WoBorders

Bulk payments for international companies via a transit account

WoBorders — Tue, 13 Oct 2026 08:09:21 +0000

Author: Ivan Chebotarov, CEO & Co-Founder of WoBorders
All references to the Monobank brand have been approved

Ukrainian entrepreneurs often register companies abroad—in Estonia, Poland, Cyprus, the United Kingdom, or the United States. At the same time, part of the team and some contractors continue to work in Ukraine. The foreign company receives payments from international clients but must regularly pay Ukrainian sole proprietors and other business partners.

If a company works with several contractors, organizing payments is relatively simple. It gets more complicated when there are 30, 50, or even 100 recipients, and funds must be transferred from abroad to each one every month.

Each payment requires verification of the bank details, amount, and payment description. After sending the funds, you need to verify that they have been credited and reconcile the transactions with the invoices. If the bank delays or returns the transfer, you have to investigate the reason separately and reauthorize the payment. When there are dozens of such transactions, the accounting department spends a considerable amount of time just on these calculations.

Another issue is bank fees. For each international transfer, the company pays a bank fee, and depending on the payment terms, additional costs for correspondent banks and currency conversion may apply. With many recipients, total fees can add up quickly, especially for regular small payments.

Estimated cost of SWIFT transfers:

Standard SWIFT transfer — approximately €10–30 in fees charged by the sending bank
SWIFT transfer with the OUR fee type, where the sender covers the costs of correspondent banks — €20–50
Express SWIFT transfer — €40–60

The actual cost depends on the bank's rates, the currency, and the transfer terms. Correspondent banks may also charge additional fees.

To avoid making a separate international transfer to each contractor, the company can use a transit account for bulk payments.

Our partner, Monobank, offers a service called “Bulk payments for international companies” for this purpose. It involves transferring funds from a foreign company to a transit account and then distributing them among Ukrainian recipients.

Here's how the process works:

- A foreign company transfers the total amount for payments to Ukrainian contractors to a transit account in a single payment.

- Prepares and submits to the bank a payment register containing the recipients' details and the amounts.

- Monobank distributes funds among Ukrainian recipients in accordance with the provided list.

Who might benefit from mass payments?

Mass payments have been used in Ukraine for a long time. IT companies are very familiar with this mechanism; even before the full-scale invasion, they were actively recruiting Ukrainian developers, designers, testers, and other specialists to work for foreign companies.

With many contractors, it's easier to process payments through a single registry than to make dozens of international transfers each month.

But these challenges aren’t limited to the IT industry. Marketing and advertising agencies regularly pay designers, copywriters, and advertising specialists. Recruitment firms work with independent recruiters, while consulting and outsourcing companies hire Ukrainian specialists to carry out projects for foreign clients.

Bulk payments can also help trading or logistics companies with many local partners in Ukraine that regularly pay for their services.

The key factor here is less the industry in which the company operates and more the number and frequency of payments. If a foreign business makes monthly payments to dozens of Ukrainian counterparties, it makes sense to consider making such payments through a transit account.

How do mass payments through a transit account work?

For example, you have an Estonian company, which develops software for European clients. Thirty Ukrainian sole proprietors—developers, designers, testers, and marketers—are working on these projects.

Every month, contractors issue invoices for services rendered, and the company must pay them. Under the usual procedure, this would require 30 separate international wire transfers.

Using a Monobank transit account, payments can be handled differently. Through the “Bulk Payments for International Companies” service, a foreign company transfers the total amount in a single payment to cover all invoices.

How to fill out the mass payouts register through a monobank transit account
Column Name	Instructions for Completion	Example
Payer's IBAN	An account in IBAN format, opened for the company at monobank	UA12322001000002909XXXXXXXXXX
Amount	The amount to be credited to the sole proprietor's account	3 000,00
Currency	Payment currency. Must match the currency of the payer's account	EUR
Recipient's IBAN	Sole proprietor's account in IBAN format, opened at monobank	UA08322001000002600XXXXXXXXXX
Recipient's Name	Recipient's surname, first name and patronymic	Ivanov Ivan Ivanovych
Recipient's Identification Code	Recipient's Tax Identification Number (TIN)	1234567890
Payment Purpose	Payment for ___ services, Agreement No. ___ dated ___, Invoice No. ___ (if available)	Payment for IT services, Agreement No. 12345 dated 05.11.2019

Important: When preparing the register, do not change the column names or the list of columns, and do not delete the row with column numbers in the monobank template.

The company is also preparing a list containing the contractors’ bank details and payment amounts. The company submits this list via the online portal, after which Monobank distributes the funds to Ukrainian recipients. For subsequent payments, it is sufficient to create a new list with the current amounts and a list of contractors.

At WoBorders, we often recommend that our clients use transit accounts for these types of transactions. One common example is— a foreign company has a corporate account with Payoneer, into which it receives payments from customers. From this account, it transfers the total amount to a Monobank transit account, from which the funds are distributed among Ukrainian sole proprietors according to the registry.

We recommend paying special attention to the remaining funds in the transit account. If, after making payments, some funds remain unused, we recommend, whenever possible, returning them to the foreign company’s account within each reporting month. This helps avoid unnecessary discrepancies during payment reconciliation and accounting in the country where the company is registered. The bank and the accountant who handles the company's books must agree in advance on the feasibility and procedure for such a return.

If your foreign company regularly pays Ukrainian sole proprietors, contact WoBorders. We’ll help you determine whether a transit account is right for you and how to properly set up payments in accordance with bank and accounting requirements.

Ця публікація Bulk payments for international companies via a transit account вперше з’явилася на сайті WoBorders.

Trademark registration in the EU: what businesses need to know

WoBorders — Thu, 08 Oct 2026 12:48:02 +0000

Author: Ivan Chebotarov, CEO & Co-Founder of WoBorders

Even if you have an active business in Ukraine and a trademark registered there, Ukrainian registration alone does not protect your brand in the EU. So, when entering European markets, consider registering your trademark in Europe.

If you do business in only one EU country, national registration and trademark protection in that country alone may be sufficient. When doing business across the European Union, register a trademark with the EUIPO (European Union Intellectual Property Office).

A single application to register a European trademark protects all 27 EU member states. If you need protection outside the EU, you can use the WIPO Madrid System. It lets you file a single international application based on a national or regional registration and specify the countries or regions where the applicant wants protection. The relevant national or regional authority makes the final decision regarding trademark protection in each country.

What are the benefits of registering a trademark in the EU?

Trademark registration grants the owner exclusive rights to distinctive marks, such as names, logos, colors, images, patterns, shapes, product packaging, or sounds, which identify products and distinguish goods or services from those of others. In most countries, trademark protection lasts for 10 years from the date the trademark application is filed. You can renew your trademark protection indefinitely every 10 years. Once you own a trademark, you can sell it to someone else or grant permission to use it through a special licensing agreement.

A trademark is registered for specific goods or services in accordance with the Nice Agreement. The Nice Classification classifies goods into classes 1 through 34 and services into classes 35 through 45.

It is important to file applications for the classes of goods and services that match your business, as this directly affects how strongly your trademark is protected in the EU. Also, you cannot simply “add” new classes after filing an application; you must file a new application. If you wish to include more than one class of goods or services, a fee is payable for each additional class.

How to check a trademark before registration

Before filing, you should check for any conflicts with existing trademarks. Verify whether identical or similar trademarks exist, which classes they are registered in, whether corresponding national trademarks exist in EU countries, and whether any applications have been filed previously.

The EUIPO rejects an application for an EU trademark if grounds for refusal exist even in only part of the European Union.

Before filing an application, check not only for exact name matches but also for trademarks similar in spelling, pronunciation, and meaning. You should also verify the goods and services already registered under the trademark.

Who is the best entity to register a trademark with: an individual or a company?

A trademark can be registered in the name of either an individual or a legal entity. The main difference is who owns the brand rights and who controls the trademark if the business structure changes or the business dissolves.

Official fees and processing times are also the same. For applicants from Ukraine, one additional consideration applies: because Ukraine is not part of the EEA, a representative in the EEA may be required to work with the EUIPO. This requirement applies to any applicant located outside the EEA, not just individuals.

If there already is registered company in the EU, trademarks are more often registered in the company’s name, since this eliminates the need to separately transfer ownership or the right to use the trademark from an individual to the company. If, however, the trademark is registered in an individual’s name, that individual may transfer the right to use the trademark to their own company or re-register the trademark in the name of a legal entity.

If an individual owns a trademark but a company uses it, the right to use it must be formalized separately, for example, through a contract. The rights of use are transferred under the terms of the contract. A company’s use of a trademark owned by an individual may have tax implications. These depend on the owner’s tax residency and the terms of the transfer of rights. In addition, the applicant’s physical address is public information and is entered into a public registry. The registry will contain two sections: “Owners” (names and addresses—physical and mailing) and “Representatives” (address of the local representative).

Steps for registering a trademark in the EU

Determine exactly what you are registering: a name, a logo, or several marks
Identify the goods/services and the classes to which they belong
Identify the territories that need protection
Conduct a professional search for similar trademarks and assess the risk of conflict
Determine the trademark owner—an individual or a company
Prepare and file a trademark registration application
Monitor the examination process and any potential opposition
After registration, monitor usage and new applications filed by competitors

We can help you register a trademark in the EU

We’ll check the name, determine the classes, and prepare an application for trademark registration with the EUIPO

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What to do after registering a Trademark

Entry in the trademark registry does not automatically protect competitors. After registering a trademark, the owner must use it for the goods or services covered by the registration and monitor new applications for similar names. If someone files an application for a similar trademark, the EUIPO may notify the owner of the previously registered trademark via email through surveillance letters. If the owner of the earlier trademark believes the new application infringes their rights, they may file an opposition within 3 months of publication. Special trademark monitoring services are available for this purpose. For example, TMview allows you to search for trademarks across various government agencies.

