Foreign founders expanding to the United States (US) face a maze of entity, tax, and state-level decisions, and the mistakes are expensive. A single missed filing can cost $25,000, per the IRS (Internal Revenue Service) rules on Form 5472. This 2026 guide walks the whole path step by step.
You get the operational playbook: entity choice, Delaware mechanics, getting an Employer Identification Number (EIN), sales tax nexus, and the compliance calendar that keeps your entity in good standing.
Why Expand Your Business to the United States?
The US offers the world’s largest economy and unmatched access to capital. US gross domestic product (GDP) surpassed $29 trillion in 2024, according to the Bureau of Economic Analysis (BEA). That scale, a deep venture capital (VC) market, and the world’s largest consumer base are why foreign founders keep choosing the US for growth.
The US is also where global investors expect to fund and scale companies. For fundraising startups, a US entity is often the price of entry to that capital.
What Are the Legal Steps to Start a Business in the USA in 2026?
Eight steps: (1) choose an entity type, (2) choose a state, (3) appoint a registered agent, (4) file articles of incorporation for a C corporation (C-Corp) or a certificate of formation for a limited liability company (LLC), (5) obtain an EIN, (6) open a US bank account, (7) register for state taxes, and (8) foreign qualify where you operate. Each step is covered below.
How Do You Check If a Business Name Is Available?
Search the Secretary of State’s business name database in your state of incorporation before filing, and confirm the mark is clear for trademark. Delaware lets you reserve a name for 120 days for $75, per the Delaware Division of Corporations. Commenda’s company name checker screens availability fast.
What Is a Registered Agent and Why Is One Required?
A registered agent is the person or company that receives legal and state documents on your entity’s behalf. Every state mandates one with a physical in-state address. Delaware requires it by statute under 8 Del. C. Section 132, per the Delaware Division of Corporations. Foreign founders almost always hire a commercial agent, often paired with a US virtual business address.
What Do Articles of Incorporation Include and Where Do They Go?
Articles of incorporation (a certificate of formation for an LLC) state the entity name, registered agent, share structure, and incorporator. You file them with the Secretary of State. Delaware’s stock corporation filing fee starts at $89 plus $9 per extra page, per the Delaware Division of Corporations. Banks then require this document, your EIN, and owner ID to open an account. For a plain-language primer, see Commenda’s business incorporation guide.
Which US Entity Type Is Best for Foreign Founders: LLC or C-Corp?
Choose a Delaware C-Corp if you plan to raise US venture capital or are a foreign parent creating a subsidiary. An LLC can work for bootstrapped solo founders and sellers, but only if you accept the Form 5472 filing burden. The table below matches your situation to the right entity.
| Your situation | Recommended entity |
|---|---|
| Raising US venture capital | Delaware C-Corp |
| Foreign parent creating a US subsidiary | Delaware C-Corp subsidiary |
| Bootstrapped solo founder, no US VC | LLC (accept the Form 5472 filing) |
| E-commerce or SaaS seller, no US fundraising | LLC, or C-Corp for simpler compliance |
C-Corps file Form 1120 annually with the IRS, due the 15th day of the 4th month after year end (April 15 for calendar-year filers). Income is taxed at a flat 21% federal rate under Internal Revenue Code (IRC) Section 11, per the IRS, then shareholders pay again on dividends (double taxation).
The foreign-owned single-member LLC is a trap. It is a disregarded entity, but it must still file Form 5472 with a pro forma Form 1120, and a missed filing costs $25,000 per year under IRC Section 6038A, per the IRS. The owner may also face effectively connected income (ECI) exposure. Commenda reports that almost none of its 100+ foreign-owned US customers keep disregarded-entity tax status, instead choosing the 21% federal C-Corp rate for simpler compliance.
Should You Set Up a US Branch or a US Subsidiary?
Most foreign companies should form a US subsidiary. A branch is viable only for minimal, short-term, or exploratory US activity where the parent accepts direct liability and US tax exposure. A subsidiary isolates liability and contains permanent establishment risk at the entity level.
A branch files Form 1120-F with the IRS and exposes the parent’s own income to US tax, and it heightens permanent establishment exposure. US customers and investors also expect a domestic entity to contract with.
Should You Incorporate in Delaware?
