Due to the growing zeal for international investment, numerous citizens from Nepal seek the best avenues to invest in the stock market of the US. Companies like Apple, Microsoft, Amazon, Google, and Tesla are from or have market shares in the US and are some of the most dominant and lucrative companies known globally.
Other than having a stable economy, the powerful and well-organized US financial system provides a good incentive to globally based investors.
If you are in Nepal and are searching for legal procedures to invest in US stocks, this article will guide you step by step and help navigate investing US stocks, including using strategies like establishing a US LLC makes the process far more efficient.
Why Invest in US Stocks?
The targeted return, as well as the rewarding possibilities associated with US stocks, makes them compelling. It is no wonder more and more Nepali investors are shifting their focus to Wall Street:
1. Accessibility of High-Growth Firms
They’re the world’s primary sources of cutting-edge technology, innovative healthcare, consumer goods, and energy, and the US boasts some of the most iconic brands with Apple, Amazon, Nvidia, and Meta Platforms leading the way as highly influential and consistently growing international businesses.
2. Portfolio diversification
Horizon West Investment, your company on the other hand, offers equity investment portfolios that are benchmarked against the Standard and Poor’s 500 index fund on the basis of sectors and volume. Investing in the US stock market also allows for currency diversification.
3. Efficient Structure and Stable Banking System
Merrill Lynch organizes its accounting, data storage, and customer relations in a sophisticated manner. In combination with information technology, this enables the company to process a huge volume of transactions within a short period of time.
4. Analysis and Stock Trading Convenience
Online databases allow for the analyzing of numerous technical indicators for each share through various programs. These programs assist investors by automatically processing the analytics, making it easier to monitor share prices.
5. Significant Factors Influencing Market Growth
Stock investments’ main driving force is share re-grants. Other factors are investments made as target returns from shares, real-estate developments, and converting assets into repayable liabilities.
Is It Legal for Nepali Citizens to Invest in US Stocks?
This remains an important inquiry with regard to prospective investors. Legally, foreign persons are permitted to participate in the US stock exchange freely. Ownership of shares in American companies is open to non-residents and non-citizens.
But some restrictions do apply in Nepal that can be complex:
- As per NRB regulations, one can not remit funds for investment outside the country without prior sanction.
- This makes it difficult, and rather dissuasive, to personally make investments in foreign stock exchanges directly from Nepal due to the existing laws.
- Moreover, Nepal has very little to no developed international investment infrastructure via banks or other financial institutions.
Nonetheless, a lot of Nepali investors have found ways around these obstacles, the most notable being the formation of Limited Liability Companies in the USA which makes it legal and simple to use US brokerage accounts.
Options to Invest in US Stocks from Nepal
Now, let’s discuss what options a resident of Nepal has for buying shares of American companies.
Option 1: Employ International Brokerage Firms (In Individual Capacity)
Some international brokers offer accounts to foreign individuals enabling them to trade in US securities. Examples include:
- Interactive Brokers
- TD Ameritrade
- Zerodha (through Vested or INDmoney) – Easier access for Indians, but may assist Nepalis with cross-border presence.
- Charles Schwab
These brokers frequently cater to a large number of countries where they offer US equities, ETFs, Mutual funds, and Options trading.
Challenges:
- Verification Problems: Certain brokers might ask for a US address alongside a Social Security Number (SSN) for verification.
- Funding Restrictions: Transferring funds from Nepal to an external broker account is complicated due to NRB regulatory policies.
- Compliance Risk: Investing in foreign markets without NRB approval could pose compliance risk.
- Limited Assistance for Nepali Nationals: Due to restrictive regulations, many international brokers do not support Nepal directly.
All in all, while this route is possible, it does create obstacles. A US LLC solves this problem with a better, compliant structure.
Option 2: Start a US LLC – The Strategic Solution for Nepali Investors
For Nepali nationals looking to invest in the American stock market, forming a Limited Liability Company (LLC) in the United States serves as one of the most practical approaches.
What is a US LLC?
A Limited Liability Company (LLC) is a legal form of doing business in the US that blends the benefits of sole proprietorships with the asset protection offered by a corporation. One of the advantages of an LLC is that it can be formed by non-resident aliens. An LLC can be entirely owned and managed by foreigners.
Why Form A LLC is Beneficial For Investing:
1. Gaining Access to U.S. Brokerage Accounts is Simple
Many brokers are more willing to work with registered US businesses than foreign nationals. An LLC is able to apply for a business account with major brokers such as Interactive Brokers, Charles Schwab, and Alpaca.