Frequently Asked Questions about Trademark registration in the EU

I already own the domain brand.com. Does that mean I have the rights to the brand?

No. Owning a domain name does not mean that you automatically have rights to the corresponding trademark. A domain name and a trademark are different legal protections. A domain name gives you the right to use a specific Internet address. A trademark grants exclusive rights to the corresponding designation with respect to specific goods and services.

If you have registered brand.com, this in itself does not prevent another person from registering “BRAND” as a trademark, provided there are no other obstacles to doing so. Similarly, registering a trademark does not automatically grant you the corresponding domain name; someone else may already own it.

Does the company name ABC OÜ protect the ABC trademark?

A company name and a trademark are distinct legal objects. The mere fact that ABC OÜ is registered in the commercial register does not automatically confer the right to the ABC trademark throughout the EU. Furthermore, the EUIPO explicitly classifies company names as “other prior rights” that may serve as grounds for opposing a later trademark.

If someone has registered a trademark, can they take my domain away?

The mere registration of a trademark does not mean that the owner can automatically take your domain name.

In the event of a dispute over a domain name, the following factors are considered: when it was registered, the trademark owner's rights, whether the domain name owner had legitimate grounds to use it, and whether the registration was made in bad faith.

Can you lose a trademark if you don't use it?

During the first 5 years after registration, there is no requirement to prove use of the trademark. If, after that, the trademark is not used continuously for 5 years in connection with the relevant goods or services, an interested party may file a petition to revoke it on the grounds of non-use.

How long does it take to register a trademark in the EU?

EU trademark registration typically takes about 5–6 months. For Fast Track applications, the process may be shorter—approximately 4–5 months. If objections or additional questions arise during the examination, the process takes longer.

See also the answers to frequently asked questions on the website EUIPO.

Ця публікація Trademark registration in the EU: what businesses need to know вперше з’явилася на сайті WoBorders.

Statistical report in Estonia (Statistiline aruanne): what the request means and who needs to submit it

Hnatyshyna Anastasiia — Tue, 08 Sep 2026 11:15:55 +0000

Author: Anastasiia Hnatyshyna, Co-Founder of WoBorders

We regularly hear from owners of Estonian businesses who have received a letter from Statistics Estonia asking them to provide data through Statistiline aruanne – the Estonian statistical reporting system.

Owners of recently registered OÜs often have the most questions. A business may have existed for less than a year, carried out only several transactions, and later paused its activity for a period of time, but it can still receive a request from Statistics Estonia.

Statistics Estonia may send these requests to VAT-registered businesses as well as OÜs without a VAT number. VAT registration alone does not determine whether an entity must complete a Statistiline aruanne.

What is Statistiline aruanne in Estonia?

Statistics Estonia collects data from businesses to produce Estonia's official statistics. The information helps to analyze business turnover, employment, developments in individual industries and other economic indicators. Some of the collected figures are also used for statistical analysis at the European Union level.

Estonian public registers already contain a large amount of information about registered businesses. Statistics Estonia therefore uses questionnaires to obtain details that are either not available through those registers or are not detailed enough for a particular survey.

Statistiline aruanne should not be treated as the same document as the annual financial report – majandusaasta aruanne. These are separate reporting obligations. Completing a questionnaire for Statistics Estonia does not change the deadline or the requirement to file annual financial statements. Similarly, filing an annual report does not prevent an OÜ from receiving a separate data request from Statistics Estonia.

If the company is already operating and has regular transactions, these matters are usually handled as part of accounting support for a company in Estonia together with other ongoing reporting.

Do all Estonian businesses have to provide this information?

No. Statistics Estonia runs different surveys, and an OÜ may be selected depending on its area of activity, business size, number of employees, thresholds established for a particular survey, or the sampling method used.

As a result, two OÜs working in similar fields may receive different questionnaires from Statistics Estonia.

Newly incorporated businesses deserve separate attention here. We regularly work with clients whose OÜ has existed for less than a year. For example, an entity may have started operating at the end of 2025, carried out transactions only in the fourth quarter, and then had no turnover for some time in 2026. This does not prevent Statistics Estonia from selecting it for a survey.

The way the OÜ was incorporated does not directly affect this obligation either. Businesses that completed company registration in Estonia through e-Residency or a notaryare subject to the same rules for statistical data collection once registered.

When an OÜ has been selected for a relevant survey, the requested information must be provided within the specified deadline.

This obligation is directly established by § 28 of the Official Statistics Act.

Received a request from Statistics Estonia?

We will review your Statistiline report, prepare the required data, and help you submit it by the deadline.

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What documents are needed for Statistiline aruanne?

There is no standard set of documents that applies to every request. The information needed depends on the questionnaire, the period covered, and the actual activity of the business.

For our accountants, a bank statement is usually one of the main documents used to prepare the figures. For example, if data is needed for the second quarter of 2026, the accountant may require a bank statement covering the period from the beginning of the year through the end of the second quarter.

If the OÜ signed agreements or carried out business transactions during that period, the accountant may also ask for the relevant contracts and supporting documents. Where the annual financial statements for the previous financial year have already been filed, they can also be used to verify and compare certain figures.

For an entity with no turnover, the amount of work is usually relatively small. If there have been more transactions, additional time may be needed to review bank statements, agreements, and financial information for the relevant period.

Even if the business did not actually carry out any activity, a request from Statistics Estonia should not simply be left unanswered. Depending on the questionnaire, the OÜ may need to indicate that there was no activity or use the option provided by Statistics Estonia to return the questionnaire without financial figures.

Can a penalty apply if the data is not provided?

Yes. Estonian law provides for consequences where requested statistical information is not supplied.

If an OÜ does not comply with a request from Statistics Estonia, a penalty payment of between €300 and €1,200, may be imposed after the relevant enforcement order has been issued. The payment can be imposed repeatedly, and paying it does not remove the original obligation to provide the requested information.

Based on our own experience, none of the businesses that WoBorders has assisted with Statistiline aruanne have so far been subject to these penalties. However, we do not consider this a reason to ignore a request. The law clearly provides for the possibility of a penalty, so we recommend responding within the required period or properly closing the request where the business had no activity during the period concerned.

How much does Statistiline aruanne cost to prepare in Estonia?

WoBorders prepares and files statistical reports for Estonian companies. You can use this service on its own or as part of your ongoing accounting.

If you've received a notice from Statistics Estonia, send it to us with your company's registration number. Our accountant will check the report and reporting period in the Statistics Estonia portal, then tell you which documents to provide.

The service usually costs €50–€100, depending on the type of report and the number of transactions and documents to review.

Get Help Filing Your Report ↓ ↓

Need to file a Statistical Report in Estonia?

Received a notice from Statistics Estonia? We can help you check which reports are due, prepare the data and fill out the required forms

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Common questions about statistical reporting in Estonia

What is Statistiline aruanne?

Statistiline aruanne is a system through which Statistics Estonia collects information from Estonian businesses for the preparation of official statistics. It is separate from tax declarations and from the annual financial statements of an OÜ.

Do all businesses in Estonia have to complete Statistiline aruanne?

No. An OÜ is required to provide the requested information when it has been included in a relevant survey. Selection depends on the questionnaire and the criteria established for that particular survey.

Can an OÜ without VAT registration receive a request?

Yes. In our experience, Statistics Estonia sends such requests both to VAT-registered and non-VAT businesses. Having or not having a VAT number does not, by itself, determine whether a Statistiline aruanne must be completed.

What should an OÜ do if it had no business activity?

The request should still be addressed, not ignored. If there was no activity during the relevant period, this should be properly reflected in the information provided to Statistics Estonia according to the questionnaire received.

Can a penalty apply for not completing Statistiline aruanne?

Yes. If you do not provide the requested information after the relevant enforcement order has been issued, a penalty payment of between €300 and €1,200 may apply. The penalty can be imposed repeatedly and does not release the OÜ from its obligation to provide the requested data.

Ця публікація Statistical report in Estonia (Statistiline aruanne): what the request means and who needs to submit it вперше з’явилася на сайті WoBorders.

How to build an international MilTech structure: procurement, investments, and IP

Chebotarov Ivan — Fri, 28 Aug 2026 09:18:38 +0000

For most Ukrainian MilTech and Defense Tech projects, incorporating a company abroad is not an end in itself. The decision is usually driven by practical business needs: sourcing components from China and other countries, working with European suppliers, opening bank accounts, managing international logistics, and, in some cases, subsequently selling products to foreign customers.

Once the jurisdiction is selected, a more important question arises: what role will the foreign company play, and how will it be integrated into the business’s operating model?

The answer will determine whether the structure can operate effectively for years without raising unnecessary questions from banks, customs authorities, and tax authorities, or whether it will become a source of ongoing compliance risks.

In our previous pillar article, domain article "What you need to know before registering a MilTech company?“ we examined when it makes sense for a Ukrainian MilTech project to establish a company abroad and when such a structure has a genuine economic rationale.

