US Business Compliance Guide

In the 2024 Fortune 500 list of companies, 46% or 230 companies were founded by non-US entrepreneurs. This trend is likely to continue into 2025 due to a robust economy and an ecosystem that supports innovation.

However, one key challenge for non-US entrepreneurs is understanding and complying with regulations at the federal, state, and local levels. This US Business Compliance Guide 2025 is written to help you understand the essential business regulations and compliance required to set up and manage a business in the US.

US Business Regulations Overview for Foreign Entrepreneurs

Running a successful business in the U.S. requires a comprehensive understanding of and strict adherence to U.S. business regulations. Unlike many countries, the U.S. has a layered government structure that entrepreneurs must familiarize themselves with.

Federal vs State Regulations

A highlight of the United States is its dual federal and state government system.

Federal regulations apply uniformly to all businesses in the 50 states and involve taxation, employment laws, import-export policies, and environmental standards. Some key federal regulations to know are as follows.

International Entrepreneur Rule (IER)

Non-citizen entrepreneurs can stay in the U.S. for up to five years, provided they:

• Started the company in the last five years,
• Have at least $311,071 in qualified investments or $124,429 in government grants,
• Create jobs and employment opportunities,
• Invested at least 10% interest in the startup.

Outbound Investment Regulations (OIP)

This rule, effective from January 2, 2025, imposes restrictions on outbound investments, especially in adversarial nations. Entrepreneurs must use due diligence processes to comply with OIP.

Corporate Transparency Act (CTA)

Businesses must report their ownership information to the Financial Crime Enforcement Network (FinCEN). 23 kinds of companies are exempt from this reporting.

Foreign Corrupt Practices Act (FCPA) and Foreign Extortion Prevention Act (FEPA)

The FCPA is another federal law that prohibits U.S. businesses and citizens from bribing foreign government officials to gain any business advantage. Closely related to the FCPA is the FEPA that punishes the “demand side” of bribery. This means any foreign official who demands, seeks, receives, or accepts can be punished. Any violation can attract 15 years of imprisonment and a maximum fine of $250,000.

Labor Laws

The federal government mandates fair and safe labor practices for employees through the implementation of Fair Labor Standards Act (FLSA) and the Occupational Safety and Health Act (OSHA). Knowing the provisions of these regulations is necessary as non-compliance can lead to legal cases.

While these are the key laws, there are also other regulations related to employment, environmental protection, and taxation.

Basic Compliance Requirements

As a first step, apply for an Employer Identification Number (EIN) from the Internal Revenue Service (IRS) to legally operate a business in the U.S. Next steps are:

• Register the business with the appropriate federal and state authorities.
• Get the necessary permits and licenses.
• Understand your tax obligations.
• Maintain accurate financial records.
• Know the reporting and auditing requirements.

With these broad steps, you can comply with most federal and state laws.

Recent 2025 Changes

Many changes are set to take effect in 2025, and these can impact your business.

• New reporting requirements through third-party platforms like PayPal have been lowered from $20,000 to just $600. This change can impact how businesses report income from these platforms.
• Many states are expected to increase the minimum wage requirements in 2025.
• States like Colorado and California have expanded their data privacy regulations.

Navigating the US Business Registration Process

Starting a business in the U.S. involves several steps, from selecting the right entity type to adhering to registration requirements. Read on to learn the important aspects to keep in mind during this process.

Entity Types Comparison

One of the key decisions is to select an appropriate entity type depending on your business objectives. The broad company types are:

• Sole proprietorship: In this type, an individual owns and operates the business, enjoys its profits, and suffers its losses.
• Partnership: Two or more individuals come together to form a company, where. they share responsibilities and losses based on the partnership deed.
• Branch office: Foreign companies can establish a branch office in the U.S., but it will be treated as an extension of the parent company and not as a separate legal entity.
• Non-profit organization: If your business has a charitable purpose, you register it under this category and earn a tax-exempt status under the IRS rules.
• Holding company: This type of entity owns shares in another company but does not have its own operations.
• Limited Liability Company (LLC): This entity combines a partnership and a corporation to offer flexibility.
• Corporation (C-Corp): This is the most popular entity type and is a separate legal entity from that of the owner.

