[soloadventurer]

Can you clarify the meaning of "operate?" Do you mean operate or is being managed?

If you mean "operate," then there isn't really much to add. If you are performing some sort of SaaS (like Netflix), the US company will pay tax on worldwide profits. The other jurisdiction may assess a withholding tax, but in practice it is difficult to collect it from consumers. If you have people selling things in another country and concluding contracts, you may have a permanent establishment in that other country and be required to file branch financial statements and pay tax thereon.

If you mean "managed from a second country," things get more complex. If the "mind and management" of the company is in another country, that country will probably take a position that the US company is subject to the local tax laws. For example, if you are a Canadian that owns a US company or corporation and you control it from Canada, then Canada will deem that company or corporation to be a tax resident and you must file a Canadian corporate tax return in addition to all your US filings. You will need to look at the US-Canada Tax Treaty carefully to see how this plays out. In particular, the tie-breaker rules and anti-avoidance rules.

I'm a tax practitioner. I shudder when I see how many people are opening US companies without looking at their home country rules. Before you consider opening a US company, ask yourself:

(1) What is my foreign affiliate disclosure requirements?

(2) Will my US company be liable for tax in my home country? Will my US company be a tax resident in my home country?

(3) What are the residency rules and tie-breakers under my country's tax treaty with the United States? (If you don't have a treaty, it should light up as a red flag.)

(4) Do I have a budget to pay for local tax advice and compliance, and US tax advice and compliance, each year?

Tax is not simple!

[Lordarminius]

> Can you clarify the meaning of "operate?"

Thank you soloadvnturer

I had in mind YC companies. They are required as a matter of procedure to incorporate in the US before funding is released.

I always had a nagging suspicion it is a more complex issue than meets the eye.

In many cases these companies (operating in markets outside the US)also frequently incorporate in their home countries (which host their target markets) eg India, South-Africa, Nigeria as the case may be