In this article, we move on to the next stage – the practical design of an international business structure. We will first examine one of the most common models for international procurement, then cover structures for raising investment, holding IP, and managing relationships between foreign and Ukrainian companies.

Briefly: an international MilTech business structure should be built around the functions each company actually performs. For procurement, a foreign company may work with suppliers, customs warehouses, logistics providers, and the Ukrainian importer. For investment purposes, it may serve as a holding company, own equity interests and IP, and act as the entry point for investors. In more complex structures, these functions may be distributed among several legal entities.

This material draws on WoBorders’ practical experience in incorporating and providing ongoing support to Ukrainian MilTech, Defense Tech, and hardware projects that work with international suppliers, build corporate and procurement structures across Ukraine, the European Union, and Asian markets, and prepare to engage with foreign partners and investors.

The key regulatory acts on which this material is based are listed at the end of the article.

In this article, Estonia is used only as one example of how such a structure can be implemented. Poland often uses similar structures, particularly when the customs warehouse, logistics provider, customs broker, or part of the operational team is based there. Therefore, most of the principles discussed below apply regardless of the specific jurisdiction chosen.

Building a procurement structure between the EU and Ukraine

This section covers a scenario in which a foreign company purchases components from manufacturers, while a Ukrainian company imports them for use in the subsequent production of finished products.

What a basic MilTech operating model looks like

In simplified terms, the structure is relatively straightforward.

A Chinese manufacturer sells the goods to a foreign company. The shipment then arrives in an EU country and is placed in a customs warehouse. The foreign company subsequently sells the goods to a Ukrainian LLC, after which the products are re-exported to Ukraine for customs clearance and use in manufacturing.

On paper, this may look like a conventional supply chain. In practice, however, it involves several separate legal, customs, logistics, and financial processes, each of which must be properly structured and documented.

A typical model works as follows.

First, the foreign company enters into an agreement with the manufacturer, negotiates the commercial terms, makes payment, and takes ownership of the goods. After shipment, the products are delivered not to a conventional commercial warehouse but to a customs warehouse or bonded warehouse, where they are stored under customs supervision without being released for free circulation within the European Union.

While the goods remain under this customs procedure, they retain their status as non-Union goods. Only then does the foreign company sell the components to the Ukrainian business; the goods are re-exported, and the final import customs clearance takes place in Ukraine.

This sequence of transactions can often make it possible to build an international supply chain without completing a full import of the goods into the European Union.

However, the mere existence of a foreign company does not automatically mean that such a structure will be considered commercially justified.

For a bank, customs authority, or tax authority, the key question will be framed differently: why is there another entity between the Chinese manufacturer and the Ukrainian company in the first place?

If the foreign company merely reissues invoices while all negotiations, financing, supply chain management, and decision-making are effectively carried out from Ukraine, its role will be much harder to justify. Conversely, if the company genuinely manages procurement, works with suppliers, finances production, coordinates with the customs warehouse, manages logistics, and assumes some commercial risk, its economic function becomes clear to all parties involved.

This distinction determines whether the structure is viewed as a fully functioning international business or merely as a formal intermediary between the manufacturer and the Ukrainian company.

Why bringing goods into an EU country does not always mean importing them into the EU

One of the main advantages of a customs warehouse is that goods can be physically located within the European Union without being legally released for free circulation.

For businesses, this distinction is fundamental.

This model is based on the provisions of the Union Customs Code (Regulation (EU) No 952/2013), which provides for special customs procedures, including customs warehousing. While goods remain under this procedure and have not been released for free circulation, they retain the status of non-Union goods.

Council Directive 2006/112/EC on the common system of value added tax (VAT Directive 2006/112/EC) provides a similar approach. It allows special customs arrangements to be applied without import VAT becoming due until the goods are released for free circulation.

Therefore, the physical arrival of a shipment in Poland, Estonia, or another EU country does not, by itself, mean that the goods have been imported into the European Union or that import VAT must be paid at that stage.

If components from a third country are cleared as a standard import into an EU Member State, import VAT becomes due and, depending on the type of goods, customs duties and other mandatory charges may also apply.

If the goods are placed under the customs warehousing procedure, import duties are not payable for as long as the goods remain under that procedure. The VAT treatment depends on the applicable procedure and the rules of the relevant EU Member State.

From a practical perspective, this means that the country where the shipment physically arrives and the country where it is ultimately imported may be different. What matters is not the physical location of the goods, but the customs procedure under which they are placed.

At the same time, this model works only if every stage of transportation is properly structured and documented. If the goods are released for free circulation within the EU, import VAT, customs duties, and other applicable charges will arise under the general rules.

Before dispatch, the logistics route, warehouse status, transit procedure, required documentation, and subsequent re-export process should be agreed with the customs broker.

Why a customs broker should be involved before the goods are shipped

One of the most common mistakes when organizing international procurement is contacting a customs broker only after the shipment has already left China or arrived in Europe.

In practice, this is often too late.

A customs warehouse is not a conventional 3PL operator that receives and stores goods. It operates under a specific authorization from the customs authorities, maintains separate customs records, and is responsible for compliance with the customs procedure under which the goods are placed.

Before signing a contract with the manufacturer, it is advisable to determine whether the specific goods can be placed in the selected customs warehouse and which procedure will apply to their subsequent re-export.

At this stage, the broker will typically help determine:

– whether the selected customs procedure is suitable for the specific goods;

– which HS code will be used;

– who will act as the declarant;

– how the transit procedure will be arranged;

– which documents will be required to complete the customs procedure;

– whether the goods are subject to additional export control requirements or special authorization procedures.

This is particularly important for MilTech, Defense Tech, and advanced electronics manufacturers.

Many components used in UAVs, communication systems, electronic warfare systems, or robotic platforms may contain elements that are not military products in themselves but, due to their technical characteristics, may fall within the scope of export controls or require additional scrutiny during international transportation.

Customs classification is rarely based solely on a product's commercial name. Descriptions such as “communication module,” “electronic unit,” or “UAV component” provide customs authorities with very little information.

For proper classification, the broker may require:

– a datasheet or technical specification for the product;

– a technical data sheet;

– drawings or photographs;

– information on operating frequencies;

– transmitter power;

– supported communication protocols;

– the functional purpose of the product;

– information on the intended end use of the product.

In more complex cases, it may also be necessary to assess whether the goods are subject to the export control regime of the country of manufacture or transit.

The earlier these issues are addressed, the lower the risk of delays after the shipment arrives in Europe. This is why, in international procurement, a customs broker often becomes involved before the first payment is made to the manufacturer, rather than only at the customs clearance stage.

What the document flow should look like

If the supply chain involves China, a foreign company, and a Ukrainian importer, the documentation should support not only the movement of goods but also the economic rationale behind the entire transaction.

This is what banks, customs authorities, and tax authorities most commonly examine.

Each reviews the documentation from a different perspective, but they all seek an answer to the same question: does the declared structure reflect how the business actually operates?

The first document is the contract between the foreign company and the manufacturer.

In addition to standard supply terms, it should include a clear description of the products and their technical specifications, price, settlement currency, payment terms, applicable Incoterms rules, the parties’ responsibilities, warranties, and a list of documents accompanying the shipment.

A separate agreement is concluded between the foreign company and the Ukrainian buyer.

In practice, this document often becomes key evidence that the foreign company performs a genuine economic function. It should therefore not simply replicate the agreement with the Chinese manufacturer. Instead, it should clearly define the role the foreign company assumes within the overall structure.

For example:

– finances the procurement;

– consolidates shipments from multiple manufacturers;

– works with the customs warehouse;

– organizes international logistics;

– arranges cargo insurance;

– oversees production;

– assumes the risks associated with delivery delays or defective products;

– coordinates with the customs broker.

If the agreement does not reflect these functions, regulators may reasonably question what exactly justifies the foreign company’s margin.

It is equally important that all supporting documents consistently describe the same transaction. Invoices, packing lists, transport documents, customs declarations, certificates of origin, and other documents should be aligned with one another.

The product name, quantity, item number, units of measurement, and technical description should not vary from one document to another without an objective reason.

For advanced electronics, the product's technical description is particularly important. A general commercial name is usually not sufficient.

The documents should preferably specify:

– the product’s intended function;

– its key technical characteristics;

– the product composition;

– the intended field of use, including military or dual-use applications;

– the status of the goods – whether they are finished products or components;

– any applicable technical restrictions.

If the goods may be subject to export control rules, additional documents confirming the end user may also be required, such as an End User Statement or End User Certificate. These documents confirm who will use the goods, where, and for what purpose.

For dual-use goods, this is often a key element of international documentation.

However, having the required documents in place does not in itself guarantee that no questions will arise. In practice, consistency between the documentation and the company’s actual business activities is becoming increasingly important.

Correspondence with suppliers, negotiations over procurement terms, internal management decisions, evidence of price approvals, and communications with logistics providers and customs brokers all contribute to the evidence that the foreign company genuinely performs its stated functions rather than merely participating in the supply chain on paper.

Modern international documentation is no longer limited to contracts and invoices. It is a combination of documents and business processes that together demonstrate the economic rationale of the entire structure.

The procurement model is only one scenario for using a foreign company in a MilTech business. If the next objective is to attract an international investor, the structure must address a different set of questions: where the equity interests and key assets are held, who owns the IP, how the investor enters the business, and what role the Ukrainian operating company continues to perform.

Need to build a procurement structure between the EU and Ukraine?

