Why Consider a US Entity
As your US customer base grows, the question of whether to set up a separate legal entity in the US becomes increasingly relevant. At first, it is entirely possible to serve US customers from Australia without a local entity. However, such a setup often leads to certain limitations. These can include challenges with cross-border taxation, difficulty receiving payments in USD, and higher foreign exchange costs.
A US entity offers more than just an administrative convenience. It can be a critical enabler of trust and efficiency. Localizing your business presence often results in greater consumer trust, which can increase conversion rates. Additionally, it simplifies partnerships with local service providers, opens access to business banking in the US, and helps manage customer service and fulfillment more efficiently.
Direct USD Payouts and Cash Flow Management
A major financial incentive for establishing a US entity is the ability to receive payments in USD directly from payment gateways and platforms. Without a US entity, many Australian businesses receive converted funds in AUD, which can incur significant foreign exchange losses and delays. By maintaining a US entity, businesses can hold and manage their USD earnings without immediate conversion, allowing for more strategic currency management and reduced transaction costs.
This becomes especially important for businesses generating substantial revenue from the US. When annual US sales reach around USD 500,000 or more, the efficiency gains from avoiding constant currency conversion can be significant. It improves cash flow, reduces fees, and enhances financial planning.
Establishing Brand Credibility in the US
Another benefit of forming a US entity is the increased brand credibility it offers within the local market. Many consumers and partners prefer to engage with businesses that appear local, with a US business address and phone number. It reassures customers that the company understands their needs, complies with local regulations, and is accessible for customer support.
For wholesale and B2B eCommerce sellers, having a US presence may also be a prerequisite for securing distribution agreements, warehouse access, or contracts with local partners. It demonstrates a commitment to the market and a readiness to serve local clients with accountability and speed.
Understanding US Business Structures
The first step in setting up a US entity is deciding on the right business structure. The most common options include Limited Liability Companies (LLCs), Corporations (C-Corp or S-Corp), and Limited Partnerships (LPs). Each of these structures has different implications in terms of taxation, management, ownership flexibility, and compliance obligations.
LLCs are often favored by eCommerce businesses due to their simplicity and liability protection. They provide flexibility in management and profit distribution while offering the advantage of pass-through taxation, which means profits are taxed only once at the owner’s level. Corporations, on the other hand, may be better suited for businesses planning to raise capital from investors or go public in the future.
The choice of business structure should be made in consultation with professionals who understand both Australian and US legal systems to ensure the setup aligns with your long-term objectives and compliance needs.
Choosing the Right State of Incorporation
The state where you choose to incorporate your US entity can affect tax rates, legal obligations, and operational flexibility. States like Delaware and Wyoming are popular due to their business-friendly laws, low fees, and minimal reporting requirements. However, your state of incorporation should also reflect your operational plans. If you expect to have warehouses, employees, or physical operations in a specific state, it may be best to incorporate there.
Each state has its own set of rules for incorporation, taxation, and annual reporting. The differences can have a meaningful impact on your administrative burden and long-term costs, so it’s important to do thorough research before making a decision.
Setting Up Your Operational Presence
After incorporating your business, several steps are required to build your operational presence. One of the first is applying for an Employer Identification Number (EIN), which is needed to open US bank accounts, file taxes, and register on local platforms. This number serves as your business’s federal tax identification and is issued by the Internal Revenue Service (IRS).
You’ll also need a virtual office with a physical US address and a US-based phone number. These tools not only help establish legitimacy but are often required when registering for certain services or fulfilling compliance checks. Virtual office providers can also offer mail forwarding and receptionist services to help manage your US-based communications.
Navigating Intercompany Agreements
Once you operate through two entities—your original Australian business and your new US entity—it’s important to formalize how these entities interact. Intercompany agreements are legal contracts that define responsibilities, service arrangements, and financial flows between the entities. These agreements help avoid legal and tax issues and ensure transparency.
There are two common types of intercompany agreements for eCommerce businesses:
- Management Services Agreement – This document outlines the services that your Australian headquarters will provide to the US entity, such as product sourcing, marketing, and administrative support. It includes a fee schedule for those services, ensuring both entities are compensated fairly.
- Licensing Agreement – If your Australian business owns intellectual property, trademarks, or proprietary software, this agreement allows your US entity to use those assets in exchange for licensing fees. This arrangement protects your IP and provides a clear revenue stream between the businesses.
