International SaaS founder compliance

Entity formation & state issues (high‑level) - Delaware remains a common choice for formation (favorable corporate law, investors) but watch annual franchise taxes and registered agent/foreign qualification requirements if you operate or hire in other states.

For state filing procedures and fees use the Delaware Division of Corporations (state resources recommended). - If you form in California, New York, Texas, or Florida, check state-specific annual filing fees, franchise taxes, and foreign qualification rules — and whether you must register (and appoint a registered agent) in states where you have nexus (economic presence, employees, physical offices). - Practical: choose formation state based on investor and banking needs (Delaware/Wyoming common for investor friendliness; consider operating/state tax costs for where customers/employees are located). 2) Federal tax & reporting for foreign‑owned U.S. entities - Foreign‑owned U.S. disregarded entities (single‑member LLCs owned by a foreign person) have specific IRS reporting obligations: attach Form 5472 and a pro‑forma Form 1120 to report reportable transactions with related parties.

The IRS Instructions for Form 5472 describe the reporting corporation and foreign‑owned U.S. DE rules and filing requirements (December 2024 revision).

See IRS Form 5472 instructions. (IRS source) - Penalties for failure to file Form 5472 (or filing late/incomplete) are severe (base penalties commonly cited at $25,000+). Practitioner guides emphasize strict compliance even where no U.S. taxable income exists. (tax practitioner sources) - Obtain an EIN early.

FinCEN and IRS guidance note EIN/TIN requirements for filings; foreign persons without SSN/ITIN may need to use Form SS‑4 by mail/fax (online EIN is limited if the responsible party lacks SSN/ITIN). Plan for the nonresident EIN timeline (mail/fax processing may take weeks). (FinCEN/IRS guidance, nonresident banking guides) - Withholding and treaty issues: payments to foreign persons (e.g., royalty/service payments) may require withholding and Forms 1042/1042‑S; relying on Forms W‑8BEN/W‑8BEN‑E for beneficial owner/treaty claims.

Consult IRS withholding rules and Treasury/IRS guidance for details. - FBAR / FATCA: individuals and entities with foreign accounts may have FBAR (FinCEN 114) and FATCA reporting obligations — coordinate with your international tax advisor. 3) FinCEN / Beneficial Ownership Information (BOI) updates that matter to international founders - Major update (March 2025 interim final rule): FinCEN revised BOI reporting under the Corporate Transparency Act so that U.S.-created companies (domestic companies) are exempt from BOI reports; the reporting company definition was revised to focus on entities formed under a foreign country law that register to do business in the U.S. (i.e., “foreign reporting companies”).

For foreign companies that register in U.S. states, FinCEN set new deadlines (existing foreign reporting companies registered before March 26, 2025, had an April 25, 2025 deadline; others have 30 days after registration).

Check FinCEN BOI pages and FAQs for current status and filing portal instructions. (FinCEN sources) - Practical: most U.S.-formed LLCs historically expected to file BOI reports — confirm current status for your entity (domestic vs. foreign) and act quickly if you are a foreign‑formed entity registered in the U.S. 4) Sales tax / state nexus for SaaS & digital products (state‑by‑state variation) - Sales/use tax treatment of SaaS and digital products differs by state.

Key authoritative positions: - New York: Prewritten (canned) computer software is taxable whether delivered physically, electronically, or by remote access — remote access licenses to prewritten software are taxable. (NY DTF tax bulletin ST‑128) - Texas: Data processing services (including many SaaS/web hosting/data storage services) are taxable; Texas publications treat web hosting, site creation/maintenance, data storage, offsite backups and many SaaS-type services as taxable data processing. (Texas Comptroller) - California: The CDTFA traditionally treats electronically transferred data products (software, data, ebooks) as generally not taxable as tangible personal property in many circumstances — but facts matter (bundled physical media, printed copies, or other elements can change the analysis). (CA CDTFA references; see state guidance) - Florida/Delaware: Delaware has no state sales tax; Florida generally does not treat digital goods as tangible personal property subject to sales tax though communications/transport services may be taxable. (State guides / compilations) - Nexus/economic presence: SaaS providers must also evaluate economic nexus thresholds, marketplace facilitator rules, and sourcing rules.

Many states impose economic nexus thresholds (e.g., $100k or $200k in sales or a transactional threshold) — check each state’s revenue department and recent updates (2024–2025) before assuming exemption. - Practical: map where customers use the service, track receipts per state, and implement sales tax automation (Avalara/TaxJar/Stripe tax) plus state‑by‑state nexus reviews.