We can help define the foreign company's role, select the appropriate jurisdiction, and structure its relationship with the Ukrainian business.

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Building a MilTech business structure to attract investment

Another reason for establishing a foreign legal entity for a MilTech business is to make it more attractive to investors. Ukrainian MilTech is developing rapidly and attracting increasing investor interest. At the same time, the ongoing war creates additional risks that may constrain foreign investment.

Ukrainian MilTech and Defense Tech projects have significant advantages: unique technologies and developments, the ability to test products under real combat conditions, practical experience, and highly skilled specialists. However, investors assess not only the potential of the business and its technology but also its stability, asset protection, and the clarity of its legal structure.

Establishing a foreign legal entity can help combine the strengths of Ukrainian MilTech with a more predictable, investor-friendly corporate structure.

A foreign company as a vehicle for attracting investment in MilTech

One of the most common structures for attracting international investment works as follows.

A foreign company is established. Jurisdictions such as the United States, Poland, Estonia, or the United Kingdom may be used. However, the jurisdiction is often selected with a specific investor in mind or based on the requirements of banks, R&D programs, or regulators.

Existing developments, technical drawings, software, patents, and other intellectual property assets are transferred from their Ukrainian owners – whether individuals or legal entities – to the foreign company.

In many cases, these intangible assets are contributed to the share capital of the newly established company. This may require confirming their market value through an independent valuation or audit, depending on the legal requirements of the country of incorporation.

If the Ukrainian MilTech business is already operating and has an incorporated LLC, manufacturing facilities, warehouses, employees, existing contracts, a network of contractors, and other assets, a common solution is to transfer ownership of the Ukrainian company to the foreign legal entity.

As a result, the structure is set up. The foreign company then owns the Ukrainian business and its key assets, including intellectual property, and can also serve as the primary vehicle for attracting international investment.

At the same time, the Ukrainian LLC continues to carry out operational activities in Ukraine: manufacturing products, employing personnel, working with contractors, and performing existing contracts.

Below is a visual example of a clear and investor-friendly structure.

Benefits of a holding structure for investors

The structure should be convenient not only for business owners but also for future investors. Why is this type of structure generally more attractive to investors?

A foreign holding company allows:

– the investor to hold an equity interest in a company incorporated in a jurisdiction that is familiar or understandable to them;

– investor rights to be formalized through corporate documents;

– clear procedures to be established for key corporate decisions;

– minority investor protection mechanisms to be put in place;

– rules to be established for share transfers, investor exits, dilution, M&A transactions, and other corporate events;

– equity incentive mechanisms to be created for management.

For a technology-driven MilTech business, the key asset is often not physical equipment but IP – software, technologies, patents, technical documentation, know-how, and other intangible assets. Investors therefore need to understand where these assets are legally held, who owns them, and under what terms the Ukrainian operating company may use them.

For more information about IP, see our article “Intellectual Property, Contracts and Compliance for Companies Entering the EU Market”.

Investment terms may cover not only the size of the investor’s equity stake but also governance rights, veto rights over certain decisions, procedures for future investment rounds, anti-dilution protection, rules governing share transfers, and mechanisms for the investor’s exit from the business. This is particularly important for MilTech companies, as potential acquirers may include major defense technology companies.

Key investment mechanisms

Once a foreign company is established, it can attract investment through several mechanisms. The best approach depends on the business stage, the type of investor, the amount of funding required, and whether the founders are willing to transfer part of their equity.

Direct investment in the company’s equity

The most traditional option is for the investor to invest funds directly into the foreign company in exchange for an equity stake.

For example, the founder owns 100% of the foreign company. The investor contributes €1 million and receives a 20% equity stake, reducing the founder’s ownership to 80%.

In this case, the company receives the funds directly and can use them to develop new products, scale manufacturing, hire personnel, or enter new markets. This mechanism is particularly common in venture capital and strategic investment transactions.

Sale of an equity stake by an existing shareholder

Another option is for the investor to purchase an existing equity stake from the founder or another shareholder.

In this case, the seller receives the proceeds rather than the company itself. Therefore, this mechanism does not constitute direct financing of the business but rather a partial exit by an existing shareholder. At the same time, the sale of an existing stake can be combined with a simultaneous injection of new capital into the company. Водночас продаж частини частки може поєднуватися з одночасним залученням нового капіталу до компанії.

Combination of a secondary sale and new financing

In practice, the two mechanisms can be combined.

For example, an investor contributes €2 million: €1.5 million is invested directly in the company as new capital, while €500,000 is paid to the founder to acquire part of their existing equity stake.

This approach enables the company to finance its growth while also providing the founder with partial liquidity.

Convertible loan

At an early stage of business development, the parties may decide not to determine the company’s final valuation immediately. Instead of making a direct equity investment, the investor provides the company with a loan that may later be converted into equity.

For example, an investor provides the company with a €500,000 loan. During the next investment round, this amount is converted into an equity stake on terms agreed in advance.

This mechanism can be particularly useful for startups when it is difficult to determine the company’s valuation at an early stage.

Investment through a dedicated investment vehicle

When several investors are involved, a separate company or investment vehicle may be established through which the investors invest in the MilTech business. This makes it possible to centralize the relationship between the founders and the investor group without creating an overly complex ownership structure directly at the level of the Ukrainian operating company.

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When a MilTech business may need multiple foreign companies

It is important to understand that the parent company in such a structure does not have to serve solely as a vehicle for attracting investment. A foreign company may enter into contracts directly with international customers, distributors, and partners, making it easier to enter international markets and sell products outside Ukraine.

Such a structure can also facilitate cooperation with major defense contractors that may have restrictions or internal requirements on engaging with Ukrainian companies and may prefer counterparties incorporated in the EU, the United States, or other familiar jurisdictions.

If a MilTech business plans to enter the EU or US market, it may also use a foreign company as a platform to establish manufacturing facilities, warehousing centers, or final product assembly operations. Localizing production abroad is not always economically justified, but in certain cases it can help diversify risks and reduce the business’s dependence on manufacturing capacity in Ukraine.

In addition, depending on the jurisdiction and the specific program, a foreign company may gain access to local grants, government support programs, R&D funding, and other incentives available to technology and manufacturing businesses. Eligibility for such support should be assessed separately for each country and specific program.

It is also not always advisable to concentrate all functions within a single foreign company. Operating activities, investment, intellectual property ownership, and relationships with international partners may be subject to different legal, financial, and tax requirements.

As a result, a MilTech business structure may consist of two or even several foreign companies rather than a single entity.

For example, one company may serve as a holding company to attract investment and hold equity interests in other companies; a second may work directly with international customers and partners; and a third may own intellectual property or conduct R&D.

This separation allows different business activities, assets, and risks to be more clearly segregated. The specific structure will depend on the business model, the countries in which the company operates, its funding sources, investor requirements, and the applicable regulatory environment.

How to approach structuring a MilTech business

There is no universal international structure for a MilTech business. Its configuration depends primarily on the functions that the foreign company is expected to perform.

For a procurement model, the key considerations include working with suppliers, logistics, customs warehousing, re-export, documentation, export controls, and the economic rationale for the foreign company’s role.

For an investment structure, the focus shifts to equity ownership, where the IP is held, the relationship between the foreign and Ukrainian companies, mechanisms for investor entry, and subsequent corporate governance.

If a single legal entity cannot logically combine all the required functions, the structure may include several companies with different roles.

If the business is still in its early stages, the first step is to determine whether establishing a foreign company is necessary and which jurisdiction to consider. These questions are discussed in detail in our article “What You Need to Know Before Incorporating a MilTech Company.”.

Frequently asked questions about international MilTech business structures

Does a MilTech business need to establish a foreign holding company?

No. The need for a holding company depends on the business model, investment plans, ownership structure, IP location, and the countries in which the business operates. For some projects, a single foreign operating company may be sufficient, while more complex structures may include a separate HoldCo, an operating company, and an IP holding company.

Does bringing goods into Poland or another EU country automatically trigger import VAT?

Not always. If goods from a third country are placed under the customs warehousing procedure and have not been released for free circulation in the EU, they may remain non-Union goods. The tax and customs implications depend on the specific customs procedure, so the structure should be agreed with a customs broker before the goods are shipped.

Can a foreign company own a Ukrainian LLC?

This model is commonly used in international corporate structures. A foreign company may own the Ukrainian operating company, while the Ukrainian LLC continues to handle manufacturing, employ personnel, work with contractors, and perform local contracts.

Where can a MilTech business hold its IP?

Intellectual property may be owned by either a Ukrainian or a foreign company, depending on the business’s corporate, investment, and tax structure. For investors, it is critical to clearly understand who legally owns the software, patents, technical drawings, technical documentation, and know-how, and on what terms the operating companies may use these assets.

Does a separate company need to be formed to attract investment?

Not necessarily. Investors can invest directly in an existing foreign company. However, some structures use a separate holding company or dedicated investment vehicle, particularly where multiple investors are involved, the asset structure is complex, or there is a need to separate operational and investment risks.

Regulatory framework

When building an international structure for a MilTech or Defense Tech business, you must consider the laws of the specific countries through which corporate, financial, and goods flows are structured.

