US tax for an owner abroad · A term for founders abroad
What is a US trade or business?
USTB. Regular, continuous business activity in the US that makes a foreign person's connected income taxable there; decided by facts, not where you formed.
Checked against the IRS's instructions and the states' own rules. Reviewed by Saais Patel, compliance reviewer.
Term 99 of 105 in the glossary, filed under U.IRS: Publication 519, tax guide for aliens
US trade or business, for a founder abroad.
The law doesn't define the phrase. Courts and the IRS look at whether activity in the US is considerable, continuous and regular: an office, staff, a dependent agent who can sign contracts, or inventory held and sold there. Forming a company in Wyoming doesn't create one, but running a warehouse in Ohio might.
If you live in a treaty country, the treaty's narrower permanent establishment test usually decides instead. It's worth putting the question to an accountant once, especially before hiring in the US or storing stock there.
Sources: IRS: Publication 519, tax guide for aliens.
Read next · guide · 6 minDo non-resident LLC owners pay US tax? The trade-or-business test, plainlyWhat founders ask next.
- Does selling to US customers create a US trade or business?
- Not on its own. Selling to Americans from abroad, with no US office, staff or agent, generally doesn't.
- Does stock in an Amazon warehouse create one?
- It can, depending on the facts and any treaty, and it's one of the cases most worth an adviser's look. It also creates sales tax nexus in that state.
- Does a US registered agent or bank account create one?
- No. An agent who only receives legal papers, and a bank account, aren't business activity in the US.
03 · See also
- US tax for an owner abroadEffectively connected incomeIncome connected with a US trade or business, which the US taxes a foreign person on at ordinary rates; pay for work done abroad usually isn't ECI.Read the term
- US tax for an owner abroadPermanent establishmentUnder a tax treaty, a fixed place of business or dependent agent in a country, which lets that country tax the business profits linked to it.Read the term
- US tax for an owner abroadDisregarded entityA single-member LLC the IRS ignores for income tax, treating its income as the owner's; it still files Form 5472 if the owner is foreign.Read the term
- US tax for an owner abroadPass-through taxationTax treatment where a company pays no income tax itself and its profit is taxed to its owners, as with an LLC or a partnership.Read the term
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