These agreements are also essential for complying with transfer pricing rules, which are designed to prevent profit shifting and tax avoidance. By clearly defining how funds are exchanged and services delivered, they reduce the risk of audits or penalties from tax authorities in either country.
Planning for the Future
Expanding into the US with a dedicated entity is a significant step that signals maturity and ambition. It lays the foundation for future growth, investment, and operational scale. Businesses that take the time to establish a thoughtful legal and financial framework early on will find themselves better positioned to seize new opportunities, mitigate risks, and maintain smooth operations across borders.
Understanding the Preparation Phase
Before beginning the process of forming a US entity, it is important to conduct a comprehensive internal review of your eCommerce business. Assess your current sales volumes in the United States, analyze your projected growth over the next 12 to 24 months, and determine how much of your revenue is generated from American customers. This foundational information will guide your decisions on when, where, and how to incorporate.
You should also evaluate whether your operational structure, accounting processes, and fulfillment strategies can scale to support a US entity. Transitioning from an international seller to a registered US business requires not only legal and financial setup but also internal alignment across departments.
Choosing the Right Legal Structure
The type of legal entity you select will influence everything from your tax obligations and liability exposure to your ability to raise capital. The three most common business structures for foreign-owned eCommerce operations in the US are:
- Limited Liability Company (LLC): A popular choice for small to mid-sized businesses. It offers personal liability protection and operational flexibility. LLCs are treated as pass-through entities by default, meaning profits are taxed at the individual level.
- Corporation (C-Corp): Ideal for businesses seeking venture capital or planning for future public offerings. Profits are taxed at the corporate level, and dividends are taxed at the shareholder level.
- Limited Partnership (LP): Typically used for joint ventures. One partner has unlimited liability, while the others have limited liability and limited input into management.
Most Australian eCommerce businesses opt for an LLC due to its straightforward compliance, tax flexibility, and legal protection. However, it is recommended to consult legal and tax professionals to determine which structure aligns best with your business model and long-term plans.
Selecting a State for Incorporation
The state in which you incorporate your US business has implications for taxes, reporting requirements, and operational convenience. Popular choices include:
- Delaware: Known for its flexible corporate laws, experienced court system, and low incorporation fees. It is a top choice for investors and technology companies.
- Wyoming: Offers minimal bureaucracy, low fees, and strong privacy protections.
- Nevada: Similar to Wyoming, with no state corporate income tax and favorable regulatory conditions.
However, if you expect to have a physical presence such as employees, warehouses, or significant sales in a specific state, it may make sense to incorporate there. Doing so can simplify compliance with sales tax regulations and reduce administrative burdens.
Registering Your US Business
Once you have decided on your business structure and state of incorporation, the next step is filing the necessary formation documents with the state government. This process generally includes:
- Choosing a unique business name that complies with state naming conventions
- Filing Articles of Organization (for LLCs) or Articles of Incorporation (for Corporations)
- Appointing a registered agent with a physical address in the state
- Paying state-specific filing fees
This process can be completed either through direct filing with the state or with the assistance of online incorporation services. Processing times vary by state but generally take between one to four weeks.
Obtaining an Employer Identification Number (EIN)
After successfully registering your business, the next essential step is obtaining an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). The EIN acts as your business’s federal tax ID and is necessary for opening a US bank account, hiring employees, filing taxes, and registering with various government agencies.
For foreign-owned businesses, the EIN application process requires submitting IRS Form SS-4 and often includes a phone call or mailed application. This process typically takes a few weeks, but it is one of the most crucial steps in establishing your entity.
Setting Up a Business Bank Account
Opening a US business bank account is vital for receiving payments in USD, paying vendors, and maintaining clean financial records. Most banks will require the following:
- Articles of Organization or Incorporation
- EIN from the IRS
- A US-based address (can be a virtual office)
- Identification documents of business owners
While some banks may allow remote account opening, others may require an in-person visit. If a physical visit is not feasible, certain fintech platforms offer alternatives that allow foreign founders to open accounts online.
Establishing a Virtual US Office and Phone Number
Having a US-based business address and local phone number enhances your business’s legitimacy and is often required for registrations and platform approvals. Many virtual office providers offer packages that include mail handling, call forwarding, and a real street address in major cities. This presence can also be useful for meeting state nexus requirements for tax purposes.
A virtual phone number with a US area code can also improve customer trust and allow for better customer service management. Cloud-based communication tools make it easy to manage this from anywhere in the world.
