Helping foreign-owned businesses capitalize on opportunities in the US

Jul 25, 2018
Jul 25, 2018
0 min. read
International tax Global services

Anticipating and planning for international business needs can be challenging for most companies and their leaders. At RSM, our global capabilities are matched by our commitment to personal attention and service to our clients.

Entering into business within the United States without adequate planning or implementation can lead to diminished returns on your investment. RSM has the experience, methodology and relationships to help you address the complexities of capitalizing on having a presence in the United States. We bring a dedicated team together to help companies leverage opportunities, reduce risk and address the unknown, while identifying potential blind spots.

Business formation

There is no national law on business formation in the United States. New business entities are created under the laws of one of fifty states or the District of Columbia. The choices regarding jurisdiction and business entity type are up to the party forming the business.

Entity choice

A difference between the United States and many other countries is the wide array of business entity forms available. But despite the wide range of choices, most foreign-owned companies set up in the United States as a corporation.

Because of certain negative tax consequences, the limited liability company (LLC), another business entity form that is popular with U.S. companies, is usually not recommended for foreign owners.

Be careful if your attorneys recommend using an LLC. They may not be aware of the negative tax consequences that can result for companies with headquarters abroad.

Jurisdiction choice

A company can incorporate in any state, whether or not it has business operations there. However, companies usually incorporate in the state where their primary operations are located, or in one of a number of states that have friendly corporation rules. The state of Delaware is the most popular of these jurisdictions, with corporate laws viewed as liberal and friendly to businesses.

Decisions on entity and jurisdiction choices are best made with the joint advice of a U.S. tax professional and a corporate lawyer; both should be experienced at working with companies headquartered abroad.

General requirements

The requirements for incorporation can vary from state to state, but incorporation is usually simple, fast and relatively inexpensive in theh United States. A corporate attorney should be retained for these matters. The following principles generally apply:

  • Incorporation can be accomplished very quickly. If needed, expedited service can result in incorporation in as little as one day.
  • The filing fees and taxes charged for incorporation vary from state to state, but are usually not excessive.
  • Minimum capital contributions are often required.
  • A corporation can have just one shareholder, which can be a company.
  • Corporations may have a board of directors and officers. Corporations can have as few as one director.
  • Shareholders, directors and officers can all be foreign citizens or residents.
  • Corporations may be required to have a registered agent located in the state of incorporation. An attorney can provide qualification details.
  • Corporations may be required to file an annual report; this would be filed with the appropriate secretary of state and the state of incorporation, and is public information. Corporations may also be required to pay franchise fees.
  • Except in the case of listed companies and companies in certain regulated industries like banking, there is generally no statutory audit requirement and no public filing of company financial information.

Tax registration

New companies are required to register with the Internal Revenue Service (IRS) and with tax authorities of the sates in which the company is incorporated or is doing business. New companies are required to apply for employer identification numbers.

The IRS issues the corporation a Federal Employer Identification Number (FEIN) which is used for federal tax purposes. This process can usually be accomplished electronically in a day or less. Most states have similar tax identification number applications process.

New companies also should complete an Electronic Federal Tax Payment System (EFTPS) business enrollment form that enables companies to remit payment to the IRS electronically.

Depending on the state in which operations are located, other registrations may be required. A company's U.S. professional legal advisors can provide full details.

Other registrations

Depending on the nature of the business, other federal and state registrations may be required. Legal counsel is recommended to determine this.

RSM contributors

  • Jonathan Hobbs
    Senior Director