Entity formation & state issues (high‑level)

2) Federal tax & reporting for foreign‑owned U.S. entities - Foreign‑owned U.S. disregarded entities (single‑member LLCs owned by a foreign person) have specific IRS reporting obligations: attach Form 5472 and a pro‑forma Form 1120 to report reportable transactions with related parties.

The IRS Instructions for Form 5472 describe the reporting corporation and foreign‑owned U.S. DE rules and filing requirements (December 2024 revision).

See IRS Form 5472 instructions. (IRS source) - Penalties for failure to file Form 5472 (or filing late/incomplete) are severe (base penalties commonly cited at $25,000+). Practitioner guides emphasize strict compliance even where no U.S. taxable income exists. (tax practitioner sources) - Obtain an EIN early.

FinCEN and IRS guidance note EIN/TIN requirements for filings; foreign persons without SSN/ITIN may need to use Form SS‑4 by mail/fax (online EIN is limited if the responsible party lacks SSN/ITIN). Plan for the nonresident EIN timeline (mail/fax processing may take weeks). (FinCEN/IRS guidance, nonresident banking guides) - Withholding and treaty issues: payments to foreign persons (e.g., royalty/service payments) may require withholding and Forms 1042/1042‑S; relying on Forms W‑8BEN/W‑8BEN‑E for beneficial owner/treaty claims.

Consult IRS withholding rules and Treasury/IRS guidance for details.

114) and FATCA reporting obligations — coordinate with your international tax advisor. 3) FinCEN / Beneficial Ownership Information (BOI) updates that matter to international founders - Major update (March 2025 interim final rule): FinCEN revised BOI reporting under the Corporate Transparency Act so that U.S.-created companies (domestic companies) are exempt from BOI reports; the reporting company definition was revised to focus on entities formed under a foreign country law that register to do business in the U.S. (i.e., “foreign reporting companies”).

For foreign companies that register in U.S. states, FinCEN set new deadlines (existing foreign reporting companies registered before March 26, 2025, had an April 25, 2025 deadline; others have 30 days after registration).

Check FinCEN BOI pages and FAQs for current status and filing portal instructions. (FinCEN sources)

4) Sales tax / state nexus for SaaS & digital products (state‑by‑state variation)

- New York: Prewritten (canned) computer software is taxable whether delivered physically, electronically, or by remote access — remote access licenses to prewritten software are taxable. (NY DTF tax bulletin ST‑128)

- Nexus/economic presence: SaaS providers must also evaluate economic nexus thresholds, marketplace facilitator rules, and sourcing rules. Many states impose economic nexus thresholds (e.g., $100k or $200k in sales or a transactional threshold) — check each state’s revenue department and recent updates (2024–2025) before assuming exemption.

• Delaware remains a common choice for formation (favorable corporate law, investors) but watch annual franchise taxes and registered agent/foreign qualification requirements if you operate or hire in other states. For state filing procedures and fees use the Delaware Division of Corporations (state resources recommended).
• If you form in California, New York, Texas, or Florida, check state-specific annual filing fees, franchise taxes, and foreign qualification rules — and whether you must register (and appoint a registered agent) in states where you have nexus (economic presence, employees, physical offices).
• Practical: choose formation state based on investor and banking needs (Delaware/Wyoming common for investor friendliness; consider operating/state tax costs for where customers/employees are located).
• FBAR / FATCA: individuals and entities with foreign accounts may have FBAR (FinCEN
• Practical: most U.S.-formed LLCs historically expected to file BOI reports — confirm current status for your entity (domestic vs. foreign) and act quickly if you are a foreign‑formed entity registered in the U.S.
• Sales/use tax treatment of SaaS and digital products differs by state. Key authoritative positions:
• Texas: Data processing services (including many SaaS/web hosting/data storage services) are taxable; Texas publications treat web hosting, site creation/maintenance, data storage, offsite backups and many SaaS-type services as taxable data processing. (Texas Comptroller)
• California: The CDTFA traditionally treats electronically transferred data products (software, data, ebooks) as generally not taxable as tangible personal property in many circumstances — but facts matter (bundled physical media, printed copies, or other elements can change the analysis). (CA CDTFA references; see state guidance)
• Florida/Delaware: Delaware has no state sales tax; Florida generally does not treat digital goods as tangible personal property subject to sales tax though communications/transport services may be taxable. (State guides / compilations)
• Practical: map where customers use the service, track receipts per state, and implement sales tax automation (Avalara/TaxJar/Stripe tax) plus state‑by‑state nexus reviews.

