Beyond the Basics: The 3 Challenges That Derail U.S. Expansion
What’s easy, what’s hard, and what you should never do when expanding your business into the U.S. from abroad. This is the second installment in our three-part series on the realities of U.S. expansion—offering straightforward, founder-to-founder insight into what it really takes to scale into the American market.
Lady Liberty - New York Harbor on Liberty Island
By now, you know that expanding into the United States is a major milestone—but it’s also a market full of nuance, regulation, and hidden complexity. Many founders underestimate just how fragmented and technical the system can be until it’s too late.
We’ve walked this path with hundreds of companies. We’ve seen the wins—and we’ve seen the avoidable cleanups. In this part of the series, we dive into the 3 things that are harder than they look and the costly assumptions that even experienced teams tend to make.
Because while some things may appear straightforward, in the U.S., what you don’t know really can hurt you.
3 Things That Are Harder Than They Look
Missing U.S. filings doesn’t always create a splash—but over time, it can quietly turn into a financial firestorm. What’s worse is that founders often don’t realize there’s a problem until the penalties are unmanageable. These are not just tax bills—they’re administrative penalties for non-filing, and they grow even if you’ve made no money at all.
1. Multi-State Compliance: 50 Systems, Not One
In the U.S., every state functions like its own mini-jurisdiction. Hire one employee in Colorado? You’ve triggered state payroll registration. Ship product to Illinois? You may owe sales tax—even if you’ve never set foot there.
Each state has its own rules, thresholds, deadlines, and enforcement style. You’re not just “expanding into the U.S.” You’re stepping into a patchwork of tax, labor, and business laws that don’t talk to each other.
Why it trips people up: Founders often assume state compliance is similar to regional rules back home—like provinces in Canada or states in Australia. In reality, it's more like trying to manage compliance across 50 countries without a centralized system.
What it costs: We've seen founders forced to retroactively register in 10+ states after hiring remote workers without realizing each one triggered nexus and new obligations.
Action Item: Map your “nexus exposure” early. Before hiring or selling into a U.S. state, ask your advisor to perform a nexus analysis to identify where you have tax and registration obligations—even if you haven’t earned income there yet.
2. Penalty Mitigation for Missed Filings: The Silent Killer
U.S. tax enforcement is uniquely aggressive when it comes to non-filing. You can owe no tax, generate no revenue, and still get slapped with tens or hundreds of thousands in penalties—just for missing deadlines.
The U.S. doesn’t require notice before imposing fines. They don’t give you a call or an email. You find out when it’s too late—usually when your IRS transcript shows penalties compounding quietly over years.
Real examples:
An Australian SaaS company hadn’t filed anything for six years. Internal financials were a mess, and U.S. and AU activity was commingled. By the time we got involved, they faced $120,000 in penalties. It took 4 months of filing and 2 years of IRS correspondence to reduce it to $25,000.
A New Zealand product company left its U.S. entity untouched after changing the name. Four years of non-filing led to $85,000 in potential penalties. We filed all returns for $12,000, and—by pure luck—the IRS didn’t assess civil penalties. Please note that this outcome is exceptionally rare.
An Austrian holding company ignored U.S. obligations and racked up $400,000 in non-filing penalties. After intensive cleanup work, we reduced it to $150,000, which they still had to pay.
What’s hard about this: The IRS penalty abatement process is long, bureaucratic, and document-heavy. Even straightforward cases can take over a year to resolve—and you only get relief if you prove reasonable cause with precision.
As Jason Booth, TaxStudio CEO, puts it, “Penalty mitigation isn’t about tax—it’s about timing, documentation, and showing the IRS that you cared enough to ask the right questions.”
File—even if you think there’s nothing to report. Don’t assume you’re exempt from U.S. tax filings just because you’re pre-revenue or holding losses. If you’re unsure, get a qualified advisor to confirm your obligations in writing.
3. Transfer Pricing & Cross-Border Structuring: Costly to Ignore, Dangerous to Wing
Transfer pricing is a known problem—but it’s still one of the most misunderstood and neglected areas for international founders.
Too often, companies assume their bookkeeper or local CPA will “figure it out.” But structuring intercompany agreements, managing Intellectual Property ownership, and pricing intercompany services or royalties all require specialist knowledge. Without it, you're exposed to audit risk, double taxation, and compliance gaps in both jurisdictions.
Why this is hard: U.S. advisors often say “yes” to cross-border work they’re not truly equipped to handle. We’ve cleaned up transfer pricing models that cost more to unwind than to build correctly.
What to look for: If your advisor doesn’t immediately ask about where your development team sits, how your IP is held, or whether you’ve priced intercompany services, they’re not thinking proactively about compliance—or audit defense.
Our Senior Manager and Tax Specialist here at TaxStudio, Cindy Gui, puts it this way: “Don’t pay your advisor to learn transfer pricing on your dime. Find an advisor who’s been in the weeds with global business models before.”
Action Item: Engage a specialist to assess your cross-border structure. Before any money moves between your parent and U.S. entity, make sure you have a compliant inter-company agreement, defensible pricing model, and clarity on where IP and revenue should sit.
Final Thought
The hardest parts of U.S. expansion aren’t always the ones that make headlines—but they’re often the ones that quietly compound risk behind the scenes. Multi-state compliance, penalty mitigation, and transfer pricing aren’t just technical hurdles—they’re strategic pressure points that demand attention early and often.
That said, these challenges aren’t insurmountable. With the right awareness and the right advisors, you can move through them with clarity. Taking time to understand where the U.S. system differs, and where things get complicated fast, gives you the power to make smarter, more durable decisions.
The goal isn’t perfection—it’s informed progress. Keep moving forward, just don’t go forward blindly.