U.S. Market Entry, Done Strategically from Day One
A successful U.S. launch begins with a deep understanding of its complex tax laws. Find everything you need for an optimal tax strategy—from entity formation to M&A and operations—in this interactive guide.
Phase 1: Foundation
Building the Base: Entity Choice & Location
The type and location of your U.S. entity are the most critical first steps, determining long-term tax burdens and operational flexibility.
C-Corp vs. LLC: The Optimal Choice for a Foreign Parent
✓ Recommended: C-Corporation
Acts as a "blocker" entity, shielding the foreign parent company from the direct tax jurisdiction of the U.S. IRS.
Limited Tax Liability: The parent's tax exposure is limited to a predictable withholding tax on dividends.
Investor-Friendly: The standardized structure preferred by VC/PE investors.
Easy Employee Compensation: Well-established mechanisms for stock options to attract talent.
✗ Not Recommended: LLC
Due to 'pass-through' taxation, the parent is considered to be directly doing business in the U.S., creating serious exposure to the IRS.
The ECI Trap: The parent becomes a U.S. taxpayer, potentially exposing its worldwide income to IRS scrutiny.
Unfavorable for Investment: Institutional investment is nearly impossible to obtain.
Complex Filing: Even with no income, complex filing requirements (e.g., Form 5472) and huge non-filing penalties ($25,000) apply.
State of Incorporation: Delaware vs. Nexus
Even if you incorporate in business-friendly Delaware, your actual taxes are paid based on where you have a physical presence (factory, office, employees). This is called "Nexus." Explore state tax rates below.
Hover over a state to see its info.
Phase 2: Growth
Accelerating Growth: Tax-Free M&A Strategy
Acquiring a U.S. company can be a shortcut to growth. Learn how to structure a deal as a "tax-free reorganization" to defer tax liabilities.
Tax-Free Reorganization Simulator (IRC §368)
Please answer the questions above to see the result.
Phase 3: Operations
Optimizing Operations: Transfer Pricing Risk
The biggest tax risk when operating a U.S. subsidiary is transfer pricing. Understanding the massive penalty risk and defending with effective documentation is key.
Transfer Pricing Penalty Risk Simulator (IRC §6662)
Analysis Results
A 20% penalty may apply if adjustments exceed $5M or 10% of revenue. This increases to a 40% penalty if adjustments exceed $20M or 20% of revenue.
Adjustment Amount vs. Penalty Amount
Phase 4: Advanced Strategy
Proactive Dispute Resolution & Tax Certainty
Powerful mechanisms exist to proactively eliminate future tax dispute risks and secure predictability.
Advance Pricing Agreement (APA)
A voluntary procedure to agree in advance with tax authorities on the transfer pricing methodology for future related-party transactions. It's the most effective way to gain tax certainty, eliminate audit risk, and prevent double taxation.
Bilateral/Multilateral APA
Involves both the U.S. IRS and the foreign tax authority. Prevents double taxation at its source but is a complex and lengthy process.
Unilateral APA
An agreement with the U.S. IRS only. The process is relatively faster, but the risk of adjustment in the counterparty country (potential double taxation) remains.
Median APA Processing Time (as of 2022)