation or Limited Liability Company (LLC). Each structure has different legal and tax implications, so it is advisable to consult with a legal professional to make an informed decision.

Once you have decided on the business structure, the next step is to register your business. This involves choosing a unique business name and filing the necessary formation documents with the appropriate state agency. Additionally, you will need to obtain an Employer Identification Number (EIN) from the IRS, which is required for tax purposes. Other important considerations include opening a US bank account, setting up a virtual office if necessary, and ensuring compliance with all US regulatory requirements. With these steps completed, you will be well on your way to successfully starting a business in the US from Lithuania.

Step 3: Opening a Business Bank Account

A business bank account is a separate account that is used exclusively for business transactions. But why is it important to open a business bank account?

Keeping your personal and business finances separate is crucial. A dedicated business bank account allows you to do just that, making it much easier to track your business’s income and expenses. This clear separation translates to simpler tax reporting come tax season.

But the benefits go beyond bookkeeping. Having a separate account can provide legal protection. It establishes your business as a distinct entity from yourself. In the unfortunate event of a lawsuit or bankruptcy, this separation can help shield your personal assets from business liabilities.

Furthermore, a business bank account can boost your credibility and project professionalism.

It demonstrates to clients and vendors that you take your business seriously and are committed to maintaining accurate financial records. This can be especially important in establishing trust with potential partners.

Finally, a business bank account is essential for accepting payments, even if you utilize a merchant account. Whether you use doola or another service, funneling those customer funds into a dedicated business account is necessary.

doola partners with banks that allow you to open a bank account remotely from anywhere in the world, like Mercury. Shop around and compare different banks’ fees and services.

Look for a bank that offers the features you need, such as online banking, mobile banking, or overdraft protection.

You may also want to consider working with a bank that specializes in small business banking.

Step 4: Understanding Your Compliance Requirements in Lithuania

Understanding Compliance Requirements for Running a US Business in Lithuania

Expanding your US-based business into Lithuania can open new markets and opportunities. However, it is essential to understand and adhere to local compliance requirements to ensure a smooth operation. Below are key considerations for understanding compliance requirements when running a US business in Lithuania.

1. Legal Structure and Registration

Before operating in Lithuania, determine the appropriate legal structure for your business. Common options include:

• Limited Liability Company (UAB): Suitable for small to medium-sized enterprises.
• Public Limited Company (AB): Appropriate for larger businesses looking to raise capital publicly.
• Branch Office: An extension of your existing US company, without creating a separate legal entity.

Register your business with the Lithuanian Centre of Registers to obtain official recognition and ensure legal operation.

2. Taxation and Financial Reporting

Compliance with Lithuanian tax regulations is crucial. Key taxation considerations include:

• Corporate Income Tax: Currently set at 15%, but reduced rates may apply for small businesses.
• Value-Added Tax (VAT): Standard rate is 21%, applicable to most goods and services.
• Social Security Contributions: Employers must contribute to employee social security and health insurance.

Prepare accurate financial reports in accordance with Lithuanian accounting standards and submit annual financial statements to the State Tax Inspectorate.

3. Labour Laws and Employment Regulations

Understanding and adhering to Lithuanian labour laws is essential for maintaining a compliant and ethical working environment. Key aspects include:

• Employment Contracts: Contracts must be in writing and comply with local labor regulations.
• Working Hours and Leave: Standard working week is 40 hours, with specific regulations on overtime and annual leave.
• Employee Rights: Adhere to regulations governing minimum wage, workplace safety, and non-discrimination.

4. Licensing and Permits

Depending on your business activity, you may require specific licenses or permits. Common requirements include:

• Retail and Wholesale Licenses: Necessary for trading goods within Lithuania.
• Construction Permits: Required for businesses involved in building and infrastructure projects.
• Health and Safety Certifications: Applicable to businesses in sectors such as food service and manufacturing.

5. Data Protection and Privacy

Compliance with data protection regulations is vital, especially given the stringent requirements of the General Data Protection Regulation (GDPR). Key considerations include:

• Data Collection and Processing: Ensure lawful and transparent handling of personal data.
• Data Security: Implement robust measures to protect against breaches and unauthorized access.
• Individual Rights: Respect and facilitate individuals' rights to access, correct, and delete their personal data.

By understanding and adhering to these compliance requirements, US businesses can successfully operate in Lithuania while maintaining legal and ethical standards.

doola offers a Total Compliance package, including bookkeeping services, to help you stay on top of your compliance requirements. This ensures your business operates smoothly and adheres to all legal and regulatory standards.

Step 5: Understanding Your Tax Obligations in Lithuania

Understanding Tax Obligations for Running a US Business in Lithuania

Expanding a US business into Lithuania can be a strategic move, offering various benefits. However, understanding the tax obligations is crucial to ensure compliance and optimize your operations. Below are key considerations when it comes to tax obligations for running a US business in Lithuania.

