For a foreign company, the U.S. market is enormous — and so is the legal surface area. Federal, state, and local rules all apply at once, and California layers on some of the country's strictest employment and privacy laws. This checklist walks through the decisions a foreign company should make, roughly in order, before selling, hiring, or opening an office in the United States.
1. Choose your structure: subsidiary, branch, or neither
The threshold decision is how much U.S. presence you need:
- U.S. subsidiary (most common). A Delaware or California corporation, or an LLC, owned by the foreign parent. It contains U.S. liabilities, simplifies contracting with American customers, and is what banks, landlords, and enterprise buyers expect. Note that an LLC's pass-through taxation is often a disadvantage for foreign owners, who may prefer a C corporation that blocks U.S. filing obligations at the parent level — get tax advice on both sides of the water before choosing.
- Branch office. The foreign entity registers to do business directly. Simpler on paper, but it exposes the parent's worldwide assets to U.S. claims and creates direct U.S. tax filing obligations for the parent. Rarely the right answer.
- No entity yet. Selling through distributors, resellers, or e-commerce may not require a U.S. entity at all — but watch tax nexus and permanent establishment rules as volume grows.
2. Register where you actually operate
Incorporating in Delaware does not license you to operate in California. A company "transacting intrastate business" in California must qualify as a foreign entity with the Secretary of State (Corp. Code § 2105 for corporations); an unqualified company cannot maintain a lawsuit in California courts on intrastate business until it registers and pays back fees and taxes (Corp. Code § 2203). Expect California's generally applicable $800 minimum annual franchise tax or annual LLC tax, subject to entity-specific first-year rules, plus local business licenses in each city where you operate.
3. Banking, tax, and reporting basics
- EIN. Obtain an IRS Employer Identification Number early — everything else (banking, payroll, sales tax) depends on it, and processing takes longer when the responsible party has no U.S. tax ID.
- Bank account. U.S. banks apply strict know-your-customer rules to foreign-owned entities; organized formation documents and ownership charts speed this up considerably.
- Tax treaties and transfer pricing. Intercompany arrangements between parent and subsidiary — services, licensing, product sales — need written agreements at arm's-length prices, documented from the start.
- Sales tax. Since South Dakota v. Wayfair (2018), economic nexus rules mean you can owe state sales tax with no physical presence. California's threshold is $500,000 in annual sales of tangible personal property for delivery in the state.
- Foreign-ownership reporting. Foreign-owned U.S. entities face specific IRS filings (such as Form 5472) with steep penalties for silence.
4. People: immigration and California employment law
Moving founders or executives to the U.S. requires the right visa — commonly an L-1 intracompany transferee visa (for executives or specialized-knowledge employees of a related foreign entity) or an E-2 treaty investor visa, depending on nationality and investment. Plan months ahead; the entity usually must exist, with the required investment, premises, and operational evidence varying by visa.
Hiring locally in California brings obligations that surprise employers from almost every other jurisdiction: at-will employment but with strict wage-and-hour rules, mandatory workers' compensation insurance, meal and rest break premiums, the ABC test restricting independent contractor classification (Lab. Code § 2775), pay transparency in job postings for covered employers, and a near-total ban on non-compete agreements (Bus. & Prof. Code § 16600). Do not import your home-country employment contracts; they will conflict with California law in a dozen places.
5. Contracts, IP, and privacy
- U.S.-ready contracts. Customer agreements, distributor and reseller agreements, and terms of service should be redrafted for U.S. law — including governing law and dispute resolution clauses chosen deliberately, not inherited.
- Intellectual property. U.S. trademark rights can arise through use without registration, but federal registration provides important nationwide benefits; file with the USPTO before launch, and confirm your brand clears existing U.S. marks. Register key copyrights and evaluate U.S. patent strategy.
- Privacy. If you meet the CCPA's thresholds — roughly $25 million in annual gross revenue (inflation-adjusted), or the personal information of 100,000+ California consumers or households, or 50% of revenue from selling or sharing personal information — California privacy law applies with consumer rights, notice obligations, and enforcement by the California Privacy Protection Agency.
- Regulated sectors and CFIUS. Finance, health, defense-adjacent technology, and telecommunications carry licensing regimes, and certain foreign investments may be subject to CFIUS review, with mandatory filings for some transactions.
6. Sequence it properly
The efficient order is usually: tax structuring advice → entity formation → EIN → foreign qualification and local licenses → bank account → intercompany agreements → visas → U.S. contract templates and privacy program → hiring. Companies that improvise the sequence end up redoing steps — reincorporating, refiling, or unwinding contractor arrangements that fail the ABC test. Coordinated international business counsel keeps the sequence straight, and pairing it with local business formation work means the structure is built once, correctly.
Talk to a California business attorney
If your company is planning a U.S. launch, a planning conversation before you form anything can save months of rework. Schedule a free consultation or call (949) 418-2113.
This article is attorney advertising and provides general information only. It is not legal advice and does not create an attorney–client relationship. Facts matter; consult a lawyer about your specific situation.
