Which U.S. Entity Formation is Best for Foreign Sellers?

A U.S. entity formation is a popular option for many foreign sellers. If you go the route of establishing a U.S. entity, there are many factors that can help you determine which entity and state are best. However, our main concern is that if you do not get all these elements answered correctly, the potential audits may be devastating to your U.S. business years down the road.

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Learn the key questions to ask to get the right answers and support

The good news is, we are able to share with you the correct order of all these elements to help you avoid the severe problems that have derailed others.

Here is a summary of the key elements that you will want to cover when forming a U.S. entity:

    • U.S. Tax responsibilities based upon entity type. Do you want to retain profits in the U.S. or have them flow to your country? 
    • U.S. Ownership options by a foreign entity or individual. Includes liability issues if the U.S. entity veil is pierced as a result of a product liability lawsuit. 
    • Tax Treaty insights. Will the US entity be viewed as a hybrid entity in your country? Will you violate the tax treaty? 
    • Which state is best for your U.S. entity formation? More importantly what is the factors beyond cost that you must consider. Do you have product liability insurance and are able to afford lower filing fees and more risk?
    • U.S. tax returns responsibilities annually. This includes both federal and state returns. Some states will require a state corporate return or franchise tax return as you register for sales or use tax. 
    • Sales tax responsibilities since the U.S. Supreme Court Case in June of 2018. This involves all the new economic nexus cases, reporting and notice states, marketplace facilitator states, and physical nexus (FBA stock). 
    • LLC formation, managed by managers or members? Do you want to disclose ownership information, need investors, flexibility with management?  Do you have the correct operating agreement to match the taxation and number of members?
    • Key timing factors related to a U.S. EIN, and banking. Make sure to avoid a permanent establishment upon filing the EIN, get the right insights in the ever-changing U.S. banking requirements as it relates to saving money on remitting of sales and use tax. 

In the end, you get what you pay for especially when you form a U.S. company. There are so many online U.S. company formation options, most make it seems so simple, but have no clue when digging into the important details that are critical to your U.S. business compliance.