Forming a U.S. subsidiary is only the beginning. To operate properly, it also needs core infrastructure (an EIN, a bank account and registrations), its own accounting, documented intercompany processes, compliant payroll, a clear map of its tax obligations, a compliance calendar, monthly reporting to headquarters and a named owner for every finance task.
International companies often treat the U.S. subsidiary as “done” once the formation documents come back. In practice, the banking, accounting, payroll, tax, reporting and intercompany processes are what allow it to operate. Use this checklist to make sure the core pieces are covered.
Once the entity is formed, it needs the basic infrastructure required to actually operate in the U.S. Some requirements apply from day one, while others depend on where and how the company does business.
Your subsidiary will typically need:
Keep in mind that forming the company in one state does not necessarily cover every state where you later hire employees or conduct business. Our entity formation team can help you plan the setup.
Your U.S. subsidiary should maintain its own reliable financial records from the start. A clear accounting structure makes tax filings, management reporting and coordination with headquarters significantly easier as the business grows.
That should include:
For international groups, the U.S. accounts should also connect cleanly with headquarters reporting, including any differences in reporting structure, currency or accounting standards. See how Orbiss handles U.S. accounting and bookkeeping.
International groups regularly move money, services and expenses between the parent company and the U.S. subsidiary. Those transactions need a consistent process rather than being sorted out informally at year-end.
Establish clear rules for:
Related-party transactions may also create U.S. transfer-pricing and reporting requirements.
One important example: Form 5472. Certain 25%-foreign-owned U.S. corporations and foreign-owned U.S. disregarded entities must report qualifying transactions with related parties. The IRS penalty for failing to file a required Form 5472 starts at $25,000.
Hiring in the U.S. introduces more than a recurring payroll run. Companies need to determine how workers should be classified and make sure the appropriate federal and state payroll processes are in place.
Before hiring, review:
Hiring in a new state can create additional registration, payroll, tax and compliance requirements. For the details, see what hiring one U.S. employee involves and our U.S. payroll services.
U.S. tax obligations depend on the company’s structure, activities, employees, customers and geographic footprint. They can also expand over time as the subsidiary grows.
Depending on the business, obligations may include:
These requirements can change as the subsidiary adds employees, enters new states, holds inventory, increases sales or changes how it operates. Our corporate tax and sales tax teams can help you map them.
Knowing what needs to be filed is only useful if the company also knows when it is due and who owns it. A central compliance calendar helps prevent missed deadlines across different providers, teams and jurisdictions.
Track:
This prevents compliance gaps and makes year-end much easier. Our U.S. corporate tax calendar is a good starting point.
Headquarters should not have to wait until year-end to understand how the U.S. subsidiary is performing. Regular reporting gives both local and international management a clearer view of performance, cash and financial issues as they arise.
A typical reporting package may include:
The reporting process should evolve as the U.S. business grows. Orbiss can build a custom reporting package around what headquarters needs.
Even when a company uses several internal teams and outside providers, every part of the U.S. finance function should have a clear owner. Gaps often appear when one party assumes someone else is handling a task.
Define responsibility for:
These responsibilities can sit with headquarters, the U.S. team, external advisors or a combination of all three. What matters is that nothing falls through the gaps.
A U.S. subsidiary does not necessarily need a large internal finance team. It does need the systems and processes of a properly functioning U.S. business.
Getting those foundations in place early makes it much easier to scale as the company adds employees, customers, states and reporting requirements. Orbiss helps international companies manage the accounting, tax, payroll, reporting and financial infrastructure behind their U.S. operations. Talk to our team about your subsidiary.
Typically an Employer Identification Number (EIN), a U.S. business bank account, a registered agent, corporate documents and initial approvals, the required state and local registrations, and any business licenses or permits that apply to its activities.
No. Forming the company in one state does not necessarily cover every state where it later hires employees or conducts business. Each new state can bring additional registration, payroll, tax and compliance requirements.
Form 5472 is how certain 25%-foreign-owned U.S. corporations and foreign-owned U.S. disregarded entities report qualifying transactions with related parties. The IRS penalty for failing to file a required Form 5472 starts at $25,000.
A typical package includes the profit and loss statement, balance sheet, cash position, budget vs. actual results, intercompany balances and commentary on significant changes.
Not necessarily. It needs the systems and processes of a properly functioning U.S. business, with a clear owner for each task. Those owners can be at headquarters, on the U.S. team, external advisors or a mix of all three.
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.