Most international companies expanding into the U.S. need support in seven areas: entity formation, corporate tax, accounting, payroll, sales tax, intercompany transactions and ongoing advisory. A U.S. subsidiary isn’t always required on day one, but selling or hiring in the U.S. creates obligations you need to identify. The services you need depend on what your company will actually do in the U.S. over the next 12–24 months.
Last reviewed: October 2026
Key takeaways
Expanding into the United States is about more than registering a company.
A European business entering the U.S. may need to navigate federal and state taxes, payroll, employee registrations, sales tax, banking, financial reporting and transactions with its parent company. Some requirements arise before the first employee is hired. Others depend on where customers, employees and operations are located.
The challenge isn’t necessarily finding a provider for each task. It’s knowing which services you actually need, when you need them and how they fit together.
Here’s how to approach that decision.
Not every international business selling to U.S. customers needs a U.S. subsidiary.
A European company may be able to sell directly from abroad, depending on its activities, commercial requirements and tax position. However, it may still have U.S. obligations, including state sales tax or, where its activities justify it, federal or state business taxation.
Three operating models are worth evaluating:
| Model | When it may fit | What needs attention |
|---|---|---|
| Sell directly through the foreign company | Testing demand or serving customers from abroad | Sales tax, contracts, withholding, U.S. activities and potential tax exposure |
| Operate through a U.S. subsidiary | Building a longer-term local operation, contracting locally or establishing a U.S. team | Formation, tax returns, accounting, banking, payroll, state registrations and intercompany transactions |
| Employ someone without establishing a subsidiary | Making an initial U.S. hire through direct foreign employment or an employer of record (EOR) | Payroll responsibilities, state employment rules, employer classification, corporate tax nexus and permanent establishment |
An employer of record may simplify hiring, but it doesn’t automatically eliminate the foreign company’s U.S. tax exposure. Nor is a U.S. subsidiary legally required in every case involving a U.S. employee.
The key question: what will your company actually do in the United States over the next 12–24 months?
A company making occasional cross-border sales has different needs from one opening an office, hiring a sales team, holding inventory and negotiating contracts locally.
Related guide: EOR vs. U.S. subsidiary: how to choose.
Once you decide to establish a U.S. entity, you need to determine the appropriate legal and tax structure and the state in which to form it.
A corporation and an LLC can have different federal tax treatments, ownership considerations and reporting requirements. Incorporating in Delaware also doesn’t automatically cover business activities in other states.
Depending on your operations, you may need:
The U.S. Small Business Administration notes that operating in additional states may require foreign qualification (SBA, Launch your business). The IRS also has specific EIN application procedures for businesses whose principal place of business is outside the United States (IRS, Get an employer identification number).
Explore: Entity formation.
Federal corporate tax is only part of the picture.
Depending on how your business is structured and where it operates, you may also need to address state income or franchise taxes, estimated payments, related-party reporting, withholding and income-tax treaty considerations.
For example, certain foreign-owned U.S. corporations must report transactions with related parties on IRS Form 5472. The standard penalty for failing to file a required, complete Form 5472 starts at $25,000 (IRS, Instructions for Form 5472).
For a European parent company, the U.S. entity’s tax position should also be coordinated with the group’s existing structure. Dividends, loans, intellectual property and management fees can all require additional analysis.
Explore: Corporate tax. Related guide: U.S. subsidiary tax and accounting requirements.
A subsidiary needs more than an annual tax return.
Someone must reconcile bank accounts, record revenue and expenses, process invoices, account for payroll and taxes, and produce reliable financial information.
A well-designed accounting process should address two needs:
That may require mapping U.S. accounts to the parent’s chart of accounts and accounting policies. U.S. tax reporting and financial reporting aren’t always based on identical rules.
Explore: Accounting.
Hiring in the United States introduces another layer of obligations.
Employers generally must address federal income-tax withholding, Social Security and Medicare contributions, unemployment taxes, employee documentation and recurring reporting (IRS, Understanding employment taxes). State and local obligations can include additional withholding, employer registration, workers’ compensation, wage rules and leave requirements.