In particular, the model described in this article takes into account:

Union Customs Code – Regulation (EU) No 952/2013 – the European Union Customs Code.
Council Directive 2006/112/EC – the common system of value-added tax in the EU.
Union Customs Code – Regulation (EU) No 952/2013 – the EU Customs Code, Articles 237 and 240, concerning storage procedures, non-Union goods, and customs warehousing, is particularly relevant to the customs warehousing model.
Export controls on dual-use items in the EU – Regulation (EU) 2021/821. The Regulation establishes the EU regime for controlling exports, brokering services, technical assistance, transit, and transfers of dual-use items.
Export controls in Ukraine – Law of Ukraine No. 549-IV “On State Control over International Transfers of Military and Dual-Use Goods”.

About this material

Ivan Chebotarov and Anastasiia Hnatyshyna prepared this material based on WoBorders’ practical experience incorporating and supporting international structures for Ukrainian MilTech, Defense Tech, and hardware projects.

We advise on jurisdiction selection, incorporation, and ongoing management of foreign companies; international corporate structuring; relationships between foreign and Ukrainian companies; and models involving international procurement and investment.

Last updated: August 2026.

Ця публікація How to build an international MilTech structure: procurement, investments, and IP вперше з’явилася на сайті WoBorders.

IP, contracts, and compliance for a company entering the EU market

WoBorders — Fri, 24 Jul 2026 09:01:54 +0000

When a technology company decides to enter the European Union market, its founders usually focus on the product, customers, and initial sales. The legal side is sometimes postponed "until later"—until an investor, a major contract, or a due diligence request arises. It is precisely at that point that it becomes clear that the business structure, intellectual property rights, and compliance with EU requirements are not separate formalities, but a single interconnected system. A mistake made at the outset in any of these areas may delay a transaction, reduce the company’s valuation, or even make market entry impossible.

Let us examine the key questions: who should own the IP, which law should govern the contracts, and how compliance should be addressed.

One Goal — the EU market, but different starting points

Entering the European Union market will look different depending on where the company starts. One scenario, for example, involves a company incorporated in the United Statesthat wishes to sell to customers in the EU and encounters European law for the first time as a foreign legal system. Another involves a company already incorporated in the EU that is expanding within the European market.

The circumstances differ, but the set of issues on which success depends remains the same: who owns the intellectual property, how contracts are drafted, and whether the business complies with EU regulatory requirements. These three areas — IP, contracts, and compliance — are closely interconnected, and a mistake in any one of them may delay an investor transaction, disrupt a major contract, or result in a fine.

For a US company, the European Union is an external legal order. Many European rules apply extraterritorially, meaning that they extend to a business even when it is incorporated overseas and has no office in the EU. A US company must therefore consciously "enter" the European legal environment: register its brand rights separately in the EU, revise its contracts to meet European expectations, and, in some cases, establish a local presence for banking, payments, and customer confidence.

For a company already incorporated in the EU, the situation is different, although not necessarily simpler.

First and foremost, it is incorporated under the law of a particular Member State. This is its home jurisdiction, and its legislation is the primary law governing the company, including corporate law, taxation, employment relations, accounting, and other matters. On top of this national layer is the European one: the single market, with its freedom of movement for goods and services and convenient EU-wide instruments. However, being "inside” the EU does not mean operating "automatically everywhere." Local differences in languages, consumer protection rules, and practices remain between Member States, meaning that expansion into new EU countries also requires careful attention.

Intellectual Property as the main asset

For a technology company, intellectual property — code, brand, design, algorithms, and databases — is, in essence, the business itself. Therefore, in any transaction, the first thing an investor or buyer will verify is whether the company actually owns what it is selling.

The main problem faced by companies, regardless of jurisdiction, is a fragmented or unclear history of rights ownership. Founders may have created IP before the company was incorporated, by outsourced contractors, or by freelancers from different countries. Unless a properly drafted agreement assigning the relevant economic rights has been signed with each of them, the intellectual property rights may legally belong not to the company, but to the individuals concerned. For an investor, a gap in the chain of title is one of the most common reasons to reduce the company’s valuation or withdraw from the transaction altogether.

A separate issue concerns code generated or suggested by third-party tools and ready-made components obtained from open sources.

Open-source software comes with its own licenses, some of which may, in practice, be unsuitable for commercial use because they require the disclosure of the company’s own finalized code. Without proper monitoring, third-party intellectual property subject to terms incompatible with the company’s commercial model may find its way into the product. License inventory is therefore not bureaucracy, but part of proper product hygiene, which is also reviewed during due diligence.

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Trademarks and territoriality

Exclusive rights to a trademark apply only in the territories where it is registered. A US company may own a mark registered with the USPTO and feel confident about its brand, only to discover, upon entering the EU, that an identical or similar name has already been registered by someone else with the EUIPO. The US registration will provide little meaningful assistance in such a situation.

For the EU market, there is a convenient option: a single application for a European Union trademark, or EUTM захищає бренд одразу в усіх державах-членах. Потрібно заздалегідь, перед поданням заявки на ТМ, оцінювати шанси на успішну реєстрацію ТМ (перевіряти, зокрема, чи вільна назва) і заздалегідь будувати стратегію подолання можливих перепон. Загальне правило одне: реєстрацію бренду під ЄС варто за можливості планувати до запуску продукту задля уникнення ризику його крадіжки потенційними конкурентами.

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Contracts: why the law of one country does not resolve every issue

Operating in the EU market means a company’s agreements may be subject to multiple legal systems simultaneously. At this point, the usual practice of applying a single template to every situation no longer works.

One of the mattersthat should be agreed in any contract is the law governing it, or governing law, and the place where disputes will be resolved, or jurisdiction. For a US company, the temptation to apply the familiar law of its home state to all transactions is understandable, but this approach does not always work. In relationships with European counterparties, and particularly with consumers, the chosen "home" law may give way to mandatory provisions of European law.

The second issue is the distinction between B2B and B2C relationships. Where a company sells to another business, the parties generally have broad freedom of contract. However, as soon as the customer is an EU consumer, European consumer protection legislationapplies. Much of this legislation is mandatory: it grants the purchaser rights that cannot be waived even with the consent of both parties. Terms such as "no refunds" or excessively strict limitations of liability may simply be unenforceable in a European B2C context, regardless of the law specified in the contract.

The third issue concerns relationships with the people who work for the company. Engaging a person as an independent contractor when they are, in practice, working as an employee creates risks in both the United States and the EU, ranging from additional tax and social contributions assessments to claims relating to employment rights. For a distributed team, every such arrangement should be reviewed separately under the relevant jurisdiction.

Finally, there is an entire category of "product" documents, including Terms of Service, public offers, license agreements, and similar documents. For a SaaS product or mobile application, these documents govern relationships with thousands of users. Their provisions must be consistent with both the ownership of the IP and the requirements of the markets in which the company operates.

It is also important to remember the IP challenges faced by MilTech projects.

In particular, the correct legal classification of the objects being created in MilTech is essential. Are they eligible for copyright protection? Do they contain other IP-protected elements? A dataset, for example, may include photographs that do not belong to the company. The object must be correctly classified to ensure it can receive copyright protection and to open new opportunities for the company.

Compliance and GDPR: a brief overview of what cannot be ignored

Compliance in the EU market is not a one-time action but an ongoing process of meeting regulatory requirements that themselves change over time. The European Union is systematically strengthening the regulation of digital businesses, meaning that companies must navigate several regulatory regimes simultaneously.

The best known of these is the General Data Protection Regulation, or GDPR. As soon as a company offers goods or services to people located in the EU or monitors their behavior, these rules apply regardless of where the company is incorporated. For a US company, this means that the GDPR applies extraterritorially, even if the company has no office in Europe. In certain cases, it may also be required to appoint a representative in the EU. A company incorporated in the EU is directly subject to the Regulation.

The penalties are significant in both cases:

for serious infringements, they may reach EUR 20 million or 4% of the company’s total annual worldwide turnover, whichever is higher.

Compliance should therefore be addressed from the outset rather than added later under the pressure of an investigation or complaint.

In addition to the GDPR, other requirements may become relevant depending on the product, including regulations on digital platforms and services, sector-specific rules, and new legislation governing artificial intelligence. The details differ from one business to another, but the underlying principle is always the same: it is less expensive to build compliance in advance than to correct failures after the event.

Why this is a comprehensive matter rather than a set of documents

The main mistake in approaching these issues is treating them as separate tasks on a checklist: signing an assignment agreement in one place, filing a trademark application in another, and updating the privacy policy separately.

In reality, IP, contracts, and compliance are elements of a single structure and are closely interconnected. Intellectual property ownership determines how contracts should be drafted. Contracts and the chosen model of working with the team create regulatory and tax obligations. Compliance runs through all of these areas: the way in which a company handles data affects both its contracts and the value of its assets. The company’s starting jurisdiction does not change the list of issues that must be addressed. A change to one element will often have consequences for the others, meaning that these matters cannot be reduced to a universal checklist.

The practical conclusion is simple. Companies entering the EU market should approach intellectual property, contracts, and compliance systematically and at an early stage — before an investor or a major contract appears. Mistakes made at the outset are more expensive than proper planning, both financially and in terms of lost opportunities. Therefore, before entering the European market, it is advisable to engage lawyers with expertise in these areas.

Article author
Andrii Zheltov Senior IT Lawyer at Legal IT Group

Ця публікація IP, contracts, and compliance for a company entering the EU market вперше з’явилася на сайті WoBorders.

Why founders choose Delaware – and when it actually makes sense

WoBorders — Fri, 17 Jul 2026 06:55:23 +0000

If you've been researching company formation in the US, chances are you've already come across Delaware.

