How to Create a U.S.-Based Brokerage Account Even if You Don’t Live There

How to Create a U.S.-Based Brokerage Account Even if You Don’t Live There

International stock and options traders outside the United States are a fast growing segment of the investor population. The steady release of new products like forex, commodity ETFs and currency options trading on U.S. exchanges have even more international traders looking to access the U.S. markets.

[VIDEO] How to Create a U.S.-Based Brokerage Account

Learning Markets has a large international readership and a question we get frequently is how to set up a brokerage account inside the U.S. if you don’t live there. Because a U.S. based account may be the most efficient and cheapest way to access the U.S. exchanges we feel that this is an important question.

Setting up a stock or options brokerage account is a subject we have discussed before and there are very few changes that a trader from outside the U.S. needs to worry about.

The biggest issue is usually that it may take a little extra time to establish the account than if you were setting one up from inside the U.S. The list below should help you understand what you will need to do to get started.

Account Application

The account application is a long form that all account holders have to fill out. It includes contact information, trading objectives questions and disclosures. Most discount brokers in the U.S. allow you to fill this application out online and even sign it electronically.

However, applicants from outside the U.S. must send, scan or fax in a hard copy. This is annoying but not a big issue.

IRS Form W8

This is a form the broker will get from you and return to the Internal Revenue Service, which is the tax collection arm of the U.S. Treasury.

The form identifies you as a foreign person and usually has to be returned to the broker in hard copy. Its about a page long but usually only takes a few minutes to fill out.

Call Your Prospective Broker(s)

If you are considering opening an account with a broker inside the U.S. make sure you are calling or contacting their customer service departments about the process before filling out the application. This accomplishes several things at once.

  1. You will find out whether they accept international accounts – not all brokers do.
  2. Customer service can explain what the process and commissions are like for international accounts. For some brokers, setting up an account is easy and for others it can be long and difficult. There is no need to increase your work load unduly.
  3. Contacting the brokerage service department is always a good idea regardless of where you are located. This will give you a taste for what working with the broker will be like. Were they courteous, knowledgeable, responsive…? Did they provide the ability to chat online rather than a phone call if you prefer that method?

These are all things you will find out and it will make a big difference if you ever have issues in the future.

1099s

If you were a resident or citizen of the United States you would get a 1099 form at the end of the year with your profits or losses from your broker. Most firms use an outside processor to send this form out and they usually don’t differentiate between domestic and foreign account holders. If you are outside the U.S. this form may not apply to you and you will want to discuss it with a local tax adviser.

The bottom line is that the process of setting up a brokerage account inside the U.S. is usually no more difficult than if you were inside the U.S. It just may take a little extra time to print and then fax, scan or ship your documents to the broker.

Image courtesy Sam Churchill.