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 first potential stumbling block is opening a bank account if the client has no U.S. personnel (and no home-country bank with an affiliate in the U.S.). See Post-formation Issues for Foreign Companies Coming to the U.S..

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 –

1. 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.
2. 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
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.