Starting and running a U.S. business as a non-resident founder can open huge opportunities. You get access to the American market, payment systems, and investor networks. But U.S. taxes are complex, and even small mistakes can lead to penalties, delays, or loss of good standing. Many founders unknowingly fall into the same traps—especially in their first year.
This guide explains the most common U.S. tax mistakes we see among non-resident founders, why they happen, and what you can do to avoid them.
Mistake 1: Assuming “No Revenue” Means “No Filing”
Many founders think they don’t have to file U.S. taxes if their company hasn’t made money yet. In reality, most U.S. entities have annual filing obligations regardless of revenue. For example, a foreign-owned single-member LLC must file a pro forma Form 1120 with Form 5472 if there were any reportable transactions, such as capital contributions or payments to the owner.
Avoid this mistake by learning your filing obligations in your first month of operation and keeping a simple record of all transactions. File on time—even if the amounts are small.
Mistake 2: Mixing Personal and Business Finances
Paying expenses from personal accounts or depositing client payments into personal accounts makes accounting messy and can cause problems during an IRS audit.
Avoid this by opening a dedicated U.S. business bank account as soon as possible and keeping personal and business funds completely separate.
Mistake 3: Missing Form 5472 Filings
Foreign-owned U.S. companies often skip Form 5472 because they don’t know it exists or assume it doesn’t apply to them. This form reports transactions between the company and foreign owners or related parties. The penalty for missing it starts at $25,000.
Avoid this by checking whether Form 5472 applies if you own 25% or more of a U.S. company as a foreign person. File it every year with your required return.
Mistake 4: Forgetting State-Level Filings
States often require annual reports or franchise tax filings separate from federal taxes. Missing these can cause your company to lose good standing, which may disrupt operations or payment processing.
Avoid this by knowing your state’s requirements and setting reminders for all deadlines.
Mistake 5: Choosing the Wrong Entity Type
Selecting the wrong structure—such as forming a C Corporation when an LLC would be more suitable—can lead to higher taxes, more complexity, or difficulty attracting investment.
Avoid this by consulting a professional familiar with U.S. tax law and the needs of foreign founders before forming your company.
Mistake 6: Poor Recordkeeping
Without organized records, you may overpay taxes, miss deductions, or file inaccurate returns. The IRS can also penalize poor recordkeeping.
Avoid this by using simple bookkeeping software from day one and storing receipts, invoices, and bank statements in an organized, secure location.
Mistake 7: Procrastinating Until Tax Season
Waiting until the last minute increases the risk of mistakes and missed forms.
Avoid this by reviewing your accounts monthly and working with a tax advisor well before deadlines.
How Bookmate Can Help
Bookmate works with foreign-owned companies, online small businesses, and venture-funded startups to keep them compliant from day one. We handle filings like Form 5472, pro forma 1120, state annual reports, and more—so you can focus on running your business.
Learn more at trybookmate.co or book a free consultation for tailored guidance.
Final Thoughts
Avoiding these common mistakes can save you thousands in penalties and hours of stress. By staying organized, learning your obligations early, and working with the right professionals, you can keep your U.S. business in good standing and set it up for long-term success.
