Merchant Accounts in the U.S.for Foreign Companies – A Problem with Workarounds
I have helped dozens of foreign clients launch their businesses in the U.S. Almost every impediment to forming a corporation and running the business under that corporation can be overcome. But there’s one problem I have not been able to solve: Opening U.S. merchant accounts (for processing credit and debit card transactions) if companies does not have personnel in the U.S.
The stumbling block used to be opening a bank account if the client has no U.S. personnel (and no home-country bank with an affiliate in the U.S.). However, as explained in Three Important Issues for Foreign Companies Coming to the U.S., I solved that problem earlier this year.
Here is why merchant accounts present a problem: The individual opening the account must have a U.S. social security number. This issue already addressed in opening a bank account, as referenced above.
In addition, that individual must agree, in writing, to provide a personal guaranty for the company’s obligations under the merchant account agreement! While the founder of a company may be willing to serve as guarantor, no mere employee, officer, agent or representative of the company will knowingly take on such a responsibility.
So U.S. merchant accounts for foreign clients without local personnel remain a problem.
Updated March 9, 2012: I now know of two possible workarounds -
- Some providers of merchant accounts will consider waiving the personal guaranty if there is an adequate cash deposit or if the merchant agrees to receive funds on a delayed basis.
- One can use a third-party credit card processor, such as PayPal. Transaction fees may be somewhat higher than those for merchant accounts, but the service works.
Dana H. Shultz, Attorney at Law +1 510 547-0545 dana [at] danashultz [dot] com
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