Want to Start a Business in the U.S.? These Tax Essentials You Must Know!

Everything You Need to Know About U.S. Taxes When Registering a Company

With the acceleration of globalization, more and more entrepreneurs and business owners are setting their sights on the U.S. market. As one of the world's largest economies, the United States offers a robust legal system, a favorable business environment, and a vast consumer base, making it an attractive destination for international investors. However, for foreign investors looking to establish a company in the U.S., tax considerations are often complex and critical. A lack of understanding of the U.S. tax system can lead to unexpected financial burdens during business operations.

This article will reveal key tax information you must know when registering a company in the U.S., and incorporate recent news updates to help you better understand and manage your tax obligations.

I. The Basic Structure of the U.S. Corporate Tax System

The U.S. tax system is relatively complex and is divided into three levels federal, state, and local taxes. This means that businesses must comply not only with federal tax requirements but also with tax regulations specific to the state and locality where they operate.

1. Federal Corporate Income Tax

The standard federal corporate income tax rate is 21%, which applies to most companies. This rate was lowered in 2017 after the passage of the Tax Cuts and Jobs Act, aiming to enhance the international competitiveness of U.S. businesses.

It’s important to note that not all companies are subject to corporate income tax. For example, Limited Liability Companies LLCs can choose to be treated as pass-through entities, meaning that business profits are passed directly to the shareholders and taxed at the individual level.

2. State Corporate Income Tax

State corporate income tax rates vary significantly. For example, Texas does not impose a corporate income tax, while California’s rate is as high as 8.84%. The choice of a company’s state of incorporation should take into account these varying tax costs.

3. Sales Tax

Sales tax is a major source of revenue for states and local governments. It generally applies to the sale of goods and services, and the rate varies by state. In some cases, it can even differ by city or county within the same state. For instance, the combined sales tax rate in California can reach up to 10.75%.

4. Employment Taxes

If a company hires employees in the U.S., it must also pay federal and state employment taxes, including Social Security tax, Medicare tax, and unemployment tax. These taxes are typically shared by employers and employees, but employers are responsible for withholding and remitting the appropriate amounts.

II. Recent Tax Policy Changes and Their Impact on Businesses

Since 2025, several U.S. states have made adjustments to their tax policies, directly affecting companies registered in the U.S.

For example, starting in April 2025, New York State adjusted its tax rate for high-income businesses, imposing a higher rate on companies with annual revenues exceeding $5 million. California is also considering a digital services tax on tech giants, although the proposal has not yet been passed, it has already drawn widespread attention.

At the same time, the Internal Revenue Service IRS has intensified its tax audits on cross-border businesses. In May 2025, the IRS released a guidance document on tax compliance for foreign companies operating in the U.S., emphasizing areas such as source of income, profit repatriation, and transfer pricing. This indicates that the IRS will impose stricter regulations on multinational businesses in the future.

III. Tax Implications of Different Company Types

Choosing the right business structure is crucial for tax planning when registering a company in the U.S. Common types include

C Corporation C Corp

Suitable for companies planning long-term growth and potential public listing in the U.S. C Corporations are subject to corporate income tax, and shareholders must also pay personal income tax on dividends, resulting in double taxation.

S Corporation S Corp

Ideal for small businesses, S Corporations avoid double taxation. Profits, losses, deductions, and credits flow through to shareholders, who report them on their personal tax returns.

Limited Liability Company LLC

Highly flexible, an LLC can choose to be taxed as an S Corporation, C Corporation, partnership, or sole proprietorship.

Branch Office of a Foreign Company

Suitable for companies that want to operate in the U.S. without establishing a separate entity. However, this structure often involves higher tax burdens and more complex compliance requirements.

IV. Tax Planning Recommendations

1. Choose a Tax-Friendly State for Incorporation

Several U.S. states, such as Delaware, Nevada, and Wyoming, are known for their favorable tax climates. These states offer low or no corporate income taxes, along with strong legal protections and a business-friendly environment.

2. Leverage Tax Treaties and Credits

The U.S. has signed numerous tax treaties with other countries to prevent double taxation. If your business is from one of these countries, you may benefit from reduced tax liabilities by utilizing treaty provisions.

3. Seek Professional Tax Advice

U.S. tax laws are complex and constantly changing. For foreign investors, it is highly recommended to consult a qualified tax advisor or attorney before registering a company to develop a sound tax strategy.

V. Conclusion

Tax considerations are essential when registering a company in the U.S. Whether it’s federal tax, state tax, employment tax, or sales tax, these obligations can significantly impact a company’s profitability. As tax regulations become increasingly stringent, businesses must be more cautious in ensuring compliance.

Understanding the tax implications of different business structures, strategically choosing your state of incorporation, and leveraging international tax treaties are all effective ways to reduce tax risk. For companies looking to expand into the U.S. market, proactive tax planning not only helps reduce costs but also lays a solid foundation for long-term, stable growth.