Expanding your business to the United States is often seen as a natural next step for companies aiming to scale internationally. What is less discussed, however, is how the first year of operations can quietly become the most critical from a tax and compliance standpoint.
The challenge is not necessarily the complexity of the U.S. system, but the assumptions founders bring with them. Many expect tax obligations to begin only when the business starts generating revenue, hiring employees, or operating at scale. In reality, the U.S. framework operates differently: compliance begins the moment your company is legally formed.
This misunderstanding alone leads to one of the most common and costly mistakes — failing to meet filing obligations in a year when the company may not have generated any income. Even without revenue, businesses are generally required to file federal tax returns, submit annual reports, and pay state-level obligations such as the Delaware Franchise Tax. In other words, simply existing as a legal entity already creates responsibilities. Notice: the Delaware Franchise Tax of march 1st is for C Corporations. For LLC’s, the deadline is June 1st.
Closely tied to this is another frequent oversight: ignoring so-called “informational” filings. Among them, Form 5472 stands out as one of the most critical — and most commonly missed — requirements for foreign-owned U.S. entities. This form is used to report transactions between the company and its foreign owner, including capital contributions, loans, and other financial movements. Because it does not necessarily result in tax due, many founders underestimate its importance. The IRS, however, does not. Penalties for failing to file can start at $25,000 per year, even in the absence of revenue.
Beyond filings, structural decisions made at the very beginning can have long-term tax implications. Choosing between an LLC and a C-Corporation without a clear understanding of cross-border taxation can lead to inefficiencies such as double taxation, limitations on profit distribution, or challenges when raising capital. In the U.S., entity selection is not merely a legal step — it is a strategic tax decision that directly impacts scalability and investor readiness. If you don’t know the differences between an LLC and a C-Corp, read our article: https://media.drummondadvisors.com/how-to-choose-the-best-corporate-structure-to-operate-in-the-u-s/
Operational delays can also create friction early on. Obtaining an Employer Identification Number (EIN), for example, is essential for opening bank accounts, hiring employees, and fulfilling tax obligations. While foreign founders are not required to have a Social Security Number to apply, the process is often slower and more manual, typically involving fax or mail submissions. Mistakes in the application can delay operations significantly, making it critical to initiate the process immediately after incorporation.
Timing also plays a critical role in U.S. tax compliance, particularly when it comes to equity. Founders who receive shares must be aware of the 83(b) election, which must be filed within 30 days of the grant date. Missing this deadline can lead to substantially higher tax liabilities in the future, and unlike many other filings, it cannot be corrected after the fact. It is a simple requirement — but an unforgiving one.
As companies begin to operate more actively, additional risks emerge in areas such as payroll and founder compensation. Misclassifying employees as independent contractors can result in penalties and compliance issues, while payments made to foreign founders — whether as salary, dividends, or service fees — may be subject to withholding taxes of up to 30%. Although tax treaties can reduce these rates, they do not eliminate the need for proper reporting and documentation.
In fact, documentation is one of the most overlooked aspects of first-year compliance. Many issues arise not from aggressive tax positions, but from inconsistent or incomplete records. Transactions between the company and its owners, capital movements, and internal financial decisions must all be properly tracked and reported. Inconsistencies in these records are among the most common triggers for IRS scrutiny.
Against this backdrop, managing deadlines becomes essential. Key dates such as March 1st for Delaware Franchise Tax, April 15th for federal filings and Form 5472. In the U.S., timing is not just administrative — it is a fundamental part of tax strategy.
Ultimately, expanding to the U.S. is not just about entering a new market. It is about building a structure that can sustain growth, support investment, and operate efficiently across borders. Tax should not be treated as a reactive obligation, but as a strategic component of that structure from day one.
Companies that understand this early are better positioned to scale. Those that do not often find themselves correcting avoidable — and expensive — mistakes.
Contact our specialists at Drummond Advisors to help you through the process in a safe and strategic way. Let’s do it together!
Written by Paola Von Atzingen