Once you select the type of company, select the state for operations.

State Selection Strategies

Most business owners prefer to select a state where their business can thrive. This is why, for example, many tech companies are centered in California despite the state’s higher taxes and more compliance regulations.

The next step is to complete the registration requirements.

Registration Requirements

Though the exact process depends on the state, the following are the broad steps.

• Choose a unique name.
• Get a physical address for the company. Some states allow registered agents to receive legal documents for the company.
• Fill out a one-page certificate of incorporation, entering the requested details.
• Once the business is registered, file a report and pay a franchise tax.
• Get an Employer Identification Number (EIN) for free from the IRS. This is necessary to open a bank account, hire employees, file taxes, etc.
• Open a bank account and start operations.

Manay CPA can help you through this entire registration process. Next, we will discuss the all-important tax compliance.

Critical Tax Compliance for Foreign Business Owners

Taxes are complicated in the U.S., as they can be levied at the federal, state, and local levels. For non-US entrepreneurs, it’s best to contact experienced tax consultants like Manay CPA to help you navigate these challenges.

Let’s look at the tax obligations at the federal and state levels.

Federal Tax Obligations

The Internal Revenue Service (IRS) is responsible for managing taxes at the federal level. Note that you have to pay taxes only on the Effectively Connected Income (ECI), which is the income received from goods or services provided in the U.S. The key taxation regulations are:

• Income Tax – Businesses must report their annual profits, file reports, and pay a certain flat percentage, depending on the entity type.
• Employment Tax – You must withhold Social Security, Medicare, and other taxes from employees and pay them to the IRS.
• Self-employment Tax – This tax applies to sole proprietors only.

State Tax Considerations

In addition to federal taxes, you will also have to pay state taxes, which can vary greatly between states. Some states, like Texas and Wyoming, have no state tax, while others, like California, have high tax rates.

Other than income tax, you will have to report and remit sales tax if your goods or services are subject to these taxes. Similarly, some states levy franchise taxes that most apply to LLCs and corporations.

International Tax Treaties

The United States has tax treaties with over 65 countries to avoid the burden of double taxation for non-US entrepreneurs. Through these treaties, entrepreneurs are given:

• Exemptions on certain incomes like royalties.
• Tax credits in their home country when taxes are paid in the U.S.
• Lower rates on interest income.

If you need more clarification, you can always contact Manay CPA, as they have the knowledge and experience to guide you through these exemptions.

Essential Permits & Licensing Requirements

Once you complete the registration processes and understand the tax considerations, your next step is to obtain the necessary permits and licenses to start operations. These requirements vary depending on your business’s location, type, and industry, but some are mandatory for all businesses.

Federal licenses

The Federal agencies regulate certain industries, and if your business falls under them, you’ll have to comply with the rules. The below table provides a snapshot of the licenses in these industries.

State-specific Permits

Besides federal licenses, you must also get state licenses. The broad permits required are.

• General business license to operate in the state.
• Professional licenses for specific fields like law, investments, etc.
• Sales tax permits if you sell taxable goods or services.

These licenses depend on the nature of your business. In general, businesses that are regulated are auctions, construction, farming, retail, vending machines, dry cleaning, plumbing, and restaurants. Also, note that these licenses and permits are for a defined time period only, and must be renewed if you want to continue operations.

Pro tip – Closely watch the renewal dates, as it is easier to renew than apply fresh.

Industry Regulations

Some industries also require specific licenses, and they are:

• Restaurants and food manufacturers.
• Construction companies.
• Online businesses that collect personal information in certain states like California and Colorado.
• Healthcare services like doctors and nurses.

Since these licenses are specific to industries, they are granted and managed by the appropriate industry bodies and overseen by the state or federal agencies.

Voluntary Licenses

Lastly, voluntary licenses are agreements between businesses and patent holders. Under this agreement, the patent holder allows the business to use his/her patent in return for a certain benefit and for a specific purpose. Though these licenses are most common in pharmaceuticals, they are now being extended to technology too, especially with the rise of Intellectual Property Rights (IPR).

