12 Questions to Ask BEFORE Forming a U.S. Entity

These 12 questions below are important to ask but are necessary to get the best answer and support.

They apply to all foreign e-commerce sellers looking to establish a U.S. entity. Forming a U.S. company is not as simple as forming a single-member LLC with a mail address.

There is much more involved. These questions will help keep you on track when working with a U.S. entity provider.

1. Do I Even Need to Form a U.S. Entity as a Foreign Seller?

   This leads to your options to sell in the U.S. as a foreign entity vs. the advantages of using a U.S. entity.

2. How Long Will it Take to Form my U.S. Company Correctly?

   You will need to know the factors that will determine the length of time to form your entity, apply for the EIN, establish a bank account, and get into compliance with sales tax. Don’t get fooled by “incorporate in 24 hours or less” headlines; these usually lead to costly mistakes.

3. Which State is Best to Incorporate?

   Know the factors and which ones are most important to YOUR situation. Most are mislead by state fees vs. important case law and protection.

4. How Should My U.S. Entity be Taxed?

   Getting these factors out of order may cost you a small fortune in unnecessary U.S. taxes. If an LLC, how should it be managed, managed by managers or members? Which one gives you the most flexibility to open a U.S. bank account and secure the proper foreign ownership? Who is the owner of the U.S. entity? What is the impact on the U.S. and foreign tax returns?

5. Do I need a U.S. Virtual Address Service?

   What type of U.S. Virtual mail and scanning service is best for my U.S. company formation? There are different approaches and consequences if you don’t get the right one for your situation (now scanning is more important than ever).

6. How do I Establish a U.S. Bank Account?

   You will also want to find out, first, when a bank account is recommended. It may not be a must, but if it is, do you need to travel to the US? And, even if you do, what must happen to get a bank account opened? Is it possible during COVID?

7. How do I know if I have a Complete Formation?

   You will need to know the steps after you file articles, to make sure you have a complete formation. Most U.S. entities have ZERO protection because they are not a complete formation.

8. Do I need to Collect and Remit Sales Tax?

   Sales tax does not fall under the U.S. tax treaties and, since the June 2018 U.S. Supreme Court Case Wayfair vs. South Dakota, it is even more important to get into compliance with sales and use tax. Do you know which states you have to get registered even if you are selling on Amazon FBA? Are you selling on Shopify? If so, do you know which states have a threshold of 200 transactions?

9. What is my U.S. Federal Tax Exposure and Requirements?

   Does forming a U.S. entity mean I will pay U.S. federal income taxes on my profits? Avoid the misinformation and confusion on this must-know subject.

10. What is the Impact with or without a U.S. Tax Treaty with my Home Country?

    Is this cookie cutter, or does it depend upon the treaty with my country? Where do I go for help?

11. How do I make a Transition from my Foreign Company to a U.S. Company?

    Most end up still operating part through both; this leads to both legal and tax issues down the road. Clear separation is important (including your sales tax registrations are a must).

12. How Do I Choose the Best U.S. Formation Company?

    You will need to know which factors to consider BEFORE choosing a company to establish your U.S. company. Experience does matter. This goes way beyond prices and services. You must know the buying criteria before getting started.

Need support in forming a U.S. Company?

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