Configuring Tax Compliance
As a US entity, you will be subject to federal corporate tax and potentially state taxes. The average US federal corporate tax rate is approximately 27 percent, slightly lower than Australia’s 30 percent. However, sales tax compliance can be more complex due to the decentralized nature of US state tax systems.
Each state sets its own sales tax rules, thresholds, and filing requirements. If your eCommerce business meets the economic nexus threshold in a particular state—often based on sales volume or transaction count—you may be required to register and remit sales taxes in that state, even if you don’t have a physical presence there.
It’s essential to use tax automation software that integrates with your eCommerce platform to calculate, collect, and file taxes accurately. Additionally, consulting a US tax advisor is recommended to ensure full compliance and minimize exposure.
Creating Intercompany Agreements
Once your US entity is active, your business will consist of two legal entities—one in Australia and one in the US. To govern the relationship between the two, formal intercompany agreements are necessary. These include:
- Management Services Agreement: Outlines the scope of services provided by the Australian entity to the US entity, including marketing, logistics, and support. It also defines the fee structure for these services.
- Licensing Agreement: Allows the US entity to use intellectual property, trademarks, or proprietary software owned by the Australian entity. It sets the terms, duration, and royalty structure for the license.
These agreements ensure transparency, support transfer pricing compliance, and reduce the risk of audits. Proper documentation also makes it easier to manage financial flows between the two businesses.
Adopting US Accounting and Financial Tools
Managing a US entity often requires a separate accounting system or software plan that supports multi-currency transactions and localized financial reporting. Popular cloud accounting platforms offer premium plans that allow businesses to manage international finances, reconcile USD transactions, and integrate with payment gateways.
Having a dedicated US financial infrastructure simplifies reporting, helps you meet compliance deadlines, and allows for cleaner books during audits or investor due diligence. It also provides insights into your US business unit’s performance, enabling more informed decision-making.
Understanding Legal and Regulatory Requirements
Your US entity must comply with ongoing federal and state-level regulations. These include:
- Annual Report Filings: Most states require businesses to file an annual report that updates key company information.
- Federal Tax Filings: Businesses must file an annual federal income tax return with the IRS, even if no income was generated.
- State Tax Filings: States may require income, franchise, or sales tax filings depending on your nexus and operations.
- Registered Agent Maintenance: You must maintain a registered agent with a physical address in your state of incorporation to receive legal notices and official correspondence.
Staying on top of these requirements is crucial to maintaining your good standing and avoiding penalties. Using compliance tracking tools or hiring a local service provider can help you manage these obligations effectively.
Building Local Partnerships
Setting up a US entity also opens the door to forming partnerships with local service providers. These may include third-party logistics (3PL) providers, domestic manufacturers, warehousing companies, marketing agencies, and customer support firms. Localizing your operations can improve shipping times, reduce costs, and enhance the customer experience.
Engaging with US-based partners demonstrates a commitment to the market and can make it easier to scale your operations while maintaining control and quality standards. These partnerships also position you to respond more quickly to changes in consumer demand or market conditions.
Registering with eCommerce Platforms and Gateways
Many US-based eCommerce platforms and payment gateways offer enhanced features or faster onboarding for locally registered businesses. With a US entity, you can often access a broader range of tools, lower transaction fees, and faster payout timelines.
Platforms such as Shopify, Amazon, Stripe, and PayPal may require a US tax ID, business address, and bank account for full functionality. Having a compliant US entity meets these requirements and ensures you can operate without restrictions.
As your customer base in the US expands, platform compliance and seamless payment handling become increasingly important. Setting up correctly from the start allows you to scale with confidence and avoid platform interruptions.
Aligning Operations Across Borders
Once your US entity is established, managing daily operations efficiently is essential for long-term success. Operating two separate legal entities—one in your home country and one in the United States—requires careful coordination, especially across finance, logistics, marketing, and compliance. Establishing clear lines of communication between your teams in both locations helps minimize confusion and ensures accountability.
Utilize project management tools that support collaboration across time zones. Develop standard operating procedures to create consistency in how tasks are executed between both entities. Clear delegation of responsibilities allows each team to operate with autonomy while staying aligned with overall business goals.
Financial Management Best Practices
Sound financial management is the backbone of a successful international expansion. With a US entity, you’ll need to manage a separate set of books that reflect all transactions within the American business. This includes sales, expenses, payroll (if applicable), and intercompany transfers.
Choose accounting software that supports multi-entity and multi-currency functionality. Ensure each transaction is appropriately categorized and reconciled to avoid reporting issues. Schedule monthly reviews of profit and loss statements, cash flow, and key financial ratios. This gives you visibility into how your US operations are performing and helps you take corrective actions promptly.
