Founder Guide

10 Common Mistakes Non-US Founders Make When Starting a US Company

Learn from the mistakes of others and save thousands in legal fees and compliance headaches

12 min read

After helping 1,100+ international founders form their US companies, we've seen the same mistakes repeated over and over. Some are minor inconveniences. Others cost thousands of dollars and months of time to fix.

The good news? Every single one of these mistakes is preventable if you know what to watch out for.

This guide walks through the 10 most common pitfalls non-US founders face when forming and operating US companies — and more importantly, how to avoid them.

📑 Table of Contents

Mistake #1: Choosing the Wrong State for Incorporation

1

The Mistake

Many international founders think they should incorporate in California because "that's where Silicon Valley is" or New York because "that's where finance happens." Others pick random states based on incomplete information from Reddit or YouTube.

Cost of this mistake: $800-$2,000+ per year in unnecessary state fees

The Solution

For most non-US founders, Delaware or Wyoming are the optimal choices:

Why not California? California has a $800/year minimum franchise tax even if you make $0. Delaware charges $300/year. Wyoming charges $60/year.

Why not Nevada? Nevada markets itself as "tax-free" but requires more expensive compliance and doesn't offer the legal advantages of Delaware.

Mistake #2: Using a Home Address for Business Registration

2

The Mistake

You need a US address for company formation. Some founders use a friend's address, a virtual mailbox, or try to use their home country address. All of these can cause serious problems.

Cost of this mistake: Formation rejection, IRS delays, legal service issues

The Solution

Use a proper Registered Agent service that provides:

What happens if you use a bad address?

Mistake #3: Ignoring Annual Compliance Requirements

3

The Mistake

"I formed my LLC and I'm done, right?" Wrong. Every US state requires annual or biennial filings to keep your company in "good standing." Miss these deadlines and your company can be administratively dissolved.

Cost of this mistake: $100-$500 in penalties + $200-$800 to reinstate

The Solution

Set calendar reminders for your state's requirements:

Better yet, work with a service that handles this automatically. At I Love LLC, we include compliance reminders and can file these reports for you.

Mistake #4: Choosing the Wrong Business Structure

4

The Mistake

Founders often choose between LLC and C-Corp without understanding the long-term implications. Converting later can be expensive and complicated.

Cost of this mistake: $3,000-$10,000 to restructure + tax complications

The Solution

Choose based on your business goals:

Choose LLC if:

Choose C-Corp if:

Key insight: You can start as an LLC and convert to C-Corp later when you're ready to raise institutional capital. Many successful companies follow this path.

Mistake #5: Missing Tax Deadlines

5

The Mistake

"I don't have any US income, so I don't need to file taxes." This is the most expensive misconception. Even if your company earned $0, you likely still need to file tax returns.

Cost of this mistake: $10,000+ in IRS penalties per year missed

The Solution

Know your filing requirements:

Single-Member LLC (Foreign Owner):

Multi-Member LLC:

C-Corporation:

Pro tip: File for automatic extensions if you need more time. An extension request is free; late filing penalties are expensive.

Mistake #6: Not Getting an ITIN When Needed

6

The Mistake

Non-US founders often assume they need an ITIN (Individual Taxpayer Identification Number) or SSN immediately. Others don't realize they need one at all when certain thresholds are crossed.

Cost of this mistake: 6-12 week delays in critical processes

The Solution

Understand when you actually need an ITIN:

You DON'T need an ITIN for:

You DO need an ITIN if:

The ITIN application process takes 7-11 weeks. Plan ahead if you know you'll need one.

Mistake #7: Opening the Wrong Type of Business Bank Account

7

The Mistake

Some founders open personal checking accounts for their business. Others choose banks with hidden fees or limited international capabilities. Many struggle to get accounts approved at all.

Cost of this mistake: $50-200/month in unnecessary fees + limited business capabilities

The Solution

Choose a business bank account that fits international founders:

Best Options for Non-US Founders:

Features to Look For:

Avoid: Traditional banks like Chase or Bank of America typically require in-person visits and are difficult for non-residents.

Mistake #8: Mixing Personal and Business Finances

8

The Mistake

"It's my company, so I can use the business account for personal expenses, right?" This is called "piercing the corporate veil" and can destroy your limited liability protection.

Cost of this mistake: Loss of liability protection + accounting nightmares

The Solution

Maintain strict separation between personal and business finances:

Business Account Only For:

How to Take Money Out Properly:

Use accounting software like QuickBooks or Wave to track every transaction. Come tax time, you'll thank yourself.

Mistake #9: Ignoring State Sales Tax Obligations

9

The Mistake

"I'm selling online from outside the US, so I don't need to collect sales tax." Since 2018's Wayfair decision, this assumption can trigger significant tax liabilities.

Cost of this mistake: $5,000-$100,000+ in back taxes and penalties

The Solution

Understand economic nexus rules:

You May Need to Collect Sales Tax If:

What to Do:

Good news: If you're selling digital products/services to other businesses (B2B) or internationally, you often don't need to collect sales tax.

Mistake #10: DIY-ing Complex Legal and Tax Matters

10

The Mistake

"I'll just Google it and figure it out myself." While the entrepreneurial spirit is admirable, US legal and tax systems are complex. What you don't know CAN hurt you — badly.

Cost of this mistake: $10,000-$50,000+ in penalties and legal fees to fix problems

The Solution

Know when to DIY vs when to hire professionals:

OK to DIY:

Hire Professionals For:

Cost-benefit reality check: Spending $1,000 on professional guidance can prevent $20,000 in penalties. It's not an expense — it's insurance.

Bonus Mistake: Not Protecting Your Intellectual Property

While not as common, this mistake can be devastating:

⚠️ The Issue

You build a brand, product, or technology without properly assigning IP to your US company. Later, investors won't fund you without clear IP ownership.

The fix:

The Path Forward: How to Avoid These Mistakes

Before Formation:

  1. Research which state fits your business model
  2. Decide between LLC and C-Corp based on funding plans
  3. Line up a registered agent service
  4. Consider working with a formation service that guides you

During Formation:

  1. Use professional services (saves time and prevents errors)
  2. Get your EIN immediately after formation
  3. Open a proper business bank account
  4. Set up accounting software from day one

After Formation:

  1. Set up calendar reminders for all compliance deadlines
  2. Find a CPA who understands international founders
  3. Keep meticulous records from the start
  4. Never mix personal and business finances
  5. Stay educated on your obligations

The Bottom Line

Every single one of these mistakes is preventable. The founders who succeed in the US market aren't necessarily smarter or more experienced — they're just better informed and willing to invest in doing things right from the start.

The cost of prevention is always less than the cost of correction.

Start Your US Company the Right Way

Join 1,100+ international founders who avoided these costly mistakes by working with I Love LLC. We'll guide you through every step, handle the complex paperwork, and ensure you stay compliant.

Included: State filing, registered agent (1 year), EIN, banking guidance, compliance reminders, and ongoing support.

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