Corporations are the most traditional type of U.S. business.
A corporation is its own “person” under U.S. law. Unlike with LLCs, there is no question as to whether a corporation is “engaged in a trade or business in the United States” (ETBUS) to determine if taxes are owed. A corporation will owe a flat rate of 21% to the IRS on its income. Form 1120 is a corporate tax return, and it is due by April 15th of each year.
Even though taxes are always owed on corporate income, a corporation offers the advantage of being more independent from its owners. Sometimes it is helpful for a business to quality as a U.S. resident on its own. There are ways to take advantage of the corporate form and reduce U.S. tax burdens, making it an interesting possibility for some businesses.
We provide many of the services needed to operate a corporation legally in the United States:
Formation – We can form your corporation in any state. New Mexico, Wyoming, and Delaware are the most popular for non-residents.
Form 1120 & Form 5472 – Form 1120 is required for all corporations. And for a corporation with at least a 25% foreign owner, Form 5472 is also required. Form 1120 is fully completed in the case of a corporation, unlike for a foreign-owned, single-member LLC. If corporation makes a profit, tax will be due at 21%, and the form is due by April 15th of each year.
Form 1040-NR – Form 1040-NR is the U.S. personal tax return for a non-resident. If you have a U.S. corporation and take compensation, tax on that compensation is most likely due in your country of residency and not in the United States. If you receive dividends, Form 1040-NR is not required as long as taxes on the dividends are withheld and remitted by the corporation. It is also possible to file Form 1040-NR as a “protective return”. A protective return preserves your right to claim deductions if the IRS ever decides you were ETBUS when you believed you were not. If required, Form 1040-NR is due by April 15th of each year.
ITIN Applications – An Individual Taxpayer Identification Number, or ITIN, is not necessarily required for the non-resident owner of a U.S. corporation, but we can help with one if needed or desired.
FBAR/Form 114 – The FBAR, or Form 114, is a form required when a U.S. person has a financial interest, signatory authority, or other authority over an account outside of the United States and the aggregate value of all foreign financial accounts exceeded $10,000 USD at any time during the calendar year. If required, the FBAR is due by April 15th of each year.
CTA/BOI Changes – The Corporate Transparency Act requires Beneficial Ownership Information reporting as of January 1st, 2024. These reports are due within 30 days of forming the corporation and then within 30 days of any change to the information. For corporations formed before 2024, the initial filing is due by the end of 2024.
State Annual Reports – Most states have an annual report, annual fee, or franchise tax to maintain your corporation.
Amendments/Address Changes – Changing certain information about your corporation after filing Articles of Incorporation will require filing an amendment. What changes require an amendment varies by state.
Form W-9 – A payor may request that your corporation complete Form W-9. This is common and appropriate.
Form 1099 – A U.S. corporation may be required to issue a Form 1099 to any U.S. person it pays.
Sales Tax – Sales tax is a complicated topic as each state has its own laws. If you are selling physical or digital products in the United States your possible sales tax liabilities need to be explored.
Dissolution – The process for dissolution varies by state. It is important to know that any IRS requirements must still be met in the year of dissolution.
The forms mentioned here cover what is needed by most clients and more. However, there may be situations that require other types of forms.