In the fast-paced world of e-commerce, TikTok Shop is emerging as a leading platform for businesses to reach millions of customers globally. With the recent announcement of Amazon’s Buy with Prime integration into TikTok Shop, merchants can now display the Prime badge, offer real-time delivery estimates, and streamline the checkout process directly through TikTok. This integration allows sellers to boost consumer trust and drive conversions by using Prime’s trusted reputation, making it a huge opportunity for e-commerce brands.
While this opens up significant seller opportunities, non-residents face unique challenges in setting up a TikTok Shop. Specifically, TikTok requires a U.S. Ultimate Beneficial Owner (UBO) who holds at least 25% ownership of the business and can provide a U.S. ID and SSN. For non-resident business owners, this can complicate matters, especially if they don’t have a U.S.-based partner.
Key Steps to Setting Up TikTok Shop as a Non-Resident
Before jumping into TikTok’s U.S. market, let’s break down the steps and potential hurdles you’ll face as a non-resident seller:
1. U.S. Tax and Business Requirements
To set up a TikTok Shop targeting U.S. customers, non-residents typically need to have a U.S. business entity—an LLC or corporation—registered in the U.S. It also requires:
- A U.S. tax ID (such as an EIN).
- A physical U.S. address (not just a virtual address).
- A 25% Ultimate Beneficial Owner (UBO) must be a U.S. person with an SSN and government-issued ID.
The UBO is a key challenge for non-residents who do not have a U.S.-based partner. However, TikTok makes this requirement non-negotiable, meaning you’ll need to take extra steps to identify a reliable U.S. partner.
2. Setting Up a U.S. Entity
To sell on TikTok Shop as a non-resident, you’ll first need to create a U.S. business entity. Here’s how you can get started:
- Choose a State: Popular states for non-residents include Delaware, Nevada, and Wyoming, which are known for their business-friendly regulations. However, consider filing costs and annual fees before selecting a state.
- Apply for an EIN: After forming your LLC or corporation, you must apply for an Employer Identification Number (EIN) from the IRS. This number is necessary for tax filing and opening a real U.S. bank account.
- Find a Physical Address: Many non-residents use virtual office services for their U.S. address, but remember that TikTok will likely require a more robust physical presence for verification purposes. You might need to lease an office or establish a physical office presence.
3. Opening a U.S. Bank Account
Once your U.S. entity is established, the next challenge is opening a U.S. bank account for TikTok Shop payments. Many neo-banks, such as Mercury or RelayFi, may not meet TikTok’s requirements, so it’s better to open an account with a traditional bank like Chase, Wells Fargo, or Bank of America.
Be prepared to provide:
- Business registration documents.
- Proof of U.S. address (such as a lease or utility bill).
- Your EIN and passport or other identification.
Some banks may require in-person visits for non-residents, so this could involve travel to the U.S. if remote setup isn’t possible.
4. Verification and Compliance with TikTok
TikTok’s stringent verification process ensures businesses are compliant with U.S. regulations, which is especially critical for non-residents. You will need to provide:
- Business registration documents to confirm your U.S. entity.
- U.S. address verification (utility bill or lease agreement).
- UBO verification: The U.S.-based Ultimate Beneficial Owner must provide their SSN and government-issued ID.
Don’t make the mistake of rushing into this process without first confirming all the details with TikTok and ensuring you’ve met every requirement.
What to Consider When Adding a 25% UBO
TikTok’s requirement for a U.S.-based Ultimate Beneficial Owner (UBO) means non-residents will need to partner with a U.S. individual who holds at least 25% of the company. This partnership can raise some tax and legal implications that must be carefully managed (this is the start of a list of extra steps that should be considered with any business partner). Keep in mind that the UBO will need to be reported on your FinCEN report. Don’t mess with FinCEN; there is more than a $10K fine on the line.
- Buy-Sell Agreements: Ensure you have a buy-sell agreement in place. This outlines the terms under which the non-resident owner can buy back the U.S. partner’s 25% share if necessary. This is essential for maintaining control of your business.
- Liability Protection: Having a UBO can expose them to liabilities, so ensure liability protection is established for all partners. Consider having an attorney draft agreements to limit risk exposure.
- Tax Implications: Both U.S. and foreign owners may face different tax obligations. Consult with a tax professional to determine how profits will be taxed and ensure compliance with U.S. tax laws. Ignoring this step can lead to serious consequences, especially if the business becomes profitable.
Don’t Make This Costly Mistake!
Many non-residents make a costly mistake: They rush to set up a U.S. LLC, get an EIN, sign up for a TikTok Shop account with a U.S. friend or find a random “guy” to serve as the 25% UBO. While this might seem like an easy fix to meet the requirements, it could lead to major legal issues down the road—especially if your business starts generating real revenue.
Here’s why this approach could end badly:
- Tax complications: Without a proper agreement in place, U.S. tax liabilities can fall on the wrong people.
- Ownership disputes: If your U.S. partner doesn’t have the proper legal protections, they could make a claim on your business, and you’d have no formal recourse.
- Risk of losing your business: In worst-case scenarios, you might lose more than just the 25% interest, and lawsuits are costly!
Pro tip: Always start with a strategic plan. To protect your business interests, work with experienced professionals who specialize in U.S. entity formation, tax strategies, and compliance. This step could save you from costly mistakes and headaches in the future.
Ready to Explore if TikTok Shop Is Right for You?
With the recent integration of Amazon’s Buy with Prime into TikTok Shop, the opportunity for e-commerce sellers has never been greater. However, for non-residents, setting up a TikTok Shop is far from straightforward. It requires careful planning, smart partnerships, and ensuring compliance with U.S. regulations. This is not for newbies with limited resources to expand.
Don’t take shortcuts. If you’re considering adding a U.S. partner to meet TikTok’s UBO requirements, consult professionals who can help you set up the necessary agreements and protect your interests.
Ready to explore your next steps and see if TikTok Shop is the right fit for your business? Schedule a free discovery call with our team today. We specialize in helping non-resident sellers establish U.S. entities, open U.S. bank accounts, and get set up for success on platforms like TikTok Shop.