It appears in startup blogs, YouTube videos, comparison guides, and recommendations from other founders. At some point, it starts feeling less like one of several options and more like the obvious choice.

Sometimes another founder recommended Delaware. Sometimes it was an article or an incorporation service comparing different states. After hearing the same advice a few times, it's easy to assume Delaware is the obvious choice.

None of those reasons is necessarily wrong.

It offers a well-established legal framework, flexible corporate rules, and a business environment that investors and lawyers are well acquainted with.

The problem is that popularity and suitability aren't always the same thing.

We've also worked with founders who registered a Delaware LLC only to realize later that the state itself wasn't solving the questions they actually had. Their real challenges appeared later: opening a suitable business account, understanding where the owners had to report income, and documenting how ownership and decision-making would work.

We usually approach the conversation from a different angle.

Instead of asking, "Which state do you want to register in?", we start with a much simpler question. What are you building?

A consulting business with a handful of international clients has very different priorities from a SaaS startup planning to raise venture capital. An e-commerce company, expanding into the US market may need a different structure than a holding company managing intellectual property.

Once we understand where the business is today and where it's heading over the next few years, choosing the jurisdiction usually becomes much easier.

In some cases, Delaware is exactly the right choice. In others, another state is simply a better fit.

The goal of this guide isn't to convince you that Delaware is the best state for every business. It isn't.

Our goal is to explain why so many founders choose it, where its advantages genuinely matter, and why, in some situations, another state may be a better fit.

Why Delaware became the first choice for so many businesses

One of the biggest misconceptions about Delaware is that its popularity stems from its tax rates. Tax advantages certainly play a role, but they aren't what made Delaware the preferred jurisdiction for so many businesses.

Ask a US corporate lawyer why Delaware is so widely used, and the conversation will usually start somewhere else – with corporate law.

Over the years, Delaware has developed a legal system built around business disputes. Its Court of Chancery and extensive body of corporate case law have created something that businesses, investors, and legal advisors value highly: predictability.

That predictability becomes increasingly important as a company grows. New founders join, ownership changes, investors come on board, and commercial agreements become more complex. At that stage, working within a legal framework that everyone already understands can make negotiations and decision-making much smoother.

Not every business reaches that point.

A solo consultant serving a handful of international clients may never need to think about Delaware's legal system beyond the day the company is registered.

A startup planning international expansion or outside investment is far more likely to appreciate that predictability as the business evolves.

Delaware's legal framework doesn't make a company more successful on its own. What it does is reduce uncertainty when the business becomes more complex – and that's one of the reasons it has remained the preferred choice for so many founders.

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Investors are familiar with Delaware – and that makes a difference

Ask founders why they're considering Delaware, and investment is usually the first thing that comes up within the first few minutes of the conversation.

The idea itself isn't wrong, but it's often oversimplified. Investors don't back companies because they're incorporated in Delaware. If incorporation alone were enough to raise capital, fundraising would be much easier than it is.

What investors value is familiarity.

Their legal teams work with Delaware entities every day, the documentation follows a structure they already know, and the legal framework rarely creates unnecessary surprises. This can make due diligence and investment negotiations more straightforward.

There is also an important distinction between a Delaware LLC and a Delaware C-Corporation.

When founders hear that "investors like Delaware", they often assume that any Delaware entity will work equally well. In practice, venture capital investors usually expect a C-Corporation.

That doesn't make an LLC the wrong choice. For agencies, consulting firms, online service businesses, and many bootstrapped startups, an LLC may still be the more practical option.

The legal structure should reflect the business's direction. A company planning to remain founder-owned will have different needs from one preparing for several funding rounds.

So the more useful question is not simply "Why Delaware?". It is "Where do you want the business to be in three to five years?" The answer usually says much more than the state named on the incorporation documents.

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The tax advantages are real – but they deserve a closer look

Taxes are probably the most misunderstood part of the Delaware discussion. Anyone researching US company formation will eventually come across claims such as "Delaware LLCs don't pay tax" or "Delaware is tax-free", but neither statement explains the full picture.

A Delaware LLC that does not conduct business in the state is generally not subject to Delaware state income tax on income earned elsewhere. This can be relevant for international founders, SaaS companies,agencies, and businesses selling digital services across different markets. The confusion starts when this state-level rule is treated as if it answers every tax question connected with the company.

In practice, there are three separate areas to consider: Delaware state taxation, US federal taxation, and the taxation of the founders in their country of residence. These rules operate independently, so a favorable answer at one level does not automatically mean there are no obligations at the others. Federal filings may still be required in the US. Another state may also become relevant if the company has employees, an office, or sufficient business activity there. At the same time, the founders remain subject to the tax and reporting rules that apply in the country where they are resident.

This is where the structure becomes more complex for non-US founders. Someone living in Ukraine, Poland, Germany, or another country is not simply opening an American company. They are adding a US entity to an existing tax position that may already involve personal reporting, controlled foreign company rules, and taxation of distributed profits.

The result depends on how the business operates, where management decisions are made, who owns the company, and how profits are used or distributed. Two Delaware LLCs can therefore have very different tax outcomes even when their formation documents look almost identical.

For that reason, the question "Does a Delaware LLC pay tax?" rarely has a useful answer without more context. Before discussing taxes, we first need to understand the business model, ownership structure, and tax residency of the founders.

Delaware gives founders room to grow

Flexibility is one of the more practical advantages of a Delaware LLC, though it rarely feels important at first.

At the incorporation stage, the structure often looks simple: one owner, one product, and a limited number of clients. But businesses tend to change quickly. A co-founder may join, an investor may come in, a key employee may receive equity, or the founders may decide to reallocate responsibilities.

This is where the Operating Agreement becomes important. It can set out voting rights, management responsibilities, profit allocation, and the process for bringing in new members or changing ownership. Instead of relying only on default rules, the founders can document how the business is actually expected to operate.

These conversations are easy to postpone when everyone is aligned, and the company is still small. The problem usually arises later, when the original agreement no longer reflects how the business is run.

Changes can still be made at that stage, but they often take more time and involve more legal work than getting the structure right from the outset. For a growing company, the value of flexibility is not only in having more options. It is in reducing the need to rebuild the structure every time the business changes.

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Privacy is useful, but rarely the deciding factor

Privacy is one of the reasons Delaware appears so often in state comparisons, especially for founders running international businesses. LLC members generally do not have to be listed in the public formation documents, which keeps ownership details out of the state registry.

That does not make the company anonymous. Banks, payment providers, registered agents, and government authorities may still need to identify the people who own and control the business. Those checks apply regardless of where the LLC is registered.

The practical difference is public visibility. Ownership information is still disclosed where required, but it is not automatically available to anyone searching the Delaware registry.

For some founders, that additional level of privacy is useful. For others, it has little effect on day-to-day operations. It is a genuine advantage, but usually not a strong enough reason to choose Delaware on its own.

Registering the company is usually the easiest step

One reason Delaware remains so popular is that the incorporation process itself is relatively straightforward.

In many cases, an LLC can be registered within just a few business days, and expedited filing is available when timing is important. For founders eager to launch a new business, that's certainly an advantage.

Registration, however, is only one step in the process. Once the Certificate of Formation has been issued, the company will usually need an EIN, banking or payment solutions, internal corporate documents, and a clear understanding of its ongoing accounting and compliance obligations.

For many founders, these practical steps take more time than the state filing itself. Incorporation may be completed in a matter of days, but getting the business fully operational often requires considerably more planning.

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Cost is important, but it shouldn't be the only factor

Almost every founder asks how much it costs to register a Delaware LLC.

The incorporation fee matters, but it gives only a partial picture of what the structure will cost over time.

A more useful question is how much it will cost the company to maintain over the next few years. The filing fee is paid once, while registered agent services, annual state obligations, accounting, federal filings, tax reporting, and professional support may be ongoing each year.

These expenses are not unique to Delaware. Most jurisdictions come with ongoing administrative and compliance costs. Delaware's advantage is that its main state-level obligations are relatively predictable, making it easier to budget for them from the start.

A lower filing fee may look attractive at the start, but it saves very little if the company has to be restructured later. When comparing states, the company's annual operating cost is usually more useful than the registration fee alone.

Delaware is accessible to international founders – but planning still matters

Delaware is often recommended to non-US founders because the incorporation process is relatively accessible. You do not need to be a US citizen or live in the United States to own a Delaware LLC, and an SSN is not required to register the company.

Після реєстрації з’являються вже інші питання. Як компанія прийматиме платежі? Який банк або платіжний провайдер працює з такою бізнес-моделлю? Яку звітність потрібно подавати засновникам у країні їхнього податкового резидентства? І чи підійде ця структура, якщо згодом до бізнесу приєднаються партнери або інвестори?

Interestingly, banking usually becomes a bigger discussion than incorporation itself.

For many founders, however, registration is only the starting point. The more practical questions come next: how the company will receive payments, which banking or payment provider supports the business model, what reporting obligations apply in the founders' countries of residence, and whether the structure will still work if new partners or investors join later.

Many non-US founders assume that registering a Delaware LLC automatically entitles them to open an account with a traditional US bank. In reality, that's often the difficult part. Without a US presence, and especially if the founders are not planning to travel to the United States, opening a traditional business bank account can be challenging. That's one of the reasons we frequently recommend payment institutions instead. For many international businesses, payment institutions provide everything needed to receive payments and operate globally without unnecessary delays.