Banking & payments for non‑resident founders - Opening a U.S. bank account remotely is feasible (fintechs like Wise, Mercury, Relay, Airwallex) but traditional banks often require in‑person visits and stronger proof of U.S. operations; banks typically require an EIN and consistent documented U.S. business address (registered agent addresses often not accepted). Nonresident guides emphasize the EIN processing timeline and alternatives (fintechs) to access USD banking quickly. (nonresident.tax / banking guides) - Practical

plan EIN application timing, prepare a banking‑compliant address (coworking lease, commercial lease, or verified address), and be ready for enhanced KYC (IDs, operating agreements, proof of operations).

Payroll, immigration, and hiring - If you hire U.S. employees, register for state payroll taxes, federal employment taxes, and satisfy I‑9 employment eligibility verification (work authorization). Founders who work in the U.S. must comply with immigration/visa rules — incorporation doesn’t confer work authorization. Consult immigration counsel for founder visas (E‑2, L‑1, O‑1 alternatives) or remote‑work considerations. 7) Data privacy & cross‑border transfers - GDPR applies when processing EU residents’ data; use lawful bases (consent, contract), implement SCCs/appropriate safeguards for cross‑border transfers, and maintain DSAR processes. U.S. state privacy laws (CCPA/CPRA, VCDPA and others) are proliferating — by 2025 many states have enacted comprehensive privacy laws. Implement privacy by design, data mapping, and vendor controls; use a privacy management platform if you scale internationally.

IP, contracts & AML/KYC for payments - Capture IP assignment (founder employment/assignment agreements) early, register trademarks as needed, and ensure customer terms & privacy/policy pages reflect cross‑border data flows. For payment processing, maintain AML/KYC practices; high‑risk payments or unusual flows may trigger enhanced due diligence by processors and banks.

Practical compliance checklist (priority order for an international SaaS founder targeting/operating in the U.S.)

Decide formation state (Delaware/Wyoming vs. home state) — consider investors, franchise taxes, and practical banking needs.

Obtain EIN early (file SS‑4 by fax/mail if responsible party lacks SSN/ITIN); prepare for processing delays for non‑residents. 3. Determine federal filing obligations

if foreign‑owned U.S. DE, prepare pro‑forma Form 1120 and Form 5472 each year; identify and document all related‑party reportable transactions.

Review FinCEN BOI status

determine whether your entity is a foreign reporting company required to file BOI and meet deadlines (or whether domestic exemption applies under current FinCEN interim rule).

Map customers by state, evaluate economic nexus thresholds, and configure sales tax collection for states where SaaS/digital goods are taxable (NY, TX, and others); consult state guidance for each jurisdiction.

Set up banking and payment rails

choose fintech vs. traditional bank, secure a bank‑acceptable U.S. address, ensure EIN documentation for account opening.

Put basic security & privacy foundations in place

SOC 2 / ISO 27001 roadmap, GDPR/CCPA baseline, data mapping, SCCs for EU transfers.

Payroll/immigration

if hiring or founders working in the U.S., register payroll accounts and ensure proper immigration status.

Contracts/IP/AML

have founder IP assignment, standard terms, privacy policy and AML processes for payments.

Retain experienced U.S. tax/CPA and U.S. corporate counsel (especially for Form 5472, withholding, state nexus, BOI questions). 10) Suggested authoritative resources to cite and include in blog/newsletter - IRS Instructions for Form 5472 (Dec 2024) — covers foreign‑owned U.S. DE reporting requirements and who must file. (IRS) - FinCEN BOI main page, FAQs, and Small Entity Compliance Guide — explains current BOI interim final rule (March 2025) and deadlines for foreign reporting companies; explains TIN/EIN guidance for BOI filings. (FinCEN) - Texas Comptroller publications on Data Processing Services (taxability of many SaaS/web hosting services). (Texas Comptroller) - New York DTF tax bulletin on Computer Software (prewritten software taxable even when delivered electronically). (NY DTF) - California CDTFA guidance on nontaxable electronic data products (review facts/circumstances). (CDTFA) - Practical guides for non‑resident founders

nonresident.tax guides on Form 5472/1120 and remote US banking timelines for non‑residents.