Work with accountants who are familiar with both your home country’s and US tax codes. This dual expertise ensures that you take advantage of all eligible deductions, remain compliant, and don’t pay more tax than necessary due to inefficiencies or errors.
Optimizing Tax Strategy for Cross-Border Operations
Operating a business across two tax jurisdictions introduces complexities but also opportunities for tax optimization. Key strategies include:
- Utilizing management service agreements to justify service-based payments from the US entity to the home entity
- Implementing a transfer pricing policy that reflects the fair market value of intercompany transactions
- Evaluating treaty benefits that may reduce withholding tax rates on income repatriated to your home country
Having well-documented intercompany agreements and adhering to IRS guidelines helps you avoid audits and penalties. Regularly revisit your tax strategy as your business grows or if legislation changes in either country.
Streamlining Logistics and Fulfillment
Efficient logistics are critical to success in the US market, where customer expectations for fast and affordable shipping are high. After establishing your entity, evaluate whether to continue fulfilling from your home country or shift to local fulfillment centers.
Working with a US-based third-party logistics provider can reduce delivery times and shipping costs. It also allows you to offer returns domestically, improving customer trust and satisfaction. Ensure that your logistics partner integrates well with your eCommerce platform and has experience supporting cross-border sellers.
Use data to track fulfillment times, return rates, and shipping costs. This analysis can guide decisions on whether to expand to additional warehouse locations or renegotiate service-level agreements with partners.
Building a Localized Customer Experience
Operating through a US entity allows you to tailor your customer experience to meet the expectations of American consumers. This includes localizing your website content, offering customer support during US business hours, and accepting local payment methods.
Invest in geo-targeted advertising campaigns that reflect American culture, language, and seasonal trends. A locally optimized customer experience can lead to higher conversion rates, stronger customer loyalty, and better word-of-mouth marketing.
Customer service is another crucial element. If your support team is based internationally, consider using a virtual call center or outsourcing to a US-based provider to offer local phone support. Fast, knowledgeable service can be a major differentiator.
Managing Human Resources and Hiring in the US
If your US operations expand significantly, you may consider hiring employees or contractors. Understanding local labor laws and employer obligations is critical. Hiring in the US involves:
- Registering for state and federal employment taxes
- Providing mandated benefits such as workers’ compensation insurance
- Adhering to anti-discrimination and wage laws
You can hire talent through platforms or work with a professional employer organization that handles compliance, payroll, and benefits. Clearly define roles and set expectations in employee contracts to align with your company culture.
Additionally, offering competitive benefits, even if you are a small business, can help attract skilled employees. Consider health insurance contributions, paid time off, and flexible working hours to make your company stand out.
Marketing Your US Entity Effectively
Marketing your business in the US requires adapting your messaging to local sensibilities. Consumers in the US respond to different brand values, promotional tactics, and seasonal sales cycles than those in other regions.
Invest in search engine optimization that targets US keywords, creates region-specific landing pages, and follows local content norms. Social media campaigns should feature US-based influencers, use American cultural references, and reflect local trends.
Running US-specific email campaigns with pricing in USD and references to local holidays helps improve engagement. Promotional events like Black Friday, Cyber Monday, and Fourth of July sales can significantly drive revenue if planned well.
Having a US entity often increases your eligibility to advertise on certain platforms or use US-specific promotional tools. Take advantage of platform features that allow geo-fencing or local reviews to reach your intended audience more effectively.
Maintaining Compliance and Annual Filings
Compliance should be an ongoing priority. US companies are required to submit federal and state tax filings annually, in addition to state-specific reports. Failure to comply can result in fines, loss of good standing, or even dissolution of your entity.
Keep a calendar of all compliance deadlines and automate reminders. Your obligations may include:
- Federal corporate tax return (Form 1120)
- State income or franchise tax filings
- Sales tax filings, depending on economic nexus
- State annual or biennial reports
Hiring a compliance specialist or engaging a local law firm can take this burden off your internal team. Make it a practice to review your compliance status every quarter.
Managing Multi-Currency Risk
Currency fluctuations can significantly impact your profitability when operating internationally. Receiving payments in USD but maintaining operations in another currency introduces exposure to foreign exchange volatility.
