eCheck for offshore merchants
Many offshore merchants have a difficult time accepting payments from United States consumers. There are a variety of reasons for which this is challenging. But being able to accept payments from US consumers can be a game-changer for offshore merchants looking to tap into the market in the States.
Although several obstacles exist for offshore merchants, there are ways around them. In this article, we discuss what those obstacles are and how to work through them. Finding a solution for high risk payment processing services does not have to be difficult.
Challenges for accepting U.S. payments
The challenges that foreign companies face when accepting payments in the United States may vary, but they all lead back to the same three items. These three obstacles are nearly impossible to avoid. They include:
- Tax ID number – To obtain a merchant account in the United States, you need a social security number or a tax ID number. This can be difficult for a foreign entity to obtain because the owners of the business do not live or work in the U.S.
- USA corporation – Merchant account providers in the U.S. also typically require articles of incorporation, to prove the existence of the business. If a foreign entity does not want to incorporate in the United States, it’s not likely that they’ll be able to secure payment processing services.
- USA bank account – Last but not least, payment service providers in the U.S. require a bank account that is based in the United States. This saves them a ton of fees and other challenges when it comes to processing payments and incurring processing fees.
How can an offshore merchant accept US payments?
With all these challenges looming, many foreign companies are left wondering what to do. The solution is very simple. An offshore merchant with incorporation in another country can set up an entity in the United States that can handle payments for them.
What do we mean by this?
Setting up an entity known as a DBA “Doing Business As”, allows offshore merchants to accept payments from US consumers in the States without filing articles of incorporation in the US. An entity such as this has the following authorities, according to federal law:
- Act as a signer for the larger corporation
- Take responsibility for signing documents and setting up bank accounts and corporations if necessary
- Handle settlements and wires to your local, foreign bank
A DBA is a non-legal entity that does business in the name of the larger corporation. For example, if you own a lawn service that is legally registered as “John Johnson Lawn Care, LLC”, that is the legal entity name. However, on your truck and marketing materials, you may use the name “John’s Lawn Care”. This is a REALLY un-creative example, but you get the picture.
Creating a DBA allows you to conduct a variety of business functions under the name that consumers see on marketing materials, websites, etc. However, the legal name of the business could be something completely different. Either way, the DBA can help the larger corporation by being a functional unit of the company.
How to setup a DBA in the US
Setting up a DBA in the United States is fairly simple. You need to fill out a handful of documents and provide proof of the larger corporation. The important part of this process is to know what is required for a DBA in each state that you will be doing business. Since each state is different, you will have to file multiple times, once in each state where you want to accept payments.
The filing process will include several of the following items, depending on which state you’re filing in:
- Complete all of the necessary documents required by that state to file a DBA
- Certificate of good standing for the legal entity
- Announcement of the DBA to the public via the local newspaper or another method
- Pay a filing fee via debit/credit card or cashier’s check, depending on the state
It’s important to note that the filing process for a non-US citizen or company is the same as for a US citizen. However, if you plan to have an agent in the US working for you and performing duties under the DBA, that person will need to be a US citizen, or have the right to work in the United States. Simply filing for DBA does not give you permission to work in the US.
How can a DBA accept US payments?
Once the DBA is established in the US, you can begin to accept eCheck payment from United States consumers. You can have an agent of your DBA set up local bank accounts for this purpose. If you set up your website with the ability to accept eChecks, your DBA can accept them through the local bank in the state or states in which you filed your DBA.
Using eChecks is the simplest way to accept payments from US consumers through your DBA. If you want to accept credit and debit card payments, you will need to work with your payment processor, or perhaps even open a new account with a US payment processor. This can create a ton of obstacles for your foreign business, as most payment processors in the US will require that you have a merchant account in the states, which will require a US incorporation.
Final thoughts
Although there are a variety of obstacles for offshore merchants to accept payments in the United States, it’s not impossible. Your first step should be to decide which states you plan to do business in and do your due diligence to find out how to file for DBA in those states. As mentioned earlier, the DBA filing process and fees will be different in each state.
Once your DBA is established, you are ready to begin selling to the US market! Being able to accept payments from US consumers and grow your business is very possible.