Tax Secrets You Must Know After Registering a US Company

The Tax Secrets You Need to Know After Registering a Company in the U.S.

In recent years, an increasing number of entrepreneurs and investors have chosen to incorporate businesses in the United States. This is not only because the U.S. offers one of the most mature business environments in the world, but also due to its flexible legal system and relatively transparent tax regime. However, despite its advantages in attracting foreign investment, the complexity of the U.S. tax system often confuses first-time business owners. Drawing from recent news developments, this article aims to clarify the essential tax knowledge you must understand when operating a business in the U.S.

1. The Basic Structure of the U.S. Tax System Federal and State Taxes Coexist

One of the biggest differences between the U.S. tax system and those of many other countries is that it operates on three levels federal, state, and local. This means that while companies must pay federal income tax, they are also required to comply with state-level tax obligations-and possibly even local sales or property taxes.

For example, in California, C-Corporations are subject to a corporate income tax rate of 8.84% as of 2025. Additionally, there is a minimum tax requirement-companies must pay at least $850 in taxes annually, even if they did not generate any profit. In contrast, Texas does not impose a corporate income tax, but levies a franchise tax based on total revenue.

Before incorporating, entrepreneurs should carefully evaluate tax differences across states and choose a jurisdiction that aligns with their business model.

2. Tax Rates and Filing Methods Vary Significantly by Business Type

In the U.S., a company's legal structure determines how it will be taxed. Common types include

Limited Liability Company LLC By default, LLCs are treated as pass-through entities, meaning profits flow directly to the owners’ personal tax returns, avoiding double taxation.

S-Corporation S-Corp Similar to LLCs, S-Corps allow profits to be taxed at the individual level, making them suitable for small businesses.

C-Corporation C-Corp As separate taxpaying entities, C-Corps are subject to a flat federal corporate tax rate of 21%, introduced after the 2017 tax reform.

At the end of 2025, The Wall Street Journal reported that Congress was debating whether to raise the corporate tax rate back to 28% due to inflationary pressures. While the proposal did not pass, it serves as a reminder for business owners to stay informed about legislative changes-particularly multinational companies setting up subsidiaries in the U.S.

3. Cross-Border Companies Face Global Taxation and Controlled Foreign Corporation Rules

Chinese entrepreneurs setting up businesses in the U.S., especially holding companies or cross-border e-commerce platforms, must be particularly mindful of U.S. tax principles such as global taxation and the Controlled Foreign Corporation CFC rules.

According to Section 951 of the U.S. Internal Revenue Code, if more than 50% of a foreign corporation’s stock is owned by U.S. shareholders each owning at least 10%, the entity is classified as a CFC. Even if profits are not repatriated to the U.S., they must still be included in the taxable income of U.S. shareholders annually.

This rule significantly impacts companies managing capital flows between China and the U.S. For instance, in early 2025, a Chinese tech firm established a research center in Silicon Valley and provided technology licensing services through an overseas parent company. Due to poor structuring of intellectual property ownership and royalty arrangements, substantial offshore profits were brought into the U.S. tax net under the CFC rules, resulting in additional tax liabilities.

4. Sales Tax Is a Major Component of Operating Costs

A commonly overlooked tax issue among entrepreneurs is sales tax. Unlike many countries with a unified value-added tax VAT system, the U.S. allows each state to determine whether and how much sales tax to levy.

Take New York State, for example-the combined sales tax rate is 8.875%, which includes contributions from the state, county, and city levels. For online retailers, the 2018 U.S. Supreme Court ruling in South Dakota v. Wayfair changed the landscape once a seller meets certain sales thresholds in a state, they are required to register and collect sales tax there.

According to Bloomberg Tax 2025 reports, major platforms like Amazon now assist third-party sellers by automatically calculating and collecting sales tax. However, businesses remain responsible for filing returns. Proper handling of sales tax helps startups avoid penalties and maintain strong financial records.

5. Leverage Tax Credits and Deductions to Reduce Your Tax Burden

To encourage development in specific industries, the U.S. government has implemented various tax incentives, including

RD Tax Credit Available to companies engaged in new product development or process improvements, allowing a percentage deduction on qualified RD expenses.

Section 199A Deduction Qualified Business Income Deduction Permits eligible sole proprietors, partnerships, and S-Corps to deduct 20% of qualified business income before calculating tax.

Green Energy Incentives For instance, investments in solar equipment may qualify for the federal Investment Tax Credit ITC.

In June 2025, the U.S. announced expanded ITC benefits for clean energy technologies, further supporting emerging green-tech startups. These policies offer legitimate opportunities for tax savings and should be thoroughly explored and utilized.

6. The Importance of Professional Tax Advisors Cannot Be Overstated

Faced with such a complex tax system, many entrepreneurs mistakenly believe they can rely solely on software or templates to complete tax filings. However, errors can result in heavy fines, audit risks, or even criminal liability.

According to the IRS Fiscal Year 2025 Report, investigations related to international tax filing mistakes increased by 17% over the previous year. The IRS is intensifying enforcement efforts, particularly regarding reporting requirements for nonresident aliens NRAs and foreign entities earning income in the U.S.

It is highly recommended that businesses engage qualified accountants or tax attorneys early in the formation process to develop sound tax planning strategies and regularly update their compliance approaches.

Conclusion

Registering a company in the U.S. is just the first step. The real challenge lies in effectively managing your tax costs while staying compliant. Understanding the intricacies of the U.S. tax system, strategically utilizing available tax incentives, and proactively mitigating risks are crucial to ensuring long-term stability and growth in a competitive market.