"Hello, sir, I am a permanent resident of Slovenia, and I have been a loyal follower of your column and YouTube channel. I want to set up a web-based service business, but I will need to set up a U.S. company and address for payments and correspondence. What is the best way to do this legally?"

Setting up a business in the U.S. requires several steps when you are not a U.S. citizen or green card holder. Here is what most foreign residents need to do to operate legally here:

Get an ITIN. An Individual Tax Identification Number is an identification number, similar to a Social Security number, for people outside the U.S. who, for one reason or another, need to pay federal income taxes in the U.S. This number will be issued to you individually, not to your company.

There are two ways to obtain an ITIN. The easiest way is to visit the nearest U.S. consulate in your home country and apply for the ITIN in person. You will need to bring a copy of your passport (or other identification card that has your photo), and the consulate officials will make a photocopy. You should receive your ITIN in two to three weeks.

The other way is to fill out IRS Form W-7 (available for download on the IRS website), and mail it to the IRS, along with a photocopy of your passport. The form is tricky, as it sometimes requires you to include a copy of the tax return you need to file. Since you are not currently in business in the U.S., you are not required to file a tax return here as yet and will have to explain in detail why you need an ITIN. Even if the application is filled out properly, you may have to wait two to three months to get the ITIN.

Choose a State for Your Business Location. In most countries, forming a corporation or business entity is simple: You register with the national companies registry, which is usually located in the capital city, and then you can operate your company anywhere in your home country.

In the United States, however, corporations are formed at the state level, not the national level. You will have to form your corporation in a particular state, and then register your corporation in additional states if and when you open a branch office there.

Choose a state with low taxes. For a list of each state's corporate income tax rate, go to the Tax Foundation website. Keep in mind that many states also charge sales tax when you sell goods or services to residents of that state.

Find a Local Accountant or Lawyer. You should hire an accountant or lawyer in the state in which you will set up your company. The Accountants World website has a directory of accountants you can search by Zip code. A similar directory for lawyers can be found on the Findlaw website or Martindale-Hubbell's website.

The accountant or lawyer you choose should be familiar with setting up corporations and complying with state tax laws.

Establish a Business Address. You have several options here. Your accountant or lawyer may be willing to let you use her address as your business address in the U.S., or she might designate a corporate registered-agent service to receive and forward any mail from U.S. government agencies to you.

You can also rent a post office box from the U.S. Postal Service or a private mailbox at one of the many UPS stores around the country. Your accountant or lawyer should have access to this box so she can forward mail to you as necessary.

Form a Corporation. It is recommended that you form a regular corporation (sometimes called a C corporation) for your U.S.-based business. There are other ways to incorporate in the U.S., but they are merely pass-throughs for tax purposes and might require that taxes be withheld when the company makes profit distributions to you. Some corporations like the S corporation are not available for foreign ownership.

Because C corporation profits and losses do not flow through to the owners, foreign owners will not need to file U.S. personal income tax returns.

Register for Federal and State Taxes. Once the corporation is formed, your accountant or lawyer will register the entity for federal, state and local taxes. Your ITIN must appear on all registration forms, along with a separate EIN (Employer Identification Number), which your accountant or lawyer will obtain for your corporation.

If you plan to become a U.S. citizen or green card holder at some point, show this column to a lawyer specializing in immigration matters (for a directory, go to the American Immigration Lawyers Association website) and let him set up your company to comply with the rules governing the type of immigrant visa you will apply for.

Cliff Ennico ([email protected]) is a syndicated columnist, author and former host of the PBS television series "Money Hunt." This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com.