Updated July 7, 2020:

A US bank account for foreign corporation isn't as easy to open as it used to be. It can be a difficult, time-consuming process. Most times, the foreign corporation must create a business entity in the U.S. to open a bank account here.

Can Foreign Corporations Open U.S. Bank Accounts?

Before a foreign corporation can open a business bank account in the U.S., it must first have a business that's registered in America. Banks will require a proof of registration when opening the account.

For corporations that want to open a U.S. account from abroad, they must understand that most banks require customers to visit in person and present identification when they open an account. Banking law is tightly regulated, and stringent checks will be done.

Some agencies and specialist banks exist that may be able to help someone open an account from outside of the U.S. These agencies usually operate on a state-by-state basis, so it's important for these corporations to look for a reputable agency in the state they've registered a business.

The Need for U.S. Bank Accounts

No matter where a foreign corporation is based outside of the United States, it has to have a U.S.-based entity to open a corporate bank account. An international business may want to open a U.S. business bank account to make it easier to do business with American customers. It also helps the business avoid the exchange rate hassle.

Businesses should always have separate bank accounts from their owners. Having a business bank account helps the corporation stay in compliance with IRS requirements, and it's helpful for managing cash flow.

Many businesses need a U.S. bank account for a number of reasons. In some cases, they may pay a fee to convert from an offshore company to an American corporation. When they do, they're then subject to the U.S. tax system, which they may not be happy about. Sometimes, they get advice on how easy it is to create a U.S. corporation.

Once they create a corporation in the U.S., it has to report to the IRS. The government presumes the corporation is doing business in America. When this happens, the foreign corporation may open up its other corporate structures (including ones outside of the U.S.) to review and audit procedures by the IRS.

Foreign Corporations and U.S. Bank Accounts

However, foreign corporations may have a solution if they start a corporation in the U.S. Delaware is one of the most popular states for forming new businesses. It may be possible for a company that's not run by a U.S. citizen or U.S. resident to start a U.S.-based corporation when it chooses a state with a business-friendly reputation.

Once they start a corporation in the U.S., the new company must file tax returns using Form 1120. The corporation's net profits are assumed to be taxable. In addition, the IRS can audit the tax return. This would require the corporation to prove if its income source is U.S.-based and if their deductions follow U.S. accounting rules.

In some cases, the U.S.-based corporation may sufficiently plan so that it doesn't owe taxes in the States. However, this significantly increases the risk of audits and accounting costs.

If the corporation chooses to go this route (looking for loopholes to avoid paying taxes), the best it can hope for is spending a few thousand dollars on compliance. In the worst case scenario, the IRS will take the opportunity to look into all companies related to the corporation. If the agency finds anything that looks like a source of revenue, it may attempt to seize whatever assets it can.

Foreign corporations need to remember that once they form a U.S. corporation, they're signing onto America's tax system. Part of this is being ready to handle any consequences.

They should have proper tax and business advice from experts in the field before they decide to make this move. These experts can help them do the following:

  • Prepare correct accounting every year
  • File U.S. tax returns

It's important that they don't take the decision to switch from a foreign corporation to a U.S. corporation lightly. Trying to avoid tax consequences often winds up being costly, legally and financially.

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