The answers depend heavily on the type of business. A software company selling subscriptions worldwide has different operational needs from an e-commerce business importing goods into the US. A solo consultant will also approach banking, compliance, and future ownership very differently from a startup preparing to raise capital. This is why incorporation should be considered part of the broader business setup rather than a separate administrative step. The state matters, but so do the payment flow, tax position, ownership structure, and plans for future growth.

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There are situations where another state simply makes more sense

Delaware is not always the right answer.

If a business operates almost entirely in another US state, registering there may be more practical. The same applies to a small local company with no plans to raise investment, expand internationally, or build a more complex ownership structure. In those cases, Delaware's advantages may never become especially relevant.

We have also spoken with founders who spent weeks comparing Delaware and Wyoming before asking a more basic question: “Do we actually need a US company at this stage?” Sometimes the answer is yes. In other cases, incorporation can wait until the structure serves a clear operational purpose.

One conversation stands out.

A founder approached us with plans to launch an early-stage startup and initially wanted a Delaware LLC. After discussing the business model, it became clear that the priority was not access to the US market. It was keeping operating costs as low as possible while validating the product.

The founder planned to reinvest all revenue into development rather than distribute profits. In that situation, we recommended forming a business in Estoniainstead. Delaware was not a poor jurisdiction. It simply was not the best match for the business at that stage.

A US company makes sense when it aligns with how the business operates or where it is heading. The choice depends on more than the state itself. The legal entity, the founders' tax residency, payment flows, annual filing requirements, and plans for future growth all need to fit together.

So, is Delaware the right choice?

Delaware has earned its reputation. Its legal system is well established, investors are familiar with it, and its flexible structure can be valuable as a company grows.

But those advantages do not make it the right choice for every business. The decision still depends on what the company does, where the founders live, how it will operate, and what the next few years are expected to look like.

For one business, Delaware may be the obvious option. For another, registering in a different state may be simpler, less expensive, and better aligned with its actual operations.

This is why we do not begin with a default recommendation. We first look at the business model, ownership, tax position, payment flow, and future plans. Once those pieces are clear, choosing a jurisdiction is usually much easier.

If you're still deciding whether Delaware is the right fit, or want a second opinion before registering a company, we'd be happy to discuss your plans.

At WoBorders, we work with founders building international businesses. Our team supports clients with company formation, EIN applications, accounting, ongoing compliance, and business structuring across multiple jurisdictions.

In some cases, that means registering a Delaware LLC. In others, we recommend a different state or even a different legal structure.

We've recommended Delaware. We've also recommended waiting. And in some cases, we've advised founders not to register a US company at all. All three recommendations can be the right one – it depends entirely on the business.

Our role isn't to steer every founder toward the same solution. It's to help build a structure that still works as the business grows. If you'd like to discuss your plans, feel free to contact our team and schedule a consultation.

Frequently asked questions

Can a non-US resident register a Delaware LLC?

Yes. Non-US citizens can own and manage a Delaware LLC without living in the US or having an SSN. After registration, the company will still need an EIN and a suitable banking or payment setup.

Do I have to live in Delaware?

No. Delaware doesn't require LLC members or managers to be state residents. Many Delaware LLCs are owned and managed entirely from outside the United States.

Does a Delaware LLC pay no tax?

Not necessarily. A Delaware LLC may not pay Delaware state income tax on income earned outside the state, but that doesn't automatically eliminate US federal filing obligations or tax responsibilities in the owner's country of residence.

The overall tax outcome depends on how the business operates and on the founders' tax residency.

Is Delaware better than Wyoming or other US states?

Not necessarily. Income earned outside Delaware may not be subject to Delaware state income tax, but federal filings and taxation in the owner's country of residence may still apply.

Can I open a US business bank account with a Delaware LLC?

Sometimes, but we usually encourage founders to consider their banking strategy before incorporating.

Traditional US banks may require an in-person visit or additional documentation, particularly for non-US residents. In many cases, a regulated payment institution is a more practical solution.

Disclaimer

The information provided in this article is for informational purposes only and does not constitute tax, legal, or accounting advice. Although we strive to ensure the accuracy and relevance of the material, U.S. tax and corporate regulations may change, and their application depends on the specific circumstances of each company.

Before making any decisions regarding company formation, accounting practices, tax reporting, or the sale of goods and services in the U.S., we recommend obtaining individualized advice from a qualified tax professional, CPA, or licensed attorney in the relevant jurisdiction.

Ця публікація Why founders choose Delaware – and when it actually makes sense вперше з’явилася на сайті WoBorders.

How could a non-resident open a bank account in the USA?

WoBorders — Mon, 18 May 2026 03:00:21 +0000

When entering the US market, entrepreneurs usually deal not only with US state for company setup, but also with choosing the right corporate structure, tax model, share distribution between founders and investors, and dividend distribution mechanisms. This stage lays the foundation for the company’s future operations, and mistakes in the initial structure may later create tax, banking, and operational risks.

Another important step after company incorporation is opening a corporate U.S. bank account. For most US companies, a business account is the basis of daily operations: receiving payments from clients, working with Stripe, Amazon, Shopify, and international counterparties, processing payroll, and maintaining financial records.

At the same time, opening a business account for a US company is not always straightforward, especially when the founders are non-US residents. American banks and financial institutions pay close attention to compliance procedures, the business structure, source of funds, type of activity, and real business presence. In some cases, banking compliance requirements may even influence the company’s structure, shareholder composition, or operational model.

Today, a US business account can be opened through traditional American banks as well as modern fintech and payment solutions designed for international businesses. The right option depends on the company’s business model, customer profile, payment geography, need for Stripe integration, and tax and corporate structure.

In this article, we will cover:

– whether a US company with non-resident founders can open a US business bank account;

– which banks and payment systems are available for U.S. companies;

– when physical presence may be required;

– which documents banks usually request;

– which risks and limitations should be considered before registering a company in the USA?

Why does a company need a corporate account in the USA?

Before opening an account, the first step is to define what the business needs it for.

The main function of a corporate account is to manage payments with counterparties: receiving payments from clients, paying contractors, covering procurement and operating expenses, and handling other business transactions. For some companies, access to physical or virtual corporate cards is also important for paying for advertising, SaaS tools, subscriptions, logistics, and other recurring expenses.

Depending on the bank or payment institution, corporate accounts may also offer additional financial features. For example, some U.S. banks allow companies to earn interest on account balances, open a line of credit, or use an overdraft facility. These options may be important for businesses that need greater liquidity flexibility or to cover short-term cash flow gaps.

It is also important to consider the type of payment details available. For domestic payments in the USA, ACH details are commonly used. They are suitable for local transfers, payroll, bill payments, and other payments within the country. For international or interbank transfers, wire transfer details or SWIFT details may be required.

Understanding these differences helps businesses organize payment processes correctly and avoid transaction delays. For example, some payment solutions allow a US company to open an account but do not always enable it to accept payments directly from individuals without a merchant provider such as Stripe.

That is why, before submitting an application, it is worth defining how the company will receive funds, who it will pay, and whether it needs cards, international payment details, Stripe integration , or other payment tools. This helps choose the most suitable solution and, where necessary, adapt the corporate structure to the requirements of the bank or payment institution.

Recommended article

Company declaration in the U.S.

Bank or payment system: which option should you choose for a US account?

Once a company has defined what it needs a corporate account for, the next step is to choose the right financial solution. For a U.S. company, this may be a traditional bank, a fintech solution, or a payment system. Each option has its own advantages, limitations, and requirements.

Traditional banks in the USA usually offer a wider range of financial services, including corporate accounts, lines of credit, overdrafts, deposit products, cards, and other banking tools for businesses. Some of the most well-known banks include JPMorgan Chase, Bank of America, and Citibank. These banks have strong reputations and may be suitable for companies that need stability, full banking functionality, and cooperation with large counterparties.

At the same time, traditional banks often have stricter onboarding requirements. They may request detailed documentation on the business model, sources of income, ownership structure, beneficial owners, and the company’s connection to the USA. In some cases, the bank may require the physical presence of a founder or director, which can make the process more difficult for non-residents.

Fintech solutions and payment systems may serve as an alternative, such as Mercury, Wise, or Payoneer account. These providers often allow companies to open accounts remotely, complete onboarding more quickly, receive payment details, and work more conveniently with international clients. For non-residents, this is often a more practical option, especially if the company needs basic payment tools, marketplace integration, or access to international platforms.

However, fintech solutions also have limitations. They may not support certain types of transactions, currencies, business activities, or payments from individuals without an additional merchant provider. Therefore, before choosing a payment system, it is important to check not only whether an account can be opened, but also whether its functionality matches the company’s actual business model.

Before making a final decision, it is worth assessing the following criteria:

– available functionality: checkout, currency conversion, account statements, invoice generation, and payment automation;
– supported operations: ACH, wire, SWIFT, B2B, or B2C payments;
– payment details provided by the bank or payment system;
– supported currencies;
– fees for account opening, maintenance, and payments;
– requirements for the business, UBOs, and beneficiaries’ residency;
– permitted and restricted business activities;
– availability of physical or virtual corporate cards;
– compatibility with Upwork, Amazon, Etsy, Stripe, PayPal, QuickBooks, Xero, or other required services.

It is also important to note that some payment systems may provide payment details through partner banks.