2. No Residency is Necessary
An individual does not need to reside in the United States or possess a Social Security Number in order to form or manage a LLC in the U.S. It is perfect for citizens of Nepal living in Nepal or abroad.
3. International Transfer Simplification
LLCs can open U.S business bank accounts making it easier to conduct international wire transfers, receive payments, and add funds to brokerage accounts.
4. Tax Benefits
An LLC with no effectively connected income in the US is unlikely to need federal income taxes. Also, pass-through taxation helps eliminate double taxation.
5. Business Identity and Asset Protection
One of the advantages of LLC is that it offers you a business identity that functions on a single proprietorship and shields your personal assets from liability and enhances your credibility.
6. Multi Use Structure
On top of investing in stocks, the LLC can also be used for freelancing, consulting, and other online businesses.
How to Start a US LLC from Nepal (Step-by-Step)
If you have never business in the US before, here is how you can set up an LLC in the US from Nepal:
Step 1: Select a State
The following are some of the most popular states for LLC formation:
- Delaware: Broadly recognized for its most business-friendly laws and ease of investor relations.
- Wyoming: Absence of state-own income taxes, high levels of privacy, and minimal annual corporate fees.
- New Mexico: Private owners and low price. Wyoming also offers.
Step 2: Register Your LLC
You can use drawing services to take care of the process for you, such as bizstartz. For this you have to provide:
- A distinctive name for the LLC.
- One registered in the state of selection.
- Articles of Organization to be filed.
Step 3: Get an EIN
You will also need to obtain an Employer Identification Number (EIN) which serves as social security number to companies. It is essential for any business looking to open a banking or business trading account. This service can be sponsored by bizstartz for you.
Step 4: Get a business bank account
A US based bank account is essential to receive or send money virtual account opening from any mercury or relay documents validating your identity may enable you to open an account remotely.
Step 5: Creating a Brokerage Account
Following the creation of the LLC and the bank account, apply for a business investment account with the following platforms:
- Interactive Brokers
- Alpaca
- Charles Schwab (Business Account)
Step 6: Allocate Resources
As noted previously, ensure to fund the brokerage account. Once that is conducted, research the available options on the US market, and invest in equities, ETFs or other tradable securities.
Taxes and Compliance for Nepali Owners of an LLC
Understanding both the American and Nepali tax implications is critical when investing through a US LLC.
In the United States:
An LLC owned by a foreigner, with no offices or employees in the US, might qualify for an exemption from federal income taxation.
It’s very likely that you will have to complete one or more of the following filings:
- File Form 5472 and Form 1120 every year.
- Claim the tax treaty benefits and reduced dividend withholding by filing W-8BEN-E with your broker.
A withholding tax of about 30% is levied on dividends, but under the US-Nepal tax treaty, holders residing in Nepal could benefit from a 15% rate.
For Nepali Residents:
- Some remittances require approval from the NRB.
- Repaying the income to Nepal makes one liable to account for it with the tax authorities.
- Consider hiring a local Chartered Accountant to ease compliance.
Risks and Considerations
Investment in US stocks presents many benefits like ease of access and liquid markets; however, these need to be counterbalanced with:
- Risk of Currency Exchange: The exchange rate between Nepalese Rupee and US Dollar could move unfavorably.
- Market Risk: Comes as inherent volatility associated with all investments; US markets could demonstrate short-term volatility.
- Regulatory Risk: There can be changes over time in the laws governing foreign investment into Nepal.
- Tax Obligation: These liabilities across countries can complicate international taxation, due to the multi-jurisdictional responsibility.
Proper forethought and collaborating with professionals like Bizstartz can significantly reduce these risks.
Final Remarks
There are immense benefits of long-term wealth, portfolio diversification, and exposure to some of the world’s most innovative companies by investing in the US stock market. However, as a Nepali investor, you need to address the regulatory and logistical hurdles very meticulously.
While direct investments are exceedingly challenging because of remittance restrictions, forming a US LLC emerges as a potent model to legally and flexibly invest in US stocks. A US LLC not only simplifies broker and bank access, but also provides various online business avenues.
Get Started with Bizstartz
Here at Bizstartz, we assist Nepali investors in forming US LLCs, obtaining EINs, opening business bank accounts, and creating brokerage accounts with investment-ready status, all remotely and effortlessly.
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