Yes if you are raising US venture capital or forming a subsidiary investors will scrutinize; not automatically otherwise. Delaware offers the Court of Chancery, deep corporate case law, and member privacy. But every Delaware corporation owes a minimum $175 franchise tax plus a $50 annual report fee, due March 1, per the Delaware Division of Corporations.
Delaware LLCs instead pay a flat $300 annual tax by June 1, per the Delaware Division of Corporations. Skip Delaware when it costs you twice: if your operations, employees, or office sit in California, New York, or Texas, you must foreign qualify there and pay both states’ fees. Incorporating in your single operating state can be cheaper.
How Do You Get an EIN as a Foreign Owner?
File IRS Form SS-4 by fax or phone; no Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN) is required. Foreign applicants call the IRS at +1-267-941-1099, per the IRS Form SS-4 instructions, and enter “Foreign” on Line 7b when the responsible party has no SSN or ITIN. The EIN is free directly from the IRS.
Without a US SSN, incorporation itself takes 2 to 5 business days, but the EIN can take 6 to 12 weeks because applications must be faxed or mailed to the IRS. Using a US-based responsible party with an SSN, such as a trusted contact or Commenda’s team, cuts this to 2 to 5 days; the role can later be transferred back to the founder via a simple IRS form. The responsible party must be an individual who controls the entity, not an agent. Processing times vary by method.
| Method | Turnaround | Source |
|---|---|---|
| Phone (foreign applicants) | Same call | IRS SS-4 instructions |
| Fax with return fax number | ~4 business days | IRS SS-4 instructions |
| Fax (live tracker) | 10 business days after receipt | IRS processing-status tracker |
| ~30 days (allow 4-5 weeks) | IRS SS-4 instructions / tracker |
The EIN gates everything downstream: your bank account, payroll, and every state tax registration.
How Much Does US Business Registration Cost?
Expect a realistic year-one range of roughly $500 to $2,000 for a DIY Delaware C-Corp, and more with a formation service or multi-state qualification. State filing fees are low; recurring franchise tax, registered agent, and annual reports drive the ongoing cost. Each line and its source appear below.
| Item | Cost | Type | Source |
|---|---|---|---|
| Delaware Certificate of Incorporation | From $89 (min), varies with shares | One-time | Delaware Division of Corporations |
| Name reservation (optional) | $75 for 120 days | One-time | Delaware Division of Corporations |
| Registered agent | ~$50-$300/yr | Recurring | Provider pricing |
| EIN | Free | One-time | IRS |
| Third-party formation service (optional) | $399-$427 | One-time | Firstbase, Clerky published pricing |
| Delaware franchise tax + annual report (C-Corp) | $175 min + $50 report | Recurring (March 1) | Delaware Division of Corporations |
| Delaware LLC annual tax | $300 flat | Recurring (June 1) | Delaware Division of Corporations |
| Foreign qualification (per operating state) | Varies by state | Per state | State Secretary of State |
What Is US Sales Tax Nexus and When Do You Owe Sales Tax?
Nexus is the connection that obligates you to register, collect, and file sales tax in a state. You trigger it two ways: physical presence (office, employees, inventory) or economic activity since South Dakota v. Wayfair (2018). Once you cross a state’s threshold, you must register before your next taxable sale.
| State | Economic nexus threshold | Source |
|---|---|---|
| South Dakota | $100,000 or 200 transactions | Commenda US nexus guide |
| California | $500,000 | Commenda California sales tax guide |
| New York | $500,000 and 100 transactions | Commenda New York sales tax guide |
| Texas | $500,000 | Commenda Texas sales tax guide |
| Florida | $100,000 | Commenda Florida sales tax guide |
When Do You Register for Sales Tax?
Register state by state before your first taxable sale after nexus is triggered. Collecting tax before you register can itself create penalties. Check the current rate for any address with Commenda’s sales tax calculator.
How Often Do You File Sales Tax Returns?
Each state assigns your filing frequency (monthly, quarterly, or annual) when you register, usually based on expected volume. SaaS (Software as a Service) taxability varies widely by state; New York taxes B2B SaaS while others exempt it. Marketplace facilitator laws shift collection to platforms like Amazon for e-commerce sellers, but they do not remove your own registration analysis, including Fulfillment by Amazon (FBA) inventory that creates physical nexus.
What Ongoing Compliance Does a US Entity Require Each Year?