The employee’s physical work location matters. A company formed in Delaware may still have obligations in California, New York or other states where its employees work.
Payroll is therefore not simply a software selection. The employment structure and registration requirements must be assessed first.
Explore: Payroll and first-employee tax and payroll obligations.
The United States has no general federal VAT system comparable to the EU VAT framework.
Instead, sales tax is primarily governed at the state and local levels. Whether a company must register, collect and remit tax depends on its activities, sales, customers, products and the rules of the relevant jurisdictions.
A business selling SaaS, physical products or professional services can face different treatment depending on the state.
Sales tax obligations can also arise without a physical U.S. office or subsidiary.
Explore: Sales tax. Related reading: sales tax vs. VAT and is SaaS taxable in the U.S.?
When a European parent owns a U.S. subsidiary, the two businesses rarely operate in isolation.
The parent may provide software development, administrative services, intellectual property, financing or staff support. The U.S. subsidiary may charge or receive management fees, royalties, reimbursements or loans.
These transactions need consistent accounting and appropriate supporting documentation. U.S. transfer-pricing principles generally require controlled transactions to be consistent with arm’s-length outcomes (IRS, Allocation of income and deductions under IRC 482).
Finance teams should establish a clear process for recording intercompany balances, approving charges, reconciling transactions and reporting results to the parent.
Explore: Custom reporting.
Expansion changes as the business grows.
An initial sales operation may evolve into a multi-state employer. A small subsidiary may start holding inventory, expanding its product range, hiring executives or pursuing outside investment.
Each development can change the tax, reporting and compliance picture.
Ongoing advisory should connect these decisions before they become disconnected projects.
| Stage | Main questions | Typical support |
|---|---|---|
| Before market entry | Can we sell from abroad? Do we need a U.S. entity? | Structure review, tax exposure, sales tax assessment, legal advice where needed |
| Formation | Which entity and state? How do we register? | Formation, EIN, state registrations, banking coordination |
| First operations | How do we invoice, pay expenses and report results? | Accounting setup, bookkeeping, tax registrations, financial controls |
| First employees | Who is the employer? Which state rules apply? | Payroll registration, employer compliance, benefits coordination |
| Ongoing operations | Which returns are due? What must headquarters receive? | Tax compliance, accounting, monthly reporting, intercompany reconciliation |
| Growth | What changes when we enter new states or restructure? | Multi-state reviews, tax planning, reporting improvements, advisory |
These stages can overlap. A company that is already selling or hiring in the U.S. may have obligations to address before its formal expansion project begins.
There isn’t one reliable price for U.S. expansion.
A single-entity business with no employees and limited transactions will have a different cost profile from a subsidiary operating across several states with employees, inventory and regular intercompany charges.
Rather than relying on a headline incorporation fee, build a budget around four categories:
| Cost category | Examples |
|---|---|
| One-time setup | Formation, legal review, registrations, banking setup, accounting implementation |
| Recurring operations | Bookkeeping, payroll administration, registered agent, financial reporting |
| Regulatory compliance | Federal and state tax returns, sales tax filings, annual state requirements, employment compliance |
| Event-driven support | New-state registrations, restructuring, financing, transfer-pricing reviews, acquisitions |
Also identify what is not included in each provider’s proposal. Low setup fees can coexist with substantial recurring requirements.
Related reading: the hidden costs of U.S. expansion.
Choosing the right provider is about more than comparing fees.
Ask prospective advisers:
Do they understand foreign-owned U.S. companies? A provider serving primarily domestic businesses may have limited exposure to cross-border ownership, related-party transactions and international reporting requirements.
Can they handle multiple states? State registrations and obligations become increasingly important as employees and customers spread geographically.
Who coordinates the work? Understand whether corporate tax, payroll, accounting and reporting are handled by different teams and who owns the overall relationship.
Can they report back to headquarters? A European CFO needs more than a tax return. The U.S. financial information must support the group’s management and reporting processes.
Where does their responsibility end? Tax and accounting advisers, lawyers, immigration specialists and insurance professionals perform different roles. A good expansion plan makes those boundaries explicit.
What changes when the business grows? The support required by a two-person U.S. operation may not be sufficient for a multi-state subsidiary.
