Do You Need a Legal Entity for the Conduct of Your Business in the United States?
Why can't you just start doing business in the United States? Why can't you just send over some employees, solicit business in the U.S., and start servicing that business either with those U.S.-based employees or back home in your home country? Subject to the immigration laws, your company actually can send over employees to do business in the United States. There is no requirement that your foreign corporation must conduct business through a U.S. legal entity, but there are several reasons to set up a U.S. legal entity for the conduct of the U.S. business.
The main reason for conducting the U.S. business through a U.S. legal entity is taxation. If your company just establishes an office in a state in the United States and starts conducting business, that state considers the entire company to be "doing business" (see below on "doing business") in that state, and the entire company becomes subject to tax in that state. That is usually a bad outcome for a company. Similarly, the entire company would also come under the tax jurisdiction of the U.S. government (in addition to the state government), and would have to file tax returns and pay taxes as a unitary organization on the worldwide operations. Therefore, it is desirable for tax planning to have a U.S. entity through which your company would conduct its business in the United States.
The main reason for conducting the U.S. business through a U.S. legal entity is taxation. If your company just establishes an office in a state in the United States and starts conducting business, that state considers the entire company to be "doing business" (see below on "doing business") in that state, and the entire company becomes subject to tax in that state. That is usually a bad outcome for a company. Similarly, the entire company would also come under the tax jurisdiction of the U.S. government (in addition to the state government), and would have to file tax returns and pay taxes as a unitary organization on the worldwide operations. Therefore, it is desirable for tax planning to have a U.S. entity through which your company would conduct its business in the United States.
"Doing Business" In the United States
The first step in deciding if you need a legal entity in the United States is to determine if you are or will "do business" in the United States. "Doing business" is a legal term that means your company has established sufficient contacts to a state through owning or leasing property, having employees in that state, or having a regular physical presence in that state that the state would recognize your company as using that state's market and having the benefit of that state's laws. "Doing business" is a determination that is done at the state level, not the federal level. Many internet-only businesses that do not have any physical presence in a state are not doing business in any particular state, and thus do not need a legal entity in the United States for the conduct of their business. However, as soon as there is any physical presence in that state, you should consult with an attorney or tax accountant to determine if registering to "do business" in that state is required.