A US entity is never “done.” Expect federal tax filings, state annual reports, franchise tax, and sales tax returns on a recurring calendar, plus foreign qualification maintenance in each operating state.
| Obligation | Form | Deadline | Penalty | Source |
|---|---|---|---|---|
| Federal corporate income tax | Form 1120 | 15th day of 4th month (April 15) | Failure-to-file penalties | IRS |
| Foreign-owner reporting | Form 5472 + pro forma 1120 | With Form 1120 due date | $25,000/yr (+$25k per 30 days after notice) | IRS (IRC 6038A) |
| Franchise tax + annual report | DE annual report | March 1 | Loss of good standing | Delaware Division of Corporations |
| LLC annual tax | (no report) | June 1 | $200 + 1.5%/month | Delaware Division of Corporations |
| State corporate income tax | State return | Varies | Varies | State DOR |
| Sales tax returns | State returns | Frequency set by state | Back taxes + penalties | State DOR |
Track every date in one place with Commenda’s compliance calendar.
What Is Permanent Establishment Risk and How Do You Avoid It?
Permanent establishment (PE) is a taxable presence of the foreign parent in the US, usually triggered by a fixed place of business or a dependent agent concluding contracts. Tax treaties define the tests. You avoid it by operating through the US subsidiary, keeping contract authority inside it, and papering intercompany arrangements at arm’s length.
How Do You Protect Your Intellectual Property in the US?
Register your trademark with the United States Patent and Trademark Office (USPTO), because US rights are territorial and foreign registrations do not protect you here. The USPTO base trademark application fee is $350 per class of goods or services, per the USPTO. Patents also go through the USPTO.
Copyrights register with the US Copyright Office, with fees of $45 for a single author, single work and $65 for the standard application, per the US Copyright Office. The Madrid Protocol lets you extend trademark protection to other member countries from a single application.
What US Employment Laws Apply When You Hire Your First Employee?
US employment is regulated at federal and state levels, and state law often exceeds the federal floor. The federal minimum wage is $7.25 per hour, per the US Department of Labor (DOL), but most states set higher rates. Employment defaults to at-will, and misclassifying contractors carries real penalties.
Anti-discrimination rules come from the Equal Employment Opportunity Commission (EEOC), and workplace safety from the Occupational Safety and Health Administration (OSHA). Each state also requires payroll registrations for income tax withholding and unemployment insurance. To hire before or without an entity, weigh an employer of record (EOR) using Commenda’s entity vs EOR calculator.
How Does US Expansion Differ for Indian and UK Companies?
The mechanics are identical, but home-country rules and treaty positions differ. Indian founders must clear Reserve Bank of India (RBI) outbound investment rules before funding a US entity. UK founders lean on the UK-US tax treaty and usually pick a subsidiary over a branch. Both use their country’s treaty to manage withholding and PE.
India to US Expansion
Indian resident founders investing in a US entity generally work through the RBI’s Overseas Direct Investment (ODI) framework, often via an Indian Limited Liability Partnership (LLP), with approval typically quoted at one to three months. Many startups “flip” to a Delaware C-Corp parent to raise global capital. The India-US treaty and transfer pricing govern intercompany charges, which should carry an arm’s-length markup.
UK to US Expansion
UK companies operate in a familiar common-law environment and usually form a US subsidiary rather than a branch to isolate liability and PE. The UK-US treaty manages withholding on cross-border payments. See Commenda’s guide to registering a company in the USA from the UK for the step-by-step path.
What Common Mistakes Should You Avoid When Expanding to the US?
The costly errors are avoidable. Watch these:
- Missing Form 5472, which triggers a $25,000 penalty per year, per the IRS.
- Ignoring sales tax nexus until back taxes accrue across states.
- Choosing an LLC without understanding the foreign-owner filing burden.
- Skipping foreign qualification in the state where you actually operate.
- Missing the March 1 Delaware franchise tax deadline and losing good standing.
- Misclassifying contractors who should be employees.
How Commenda Simplifies Business Expansion in the United States
Commenda gives foreign founders certainty that their US expansion is handled from one platform. Commenda incorporation forms your Delaware C-Corp or LLC and appoints your registered agent, while entity management runs your annual reports, franchise tax, and subsidiary compliance on an automated calendar. Commenda’s indirect tax software tracks physical and economic nexus across states and handles sales tax registration and filing.
Monitor your exposure with Commenda’s evergreen US nexus exposure guide, kept current with each state’s thresholds. Book a demo call to get a free US expansion compliance assessment covering your entity, tax, and nexus exposure.
