The United States is the holy grail for International Market Entry. For the time being it remains the worlds largest economy with a 2022 GDP of more than $23.3tn. This compares to GDP of $3.2tn and $1.5tn for the United Kingdom and Australia respectively. However, it can be a challenge for the foreign business owner to successfully execute entry into the USA. The factors that make it difficult to crack are numerous and complex, and we’d group them as:

  • Legal structure options
  • Business location: Federal, State and Local requirements
  • Access to banking and business finance
  • Culture differences

In this article we’ll explore the first of these, legal structure options in the United States.

Legal structure

There are a number of different legal structures that foreign investors can choose from when starting a business in the United States. The most common legal structures are:

  • Sole proprietorship
  • Partnership and Limited Liability Partnership (LLP)
  • Limited liability company (LLC)
  • Corporation

Each legal structure has advantages and disadvantages depending on your unique circumstance. It’s important to choose the one that is right for your business.

Sole proprietorship

A sole proprietorship is the simplest and least expensive legal structure for starting a business and it is broadly equivalent to the sole trader status in the United Kingdom and Australia. The benefit of this legal arrangement is that it’s the simplest form and doesn’t require any special registration or licensing.

The drawback of operating as a sole proprietor is the owner is personally liable for all debts and liabilities of the business. It also brings the operator into the web of IRS tax filings as they will need to pay self-employment taxes on their business income. Due to the lack of separation between the sole proprietor and the business it is also disadvantageous regarding how much tax the operator will pay. For example, business expenses can’t be deducted from their income.

Other drawbacks are that, in the growth stage, it can be difficult to raise capital as lenders and investors are hesitant about businesses that don’t have a legal identity separate from their owners. This lack of separation then makes it difficult to sell the business if that is a desired outcome.

For the international business owner the final downside is that this form doesn’t provide a route to a United States visa. The main visa options for running your business are the E2 Treaty Investor and the L1A Intercompany Transfer. For both of these options a requirement is to have bona fide United States business, and the lack of separate legal identity means that a sole proprietorship fails this test.

Partnership and Limited Liability Partnership (LLP)

A partnership shares many of the characteristics of the sole proprietorship, with profits and losses being passed through to partners and taxed on their individual tax returns. Likewise, a partnership is relatively easy to set up with the formalities being a certificate of formation filed with the State where the partnership will be located.

Conversely a Limited Liability Partnership (LLP) is much more akin to the LLC structure that we’ll come onto next. This is because it introduces the Limited Liability concept, that means that the Partners are not personally liable for the debts and liabilities of the business. However, LLPs retain the pass through tax status with the partners reporting the partnership income on their tax return.

Where LLPs differ from LLCs is in that they offer more flexibility, with less onerous requirements for management and governance. This additional flexibility makes the LLP a popular solution for professionals such as lawyers, accountants and architects. Who can form an LLP is an area of complexity and is dependent upon which State you plan to operate. For example, an accountant operating in California must be a licenced CPA to form an LLP whereas this restriction does not exist in New York. It’s critical to get professional advise before embarking on formation of an LLP.

The downsides of a Partnership are in making sure that the partners have an aligned vision and goals for the business. Disputes can arise between the partners and it is more difficult to dissolve a partnership than a sole proprietorship. Another consideration is whether a business sale will be a desired outcome and how this will be agreed by the partners.

Partnership and LLP are both deemed bona fide businesses. Like LLCs and Corporations, either of the Partnership options are legal forms that can meet the E2 and L1A visa requirements. It’s important to note though that generally an individual must be authorised to do business in the State of formation to be a partner in an LLP, which may preclude the vehicles use for international market entry. Again, specialist advice should be sought to understand this restriction and potential solutions.

Limited liability company (LLC)

An LLC is a hybrid business structure that offers the limited liability protection of a corporation and the flexibility and pass-through taxation of a partnership. This makes LLCs a popular choice for businesses of all sizes, including international businesses. Some of the advantages of the LLC mirror the LLP and include limited liability as well as flexibility in management and governance.

Where the LLC differs from the LLP is in the options available for tax status. As a standard, and unless you request to file differently, LLCs are are taxed as pass-through entities, which means that the profits and losses of the business are passed through to the members and taxed on their individual tax returns. However, the LLC can elect to either file as an S-Corp or C-Corp instead. The benefit of remaining as a pass through entity is that double taxation is avoided, however there are other benefits of being taxed as a corporation so you should seek advice and consultation on this if you choose to go down the LLC route.

There are disadvantages of choosing to operate as an LLC, the most obvious being the varying State laws governing LLCs which include the governance formalities and annual fees. These considerations will be the focus of the separate business location article.

Overall, LLCs can be a good choice for international business owners who are looking to enter the US market. However, it is important to carefully consider the advantages and disadvantages of LLCs before making a decision.


A corporation is a legal entity that is separate from its owners. This means that the corporation is its own legal person, and its owners are not personally liable for the debts and liabilities of the business. This is a significant advantage for international business owners, as it protects them from personal financial loss in the event of bankruptcy or other legal problems.

There are two main types of corporations in the United States: C corporations and S corporations. A C corporation is a regular corporation that is taxed separately from its shareholders. This means that the corporation pays taxes on its profits, and then the shareholders pay taxes on any dividends that they receive from the corporation. C corporations are the most common type of corporation in the United States and are similar to a limited company in the United Kingdom and Australia.

An S corporation on the other hand is a type of corporation that is taxed like a partnership. Profits and losses are passed through to the shareholders, and the shareholders pay tax on their share of the profits on their individual tax returns. S corporations are a popular choice for small businesses because they offer limited liability and pass-through taxation. However, they are generally not suitable for a foreign resident alien looking to enter the United States market as the owner must meet the substantial presence test. Meaning that you must be physically present in the United States for at least 183 days during the tax year.

Corporations offer a number of advantages for international business owners beyond limited liability. Corporations have a great deal of flexibility in management and governance. This can be important for international businesses that need to be able to adapt to different laws and regulation and as well as access to capital. Corporations are typically able to raise more capital than other business structures. This is because corporations are seen as being more stable and reliable than other types of businesses Additionally Corporations may be able to take advantage of certain tax benefits that are not otherwise available.

There are also some disadvantages to consider when forming a corporation, including the cost with Corporations being more expensive to form and maintain than other business structures. This is due to them being subject to more regulation than other business structures and having more complex management requirements than other business structures.


Before committing to enter the United States market it’s critical that you get the fundamentals right.

  • Do your research. It is important to research the US market before you make any decisions. This includes researching the industry, the competition, and the regulatory environment.
  • Get help from experts. Consult with an accountant and attorney as appropriate so that you get to the right solution. It’s much more expensive to unpick problems after the fact than it is to get it right first time.
  • Network with other businesses. Networking with other businesses is a great way to learn about the US market and to find potential partners and customers. Start with attendance at trade shows, joining industry associations, and attending business events.
  • Be patient!