Many clients in China and elsewhere set up a U.S. company to sell here, hold real estate or invest. Forming one takes a day. Keeping it compliant from abroad is where people get into trouble. These are the questions we answer most.
LLC or corporation?
It depends on what the company will do and how you want to be taxed.
- Single-member LLC: by default it is “disregarded” for income tax, so its income is treated as the owner’s. If the business is in the U.S., the foreign owner files a U.S. return personally (Form 1040-NR, or Form 1120-F for a foreign company owner).
- Corporation (or an LLC that elects to be taxed as one): pays the 21% federal corporate tax itself. Dividends to a foreign shareholder are subject to 30% withholding, reduced by treaty — to 10% under the U.S.–China treaty. The owner usually does not have to file a U.S. return just because they own shares.
Holding U.S. real estate or planning for estate tax adds other considerations; a structure that works for a trading company may be wrong for a rental property.
Delaware, Wyoming or California?
Forming in Delaware or Wyoming does not avoid California if the company does business here. A company with an office, employees, inventory, or sales, property or payroll in California above the yearly thresholds is “doing business” in California. It must register with the Secretary of State and pay California tax. If your business is really in California, forming in California is often simpler and avoids paying two states.
What is Form 5472, and why is the penalty so large?
A U.S. corporation that is at least 25% foreign-owned, and a single-member LLC wholly owned by a foreign person, must report transactions with related parties on Form 5472 (§6038A; Treas. Reg. §1.6038A-1). For a foreign-owned LLC, that includes the owner putting money in or taking it out, so almost every such LLC has something to report, even with no income. The LLC files Form 5472 attached to a pro forma Form 1120, by paper, by the corporate due date (April 15 for a calendar year, extendable to October 15). The penalty for not filing, or filing an incomplete form, is $25,000 per form per year, plus $25,000 for each 30 days the failure continues after IRS notice. It also keeps the statute of limitations open (§6501(c)(8)).
What does California charge?
LLCs, corporations and limited partnerships that are organized, registered or doing business in California owe at least $800 a year in franchise or annual tax. LLCs with California gross receipts of $250,000 or more also pay an LLC fee that rises with receipts. The first payment is due early in the first year, and the tax continues until the company is formally cancelled. Simply stopping business does not end it.
Do we still have to file a BOI report with FinCEN?
Not for a U.S.-formed company. FinCEN’s final rule of August 2026 permanently exempts companies formed in the United States and their owners from beneficial ownership reporting under the Corporate Transparency Act. The requirement now applies only to foreign companies that register to do business in a U.S. state, and even those do not report U.S.-person owners. Your bank will still ask who owns and controls the company.
How do we get an EIN and open a bank account?
A foreign owner can apply for an EIN with Form SS-4 without a Social Security number; the IRS processes these by fax or mail. Banking is harder. Many banks want to meet the owner in person, and they will ask for the formation documents, EIN letter, operating agreement, passport and proof of address, plus an explanation of the business and where the money will come from. Plan for this before signing leases or contracts.
What else do we need to keep up each year?
- A registered agent in the state of formation and in each state where you register.
- State annual reports or statements of information (California: every two years for LLCs and every year for corporations).
- Federal returns: Form 5472 with pro forma 1120 for a foreign-owned LLC, or Form 1120 with Form 5472 for a corporation.
- Withholding and Forms 1042/1042-S when paying dividends, interest or other fixed income to foreign persons.
- Separate bank accounts and written records of every transfer between the company and the owner.
We missed filings in past years. What now?
Do not just start filing this year and hope the past stays quiet; the missing years stay open. Gather the bank records, prepare the missing forms, and file them with a reasonable-cause statement explaining what happened. A good statement, filed before the IRS contacts you, gives you the best chance of avoiding or removing the $25,000 penalties.
Does owning a U.S. company give me a visa?
No. Owning a company does not, by itself, allow you to live or work in the United States. Working in the business while in the U.S. on a visitor visa can be a problem. If a visa is part of the plan, talk to an immigration attorney before you invest.
How does the U.S. company pay its foreign owner?
Through documented payments that match what the money is for: salary for work actually done (which may require a work visa if done in the United States), dividends or distributions on ownership, interest on a real loan, or fees under a services or license agreement. Each has different tax treatment and withholding. Undocumented transfers back to the parent are the most common source of trouble on Form 5472 and in audits.
What about transfer pricing?
Prices between the U.S. company and its foreign parent or affiliates (for goods, services, royalties or loans) must be consistent with what unrelated parties would agree to (§482). If the U.S. company buys products from its Chinese parent, the price affects U.S. income tax and customs value at the same time, so the two should be planned together. Keep intercompany agreements and a simple pricing analysis on file.
Does importing through the U.S. company change anything?
Yes, especially from January 5, 2027. A U.S. company owned by a foreign parent is usually a “foreign importer of record” under CBP’s new rule unless it meets the U.S. ownership or real-property test, and must then use a CTPAT-validated customs broker. See our articles on U.S. and foreign importers of record.
Can the foreign owner sign documents from abroad?
Usually. Most company documents can be signed electronically. When a notarized signature is required, for example for a deed or a bank form, documents signed in mainland China can be notarized there and authenticated with an apostille, which China has accepted since November 2023. Some banks still require an in-person visit to open an account.
Sources: 26 U.S.C. §§1442, 6038A, 6501(c)(8); Treas. Reg. §1.6038A-1; Instructions for Form 5472; Cal. Rev. & Tax. Code §§17941, 17942, 23101, 23153; FinCEN final rule, 91 Fed. Reg. 52508 (Aug. 14, 2026); U.S.–China income tax treaty, art. 9. As of November 2026.