For non-U.S. business owners, knowing and getting the right licenses can be confusing. At the same time, they are necessary to avoid legal issues for your business. Experts like Manay CPA can identify and help secure these permits for you. For example, Manay CPA’s experts can help your business get an alcohol license based on state and federal regulations.

Banking & Financial Compliance

Complying with banking and financial regulations helps you have smooth operations and an excellent track record. More importantly, this compliance gives you a good financial stand, which can come in handy while applying for loans, hiring, and attracting more investments.

US Banking Requirements

U.S. banks scrutinize documents and do background checks before allowing you to open an account. In general, they require the following documents:

• EIN
• Business registration documents.
• Personal IDs.
• Proof of address.

Note that you will be subject to Know Your Customer (KYC), Know Your Business (KYB), and Anti-Money Laundering (AML) checks to prevent fraud and suspicious activity. Any violations can result in hefty fines. For example, in 2021, NatWest was fined £264.8 million for AML breaches.

International Transactions

All international transactions are monitored by the Office of Foreign Assets Control (OFAC). It imposes sanctions against certain countries or individuals to prevent terrorism and other illegal activities and all international transactions are screened for compliance.

Banking activities are also subject to the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Bank Secrecy Act. Also, if you run a banking or insurance business, regulatory bodies like the Federal Reserve, FDIC, and OCC look into transactions.

Currency Reporting

The U.S. has strict restrictions on international money transfers, especially those involving substantial sums of money.

Some compliance aspects to watch out for are:

• If your business holds more than $10,000 in foreign bank accounts, you must file the Foreign Bank Account Report (FBAR).
• The Foreign Account Tax Compliance Act (FATCA) requires certain U.S. taxpayers holding financial assets outside the country to report them to the IRS. It also applies to non-US citizens who are U.S. taxpayers.
• The Currency Transaction Report (CTR) is necessary if transactions exceed $10,000 in a single business day. The West Virginia Community Bank was penalized $4.5 million for failing to file more than 400 CTRs.

As you can see, the compliance process is complicated and this is where trusted partners like Manay CPA can take care of them for you.

Ongoing Compliance & Reporting

Compliance and reporting are continuous processes, and businesses must adhere to them strictly. Failure to follow these procedures can result in heavy fines and penalties that can, in turn, negatively impact your business.

Annual Requirements

Annual reporting requirements vary by business. It can also be different at the federal and state levels.

However, you must generally comply with the following requirements.

• Tax filings.
• State reports about ownership and address.
• Renewal of necessary permits and licenses, both at the federal and state levels.
• Any other mandatory requirements that the federal and state governments can impose by changing appropriate laws.

Note that the dates of filing may be different for different types of taxes and licenses. Make sure you stay on top of these filing dates and comply with them.

Non-filing can lead to hefty fines. Take the case of Coca Cola which was ordered to pay $6 billion in back taxes and interest.

Quarterly Obligations

If you are likely to pay more than $1,000 in taxes in a year, you must make quarterly tax payments to the IRS and states if applicable. Similarly, you must pay payroll taxes and Medicare either semi-weekly or monthly. The same applies to also sales tax returns and state-specific excise taxes.

Record-keeping Essentials

Maintaining proper records is key for reporting and compliance. Some good practices to follow are:

• Keep detailed records of income, payments, invoices, and bank statements.
• Maintain minutes of the meetings and resolutions.
• Use secure systems for data storage.
• Conduct regular audits to ensure everything is in place.
• Leverage technology to improve your workflows and processes.
• Employ techniques like encryption to safeguard your data from unauthorized access.

The U.S. government is changing many regulations to make them relevant in today’s tech-driven and competitive global environment. As a business owner, you must stay on top of these changes and adjust your processes accordingly. Manay CPA can help you stay organized with documents and support compliance and reporting.

Conclusion

To conclude, starting and running a business is unique in the U.S. because of its dual government structure, extensive compliance requirements, and ever-changing laws to keep up with global competition. This U.S. Business Compliance Guide 2025 has all the required information for non-US citizens to begin their entrepreneurial journey in the U.S. If you have doubts, reach out to experienced companies like Manay CPA, who can guide you through every step.

Start your US business journey with confidence – Schedule a free consultation with Manay CPA’s International Business Experts.