3 Things You Should Never Do When Expanding into the U.S.
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.
Washington, United States
3 Things You Should Never Do When Expanding into the U.S.
Some mistakes are fixable. Others are expensive, damaging, or—in some cases—legally indefensible. These are the three critical missteps we consistently see international businesses make when entering the U.S. market. Avoiding them isn’t just good practice—it’s foundational to operating responsibly and reducing long-term risk.
1. Never Charge Sales Tax Before You’re Registered to Collect It
It seems simple: if you're selling a product in the U.S., you should collect sales tax at checkout. But here’s what many businesses don’t realize: you must be registered in that state before you can collect and remit. Doing otherwise is not just noncompliant—it can be considered a form of tax fraud.
In several states, charging but not remitting sales tax is a felony. You’ve essentially held money on behalf of a government agency and failed to deliver it.
This mistake happens most often with:
E-commerce businesses using platforms that auto-collect sales tax
Businesses who assume sales tax is the U.S. version of their home country tax system - e.g., Australia’s GST
Startups trying to be "proactive" by charging tax too early, without proper setup
The U.S. doesn’t have a federal sales tax. Each state—and in some cases, cities and counties—has its own registration process, collection rules, and filing cadence.
Action Item:
Before collecting a cent of sales tax, register in every state where you have tax nexus. This might be triggered by sales volume (economic nexus), physical presence, inventory, or even affiliate marketers. Use tools like TaxJar, Avalara, or a qualified advisor to map out your exposure.
2. Never Assume the U.S. Will Work Like Your Home Country
One of the most dangerous mindsets a business can bring to U.S. expansion is, “It’ll probably be similar to what we’re used to.” It won’t be.
Some common assumptions that don’t translate:
Dormancy ≠ exemption: In Australia or the U.K., a dormant company may be exempt from annual tax filings. In the U.S., all entities—active or not—must file. Every. Single. Year.
Email ≠ communication: In many countries, government communication is digital and efficient. In the U.S., you’ll deal with long phone queues, snail mail, and inconsistent state-level processes.
Banking ≠ simple: U.S. banking is bureaucratic, conservative, and still runs on physical infrastructure. You won’t be doing same-day transfers from an app without jumping through hoops.
This misunderstanding isn’t just inconvenient—it creates blind spots around compliance, financial planning, and regulatory response time.
Action Item:
Before entering the U.S., build a compliance checklist that assumes nothing will work like it does back home. Talk to someone who has operated across both markets, and document key differences in taxes, banking, government response time, hiring practices, and payroll systems.
3. Never Let a U.S. Entity Sit Dormant Without Filing
Forming a U.S. entity creates an automatic legal and tax obligation—whether or not you’re operating, generating revenue, or trading at all. Many international businesses form Delaware entities early (or inherit them through acquisition), change the name, and forget about them.
What happens next?
Required tax filings are missed.
The IRS applies failure-to-file penalties: $25,000 per year, per Form 5472, for foreign-owned US entities (LLCs or corporations)
Late notices arrive (often by mail) and go unread.
Penalties compound.
Real example:
An Austrian company formed a U.S. entity, took no action for multiple years, and didn’t file any returns. By the time they came to us, they were facing over $400,000 in penalties. After intensive remediation and appeals, we helped them reduce the amount to $150,000—but the damage was done.
This is not a tax strategy issue—it’s an administrative failure that could have been prevented with a $3,000 annual compliance plan.
Action Item:
Assign ownership of compliance the moment you form your entity. Even if you’re not operational, you’ll need to file at least an annual tax return and disclosure forms like 5472. Missing these filings triggers massive penalties—especially for foreign owners.
Final Thought
Expanding into the U.S. isn’t easy—but it’s absolutely doable. The complexities are real, but so are the tools, frameworks, and expert partners available to help you navigate them.
These common mistakes aren’t a reason to pause your ambition—they’re just a reminder to move forward wisely. With the right guidance, a bit of patience, and a willingness to ask the right questions early, you can turn U.S. expansion into one of the most rewarding chapters of your business journey.