Seven mistakes foreign founders make when incorporating in the US

Forming a US company is quick. Undoing a poor formation decision is slow and sometimes expensive. The most common mistakes foreign founders make when incorporating in the US are not about the filing itself. They concern timing, entity choice, deadlines that nobody put in a calendar and advice that was right a few years ago but is not now. Here are seven to avoid, based on official sources read in October 2026:

• Incorporating before the market has said yes.
• Choosing the entity on price instead of plan.
• Missing Form 5472 on a foreign-owned LLC.
• Paying franchise tax on the wrong method.
• Letting the 83(b) window close.
• Underestimating EIN and banking timelines.
• Following outdated compliance advice.

Incorporating before the market has said yes

A US entity brings fixed costs: registered agent, Delaware annual tax, bookkeeping, a tax return and often a US address. Those costs are modest compared with a US hire, but they start a compliance clock that runs whether or not you have customers. Founders sometimes incorporate because it feels like progress, then spend a year filing returns for a company with no revenue.

Ask what the entity unlocks. If a US investor, a US enterprise customer or a first US hire needs it now, form it. If you are still learning which buyers will pay, you may be able to test demand first. That is the thinking behind building US traction before fixed cost. Greatweek's US Market Entry work answers that question before the filing: whether the US opportunity is real at your stage or a year too early, the narrowest wedge that can produce reference customers, and the sequencing and cost of a 90-day plan you can take to the board. The free US Market Entry Playbook is a good place to start.

Choosing the entity on price instead of plan

An LLC can look simpler and cheaper. For a company that will raise venture capital, it is often the wrong starting point. Stripe's Atlas documentation describes C corporations as preferred by institutional investors who might be unable to invest in LLCs, and as the structure used to grant equity to employees, advisors and investors. The same source notes that LLC profits and losses pass through to founders by default, and that tax filings can become complex with a non-US founder.

The right choice depends on your funding plan, your home-country tax position and whether the US company will be a subsidiary. The trade-offs are set out in Delaware C corp vs LLC for non-US founders.

Missing Form 5472 on a foreign-owned LLC

This is the costliest mistake on the list. According to the IRS Form 5472 instructions (revised December 2024), a domestic disregarded entity wholly owned by a foreign person must file a pro forma Form 1120 with Form 5472 attached. Many owners assume a single-member LLC with no US income has nothing to file.

The penalty for failing to file, or for filing a substantially incomplete form, is $25,000, with a further $25,000 if the failure continues more than 90 days after IRS notification.

These filings cannot be e-filed. They go by fax or mail, with "Foreign-owned U.S. DE" written across the top of Form 1120.

Paying franchise tax on the wrong method

Delaware calculates franchise tax for corporations in two ways. Under the Authorized Shares method, the minimum is $175 for 5,000 shares or fewer. Under the Assumed Par Value Capital method, the minimum is $400 (rates per Delaware's franchise tax page, as of October 2026). Startups often authorize millions of shares, and Stripe notes that Delaware's default notices use the Authorized Shares method, which produces large bills for companies with more than 5,000 shares.

Founders who see a large notice and pay it without checking can overpay. Most Atlas companies, Stripe says, pay less under the Assumed Par Value Capital method. Missing the March 1 deadline costs a $200 penalty plus interest of 1.5% per month on unpaid tax.

Letting the 83(b) window close

When founders receive shares subject to vesting, the 83(b) election has a hard deadline. IRS Publication 525 says the statement must be filed no later than 30 days after the property was transferred. You can use a written statement or Form 15620.

For non-US founders, the answer is not always to file. Stripe's guidance says founders who will never be US taxpayers do not need an 83(b), while those who file or may file US returns should consider it. The mistake is letting the 30 days pass before anyone has decided, because a missed deadline usually cannot be fixed.

Underestimating EIN and banking timelines

Founders often plan the bank account for the week after formation. Without an SSN or ITIN, the EIN cannot be obtained online. The published timelines, as read in October 2026:

Banks need the EIN, and some need more. Mercury requires existing or planned US operations and will not accept a registered agent address or PO box as your principal place of business. Build these weeks into the plan before you promise a US customer an invoice from a US entity.

Following outdated compliance advice

US rules have changed recently, and older articles have not kept up. Two examples matter. Advice that every new company must file a BOI report is out of date for US-formed companies after FinCEN's August 2026 final rule. Some sources still quote $300 for the Delaware LLC annual tax, while Delaware's official page says $400 as of October 2026. Neither the LLC tax nor the corporate franchise tax is prorated, so a company formed in late December owes the full year.

Frequently asked questions

What is the penalty for not filing Form 5472?

The IRS instructions set a $25,000 penalty for failing to file, with an additional $25,000 if the failure continues more than 90 days after IRS notification.

Should a non-US founder file an 83(b) election?

It depends on whether you are or may become a US taxpayer. Stripe says founders who will never be US taxpayers do not need one. Decide with a tax advisor within the 30-day window.

Why is my Delaware franchise tax bill so high?

Delaware's notices use the Authorized Shares method by default, which can give large figures for companies with many authorized shares. The Assumed Par Value Capital method often produces a lower amount.

Is it a mistake to incorporate in the US too early?

It can be. The entity brings recurring costs and filings from day one. If you do not yet need it for investors, customers or hiring, testing demand first may be the better order.

Most of these mistakes come from doing the right things in the wrong order. For the full case for and against a US entity, read the benefits of incorporating in the US, or book a 20-minute US Entry Review through our contact page. Greatweek is not a tax advisor or law firm, so confirm entity, tax and filing decisions with a qualified US tax advisor or corporate lawyer before you act.