1. Corporate Income Tax (CIT)

Corporate Income Tax Rate: Lithuania imposes a standard CIT rate of 15%. However, small businesses with fewer than 10 employees and earning less than EUR 300,000 in annual revenue may qualify for a reduced rate of 5%.

Taxable Income: Taxable income in Lithuania includes worldwide income, but certain deductions and allowances can reduce the CIT liability. It's important to understand what constitutes taxable income and the permissible deductions.

2. Value Added Tax (VAT)

Businesses operating in Lithuania are subject to VAT, which is a consumption tax applied to goods and services. The standard VAT rate is 21%, with reduced rates of 9% and 5% applicable to specific goods and services.

• Registration: US businesses must register for VAT if the annual turnover exceeds EUR 45,000.
• Filing: Monthly or quarterly VAT returns must be filed, and compliance with the VAT code is essential to avoid penalties.

3. Double Taxation Avoidance

To avoid double taxation, the US and Lithuania have a tax treaty in place. This treaty helps mitigate the risk of being taxed on the same income in both countries.

• Tax Credits: The treaty allows for tax credits to be applied, offsetting the tax paid in one country against the liability in the other.
• Permanent Establishment (PE): Understanding the concept of PE is crucial as it determines the extent of tax obligations in Lithuania.

4. Payroll Taxes and Social Security Contributions

Lithuanian law requires employers to withhold and contribute to social security and other mandatory employment taxes.

• Employer Contributions: Employers must contribute approximately 1.77% towards social security.
• Employee Withholding: Employees contribute around 19.5%, which includes health insurance and pension contributions.

5. Transfer Pricing

If your US business conducts transactions with related parties in Lithuania, adherence to transfer pricing regulations is mandatory. Lithuania follows OECD guidelines on transfer pricing to ensure that the transactions are conducted at arm's length.

6. Local Tax Compliance

Ensuring local tax compliance involves timely filing of tax returns, maintaining accurate financial records, and adhering to Lithuanian accounting standards. Regular audits and consultations with local tax advisors can help maintain compliance.

Conclusion

Understanding tax obligations is paramount for US businesses operating in Lithuania. Staying informed about corporate tax rates, VAT regulations, double taxation arrangements, payroll taxes, transfer pricing, and overall local compliance will aid in the smooth operation and growth of your business in Lithuania.

It’s a good idea to consult with a tax professional or an accountant (or to hire these roles in-house) to make sure you’re not missing anything.

doola's Total Compliance package can handle your tax filings for you, ensuring you remain compliant with federal, state, and local tax requirements.

Step 6: How doola Can Assist

doola simplifies the incorporation and setup process for your company, ensuring you’re ready to charge customers, hire your team, and raise funds as quickly as possible.

Fill out your company details in the doola form in less than 10 minutes. Then, we’ll incorporate your company in any of the 50 US states, get your IRS tax ID (EIN) for you, and file your 83(b) tax election if needed. 

doola can also help you open a bank account and start accepting payments even before the IRS assigns your tax ID.

doola founders also gain access to exclusive discounts at leading software partners, one-click onboarding with select partners, and free CPA consultations.

The doola Application

It takes less than 10 minutes to fill out the details of your new company. You’ll choose your company structure (C corporation, limited liability company) and pick a company name.

Our instant company name checker will let you know if it’s available before you submit your application. You’ll add an address and phone number and review and sign your EIN SS4 letter in one click.

Forming the Company

doola will review your application and file your formation documents in the state within one business day. doola charges $297 for our Starter Plan and your first year of registered agent services (a state compliance requirement), and $297 each year thereafter to maintain your registered agent. 

You can also opt for our Total Compliance plan.

Getting Your IRS Tax ID (EIN)

After your formation in the state is complete, doola will file for your company’s IRS tax ID. Founders who provide a US Social Security number, US address, and US phone are eligible for expedited processing. All other users will receive standard processing. 

For standard orders, doola will fax your form SS4 to the IRS and then call the IRS to retrieve the EIN for you to expedite the process if we can, using real-time IRS data to determine when your filing is likely to be available.

Filing Your 83(b) Tax Election

Many startup founders choose to file an 83(b) tax election to potentially save on future personal taxes. doola can file and mail your 83(b) tax election in one click for both US and non-US founders — no trip to the post office required.

We’ll file it using USPS Certified Mail with tracking, and you’ll get a copy of your signed 83(b) election and proof of filing in your Dashboard.

Partner Perks and Discounts

doola partners with a range of third-party tools to offer special pricing or access to founders. We offer discounts on engineering, tax and finance, compliance, and operations tools, including Amazon Web Services.

doola also partners with Mercury to provide faster, automatic onboarding using your doola company information so you can get ready to bank and fundraise even faster.

Founders may also access discounts on other doola products, including up to one year of free credits toward payment processing.

Read our guides for startup founders, or learn more about doola and how we can help you set up your new business quickly and easily.

Turn your entrepreneurship dream into reality today!

We do our best to provide accurate and up to date information, however the information provided here are just guidelines. Please speak with a tax and compliance professional in your country