A certificate of incorporation doesn’t automatically establish payroll, accounting processes, tax registrations or ongoing compliance.
Better approach: build the operational checklist alongside the formation plan. Our U.S. subsidiary setup checklist is a good starting point.
A Delaware corporation with employees or operations elsewhere may face additional registration and tax obligations.
Better approach: review the actual locations of employees, customers, offices, inventory and activities.
If the U.S. subsidiary’s accounts, reporting schedule and intercompany records aren’t designed around group needs, consolidation and decision-making become harder.
Better approach: agree on reporting responsibilities, accounting policies and intercompany processes before the operation becomes complex.
Consider a European B2B software company with existing U.S. customers. It plans to hire a commercial director in New York and add more employees if sales grow.
Before creating a subsidiary, the company reviews whether its existing direct-sales model remains appropriate, the activities its first U.S. employee will perform and the advantages of a separate U.S. entity.
If it proceeds with a U.S. subsidiary, it will need to coordinate entity formation, corporate tax, employee registrations, payroll, accounting and intercompany reporting. It must also assess the sales tax treatment of its software in relevant states.
The European finance team will want consistent monthly numbers, even though many U.S. tax filings are periodic or annual.
The lesson is simple: these are connected decisions. Designing them together reduces the risk of leaving important responsibilities between providers.
Illustrative scenario; requirements depend on the actual facts.
Often, yes, and it can even hire before forming a U.S. entity. The main risks are state sales tax once sales exceed a state’s economic nexus threshold, U.S. corporate tax (and a Form 1120-F filing) if its U.S. activities amount to a U.S. trade or business or a permanent establishment, and employer registrations in each state where an employee works. The conclusion depends on what the company sells and what it does in the United States.
Potentially. Direct employment by a foreign company and EOR arrangements are possible structures. They don’t eliminate the need to review payroll, state registrations, employment law and corporate tax exposure.
No. Delaware may be appropriate for many businesses, but the best choice depends on ownership, investment plans, commercial operations and where the company will actually conduct business.
It needs reliable financial records supporting its U.S. tax and reporting obligations, even if parts of the process are administered by its overseas parent or an external team. The accounting arrangements should reflect the entity’s classification and reporting needs.
The answer depends on your business. A finance-led expansion often involves tax and accounting specialists working alongside legal counsel, payroll providers and other advisers. Responsibilities should be assigned explicitly.
A firm that specializes in foreign-owned U.S. companies can manage all four together, so payroll, sales tax and corporate tax decisions stay consistent and the parent receives one set of numbers. Orbiss is one such firm: it handles U.S. accounting, corporate tax, payroll and sales tax for international companies, in English, French and Spanish. Whoever you choose, confirm they work with foreign-owned companies, operate in several states and can report in the format your parent needs. Legal and immigration questions usually need separate counsel.
At a minimum: an EIN, employer registrations in the state where staff work (withholding and unemployment insurance), workers’ compensation coverage, a payroll provider, and a corporate tax review of whether the office creates a U.S. trade or business or state tax nexus. If the office belongs to a U.S. subsidiary, add its federal and state returns, and Form 5472 if it has reportable transactions with foreign related parties.
Bookkeeping that tracks revenue, payroll and sales by state, a monthly close, sales tax tracking for each state where the company is registered, and someone who flags new registration requirements as employees and customers spread. Review the state footprint whenever you hire in a new state or start selling there.
A successful U.S. expansion needs an operating foundation that grows with the business.
That means understanding your tax position, choosing the right structure, setting up accounting and payroll correctly, and keeping the U.S. operation connected to the international group.
Orbiss helps international businesses manage the U.S. tax, accounting, payroll and advisory side of that process, from initial setup to ongoing operations.
Let’s discuss your U.S. expansion.
Read more: U.S. subsidiary tax and accounting requirements · what one U.S. hire triggers · U.S. subsidiary setup checklist
This article is for general informational purposes only and does not constitute legal, tax, or accounting advice. Rules and requirements vary by company, individual, and jurisdiction, and can change. Please seek advice appropriate to your specific situation.