What to review before forming a U.S. company

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Forming a U.S. company starts with the business purpose: what the entity will do, who will own it and how it will connect with the investor's activities in other countries.

This guide helps Latin American founders and investors prepare an initial professional discussion. The aim is to define the structure requiring assessment and the information needed before registration begins.

1. Define the entity's business purpose

Describe customers, suppliers, products, people and assets. Distinguish selling from abroad, contracting locally, holding inventory and establishing a physical operation. Document how you expect to fund the company and use or distribute its results.

Compare structure options against this activity map before selecting a jurisdiction. Our international company formation service starts with the proposed structure and commercial objectives.

2. Separate legal form from federal tax classification

An LLC does not have one universal federal tax classification. The IRS explains that treatment depends on factors including membership and elections: it may be a corporation, partnership or entity disregarded from its owner for income tax purposes. Source: IRS, Limited liability company.

Connect the entity review with its owners and their countries of tax residence. A structure's name alone does not determine the project's tax cost.

3. Distinguish state registration from an EIN

The SBA explains that business structure and location affect how and where registration is required. An EIN is a federal tax identification number; the IRS instructs applicants creating a legal entity to form it with the state first. Application channels depend on the applicant's circumstances. Source: SBA; source: IRS, EIN.

Keep formation, tax identification, licences and other registrations as separate workstreams to assess against the planned activities.

4. Assess information reporting from the outset

A foreign-owned U.S. LLC treated as disregarded may have information-reporting duties. Where reportable transactions trigger Form 5472, IRS instructions provide for filing it with a pro forma Form 1120. Applicable conditions and exceptions require review; this is not an automatic conclusion for every entity. Source: Form 5472 instructions.

Gather information on contributions, loans, withdrawals and other dealings with owners and related entities so the professional can identify relevant transactions. Explore our U.S. tax advisory services.

5. Connect the U.S. review with the owner's home country

Prepare the complete ownership chart, tax residences and expected flows between jurisdictions. A coordinated review should frame the relevant questions about income, payments, distributions and supporting records on both sides of the structure. See our international tax planning and compliance services.

6. Prepare for banking and ongoing maintenance

Organise a consistent file covering ownership, activities, contracts and funding. Avoid building the project around an assumption that a bank account will be approved automatically. Budget for the accounting, filings, renewals and professional support confirmed by the review.

Information for an initial assessment

• Owners and their tax residences.

• Activities and target markets.

• Planned locations of people, inventory and assets.

• Funding sources and related-party flows.

• Existing structures and available records.

• Banking needs and project timing.

The initial output should distinguish options, missing information and decisions requiring validation before registration. The review may conclude that the proposed structure needs changes or that a new company is unnecessary.

Discuss your plans with Global Tax Counsel before formation.

This content provides general information as of the stated date and does not replace an assessment of an organisation’s particular circumstances.