Implement a currency risk management strategy that may include:
- Holding balances in USD to fund local expenses
- Converting currencies only when necessary
- Using forward contracts or hedging instruments to lock in exchange rates
Understanding your exposure and taking proactive steps to minimize risk helps stabilize your margins. Work with financial advisors to create a strategy that aligns with your cash flow needs.
Scaling with Technology and Automation
Leveraging technology is essential for managing operations across multiple countries. Automate as much as possible—from inventory tracking to sales tax calculation—to reduce manual work and minimize errors.
Key areas to focus on include:
- Automated order fulfillment and shipping label generation
- Real-time inventory management synced across multiple channels
- Multi-currency accounting software with integrated bank feeds
- Automated tax compliance tools
Automation frees your team to focus on strategy and growth rather than repetitive administrative tasks. Evaluate tools that scale with your business as transaction volumes increase.
Expanding Sales Channels Within the US
Once your US entity is stable, consider expanding your sales reach by listing on additional marketplaces and platforms. Each channel brings a new customer segment and revenue stream.
Top eCommerce marketplaces to consider include:
- Walmart Marketplace
- Target Plus
- eBay US
- Etsy (for handmade or vintage items)
Each platform has its own onboarding requirements and fee structures. Having a US entity can streamline registration and give you access to promotional opportunities reserved for domestic sellers.
Omnichannel sales strategies, combining direct-to-consumer websites with marketplaces and wholesale partnerships, help reduce dependency on a single channel and build a more resilient revenue base.
Evaluating Business Performance Across Borders
Managing a business with both international and US operations requires clear reporting and performance tracking. Develop key performance indicators for each entity and consolidate your financial data regularly.
Measure metrics such as:
- Gross profit margins by region
- Customer acquisition costs in the US
- Average order value for US customers
- Return and refund rates
Use dashboards that allow for side-by-side comparisons between your home entity and US business. This visibility allows you to identify what’s working in each market and make data-driven decisions.
Regular board or leadership reviews should include segment analysis that identifies trends, risks, and opportunities within the US operation. Consider setting quarterly goals specific to the US entity to track its contribution to overall company success.
Planning for Long-Term Growth
Once your US entity is profitable and stable, think beyond current operations. Can you open a physical storefront? Expand to additional states? Launch new product lines tailored to US consumers?
Building a sustainable US presence involves reinvesting profits into strategic initiatives. Whether it’s marketing, hiring, or product development, your US entity should be equipped to support long-term growth without constant reliance on the home office.
In addition, develop a contingency plan that includes scenario forecasting for economic downturns, regulatory changes, or currency fluctuations. Long-term planning positions your business to adapt to change and capitalize on new opportunities.
Conclusion
Expanding your eCommerce business into the United States is a strategic move that offers access to one of the largest and most dynamic consumer markets in the world. As explored throughout this series, setting up a US entity can unlock significant opportunities—from increasing USD revenue and simplifying tax obligations, to reducing transaction costs and enhancing the customer experience.
We explored the foundational reasons to consider establishing a US entity. For many Australian eCommerce businesses, receiving payouts in USD, improving platform compatibility, and reaching American consumers with locally relevant offers are powerful incentives. While the initial setup comes with its complexities—ranging from choosing the right entity type to creating intercompany agreements—the long-term operational flexibility and financial benefits can justify the investment, especially for businesses generating strong US-based revenue.
Addressed the essential legal, financial, and tax considerations that accompany the formation of a US entity. From understanding corporate tax rates and sales tax obligations to managing compliance with federal and state regulations, preparation is key. Ongoing operational costs such as registered agent fees, accounting software, and tax filing requirements must be planned for, but with the right professional support, these tasks can be handled efficiently and cost-effectively.
Focus turned to managing and scaling your US operations effectively. We discussed aligning cross-border teams, optimizing your tax strategy, streamlining logistics, localizing customer experiences, and implementing systems that support sustainable growth. Leveraging automation, robust reporting tools, and multi-currency strategies ensures your US entity can operate smoothly and profitably. Furthermore, expanding into new sales channels and planning for long-term investment positions your business to capitalize on the momentum generated by US market entry.
Setting up a US entity isn’t just about technical compliance or financial gain—it’s about laying the groundwork for a global business that is agile, competitive, and built for scale. Whether you are just entering the US market or looking to solidify your existing presence, establishing a US entity can serve as a launchpad for deeper market penetration, operational independence, and global growth.
As with any strategic move, success depends on thoughtful planning, diligent execution, and continuous adaptation. By understanding the full scope of setup, management, and expansion, your eCommerce business can confidently take the next steps toward thriving in the US and beyond.