For example, Payoneer may provide clients with Citibank payment details for local and cross-border payments. This does not mean that a full bank account is opened directly with Citibank, but it may be a convenient solution for receiving and sending payments.

The main advantages of fintech solutions for non-residents are remote account opening, faster onboarding, a simpler interface, accessibility for international businesses, and convenience for daily payments. At the same time, traditional banks may be a better choice for companies that need credit products, broader banking functionality, or a long-term reputational presence in the USA.

The right choice of bank or payment institution affects not only the convenience of daily operations, but also the level of compliance risk. A mismatch between the company’s business model and the financial institution's requirements may result in account opening refusal, blocked transactions, or service termination.

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What documents are needed to open a US business bank account for an LLC?

After choosing a bank or payment system, the next stage is the compliance review. At this stage, the bank or fintech provider evaluates not only the company itself but also its owners, business structure, funding sources, and the legitimacy of its operations.

All U.S. banks and payment systems use AML/KYC procedures to verify clients. As part of these checks, the financial institution may review the company’s ownership structure, business model, source of funds, sanctions exposure, and the PEP (politically exposed person) status of its beneficial owners.

As a result, businesses are usually expected to provide:

– company registration documents;
– EIN (Employer Identification Number);
– an Operating Agreement for an LLC or Bylaws for a Corporation;
– passports or IDs of founders and directors;
– SSN or ITIN, if available;
– proof of residential address;
– a description of the company’s business model;
– information about clients, contractors, suppliers, and sources of incoming funds.

This stage should be taken seriously. The more transparent, structured, and understandable the information provided to the bank is, the higher the chances of account approval.

If the company has already signed contracts, invoices, or memorandums of cooperation, it is advisable to prepare them in advance. If the business is still at an early stage, it is worth preparing a list of potential clients, explaining the monetization model, and describing the specific services or products the company plans to sell.

Banks also often pay attention to the company’s digital presence. A corporate website, a company LinkedIn page, active social media profiles, or publicly available information about the team may positively influence the compliance review. It may also be an advantage if the founders or management publicly indicate their connection to the company on LinkedIn or other professional networks.

Banks also assess the company’s substance, meaning its real economic presence. This is especially relevant for U.S. companies owned by non-residents. In practice, the bank checks whether the company is a genuine operating business rather than a formal “shell” with no real activity.

By economic substance, banks may mean:

– a physical office;
– employees or management in the USA;
– local contractors;
– U.S.-based clients;
– real business operations that correspond to the company’s declared activity.

If the company can provide evidence of its activity in the country, and a company representative can confirm their residence in the USA and visit the bank in person, the chances of opening a U.S. business account with a traditional bank are relatively high.

That is why businesses should think through their corporate structure before applying for an account. In practice, banks tend to view the following more positively:

– a transparent ownership structure without unnecessary layers of companies;

– no nominee directors, or a clear explanation of why they are used;

– economic substance in the USA;

– a clear logic behind the movement of funds;

– a realistic operational business model.

For example

If a company provides services, the bank may assess whether the business has enough employees or contractors to deliver the declared scope of work. If the company works with intellectual property, it is important that the IP rights belong to the company itself or are properly licensed. Situations where IP formally belongs to an individual while the company receives the income may be viewed by banks as a higher compliance risk.

Fintech requirements are usually less strict than those of traditional banks. However, fintech companies also follow AML/KYC procedures and apply their own risk assessment policies. Some payment systems may be more flexible with non-residents or Ukrainian founders, while others may require additional checks or refuse to open accounts for certain categories of clients or businesses.

For example, Mercury has publicly reported restrictions for US companies whose founders are Ukrainian citizens and cannot confirm residence in another supported country. In 2024, the company notified clients about the termination of some accounts in such cases. At the same time, Mercury stated that it may work with Ukrainians residing in the USA or other supported jurisdictions.

This case shows that even fintech solutions with remote onboarding may have their own compliance restrictions, which directly affect both the ability to open an account and the possibility of maintaining it in the future.

Order a consultation on opening a U.S. business account

We provide comprehensive business support in the USA

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Why can a US account application be rejected?

Rejection of a corporate account application in the USA is quite common, especially for companies with non-resident owners. In most cases, the reason is not the company’s country of origin itself, but the compliance risks identified by the bank or payment system.

The most common reasons for rejection may include:

– a non-transparent ownership structure;

– lack of economic substance or a clear business connection to the USA;

– an unclear business model;

– no website, public information, or digital presence;

– high-risk business activity;

– transactions involving sanctioned jurisdictions;

– difficulties confirming the source of funds;

– use of nominee directors or complex corporate structures;

– a mismatch between the declared business activity and the company’s actual operations.

It is also important to consider that fintech providers and banks may have their own internal policies regarding founders' citizenship or country of residence. Even if the business is fully legal, a financial institution may reject the application due to its internal risk policy or provider-specific restrictions.

Preparation for opening a U.S. account does not begin with submitting an application. It starts earlier, at the stage of company structuring, document preparation, and choosing the right financial solution for the specific business model.

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Conclusion

Opening a corporate account for a U.S. company is not a formality but a separate strategic stage that requires preparation and a clear understanding of banks' and payment systems' requirements. Despite the wide range of available solutions, from traditional banks to modern fintech providers, there is no universal option that suits every business.

The key factors for successful account opening are usually a transparent company structure, economic substance, and compliance with AML/KYC requirements. These are the aspects banks and payment institutions assess during compliance reviews, and they often determine the final decision on account approval and further servicing.

Fintech solutions can significantly simplify the process of opening an account for a U.S. company, especially for non-residents. At the same time, they also have their own limitations related to jurisdiction, business activity, or internal compliance policies. Traditional U.S. banks, in turn, offer broader banking functionality and stability, but often require deeper preparation and a clear connection between the company and the USA.

Therefore, the answer to the question “Is it possible to open an account in the USA?” is yes, but only with proper business preparation and the right financial solution selected at the company structuring stage.

The WoBorders team helps entrepreneurs with company formation in the USA, selecting banking and fintech solutions, opening corporate accounts, and preparing for AML/KYC checks. We are official Payoneer partners and help choose the most suitable payment solution depending on the business model, customer type, jurisdiction, and required functionality.

You can contact us through the website form, email, Telegram, or WhatsApp. We work Monday to Friday, from 09:00 to 18:00 Kyiv time, and will be happy to help you launch and build the financial infrastructure for your US company.

FAQ about opening an account in the USA

Can a non-resident open a business account in the USA?

Yes, a non-resident can open a corporate account for a U.S. company through a bank or fintech provider. However, the requirements depend on the business structure, the founders’ country of residence, and the company’s type of activity.

Can a US business account be opened remotely?

Yes, many fintech providers allow companies to open an account remotely without visiting the USA. However, banks and payment systems still conduct AML/KYC checks and may request additional documents.

Is an SSN or ITIN required to open an account?

Not always. Some fintech providers allow account opening without an SSN or ITIN, while traditional banks may require them depending on the company's structure and the founders’ status.

What documents are required to open a corporate account in the USA?

Typically, banks or payment systems request company registration documents, an EIN, a passport of the founder or director, proof of residential address, and a description of the business activity.

Is physical presence in the USA required?

For fintech solutions, not always. However, many traditional banks may require a personal visit from the founder or director to open the account.

What is AML/KYC?

AML/KYC refers to client verification procedures used by banks and payment systems to assess the business structure, source of funds, and compliance risks.

What is economic substance?

Economic substance means proof that the company conducts real business activity. Banks may assess whether the company has an office, employees, clients, or operational presence in the USA.

Why can a U.S. business account application be declined?

The most common reasons include a non-transparent company structure, lack of economic substance, high-risk business activities, AML/KYC concerns, or a mismatch between the business model and the bank or fintech provider's requirements.

What is better for a non-resident: a bank or a fintech solution?

Fintech solutions often make remote account opening easier and onboarding faster. Traditional banks may offer broader functionality, but they usually have stricter compliance requirements.

Does WoBorders help with opening a U.S. business bank account for non-residents?

Yes, the WoBorders team helps with company registration in the USA, selecting banking and fintech solutions, preparing AML/KYC documentation, and opening corporate accounts for non-residents.

Disclaimer

Ця публікація How could a non-resident open a bank account in the USA? вперше з’явилася на сайті WoBorders.

UK LTD vs LLP for Non-Residents: Which structure to choose?

WoBorders — Thu, 14 May 2026 04:00:12 +0000

Choosing between a UK LTD and LLP is a key decision for a non-resident who has already chosen the United Kingdom as the jurisdiction for their business. The selected structure affects taxation, access to banking and payment solutions, and how the business is perceived by clients, partners, and financial institutions.

If you have already chosen a structure and need support, see the UK company registration terms for non-residents..

The main difference between UK LTD and LLP is how profit is taxed and distributed.

A UK LTD pays corporate tax at the company level, while an LLP typically shifts tax obligations directly to the partners in their country of residence.

For non-residents planning to open a UK company, this choice should be based not on registration speed but on long-term business goals, tax position, and financial operations.

The UK remains a practical jurisdiction for international services, IT, consulting, e-commerce, and cross-border business. Both LTD and LLP structures are registered via Companies House , the UK’s corporate register, which handles incorporation and reporting requirements.

UK LTD vs LLP: key differences for non-residents (table format)

Comparison between LTD and LLP structures in the United Kingdom: taxation, profit distribution, banking, payment systems, and business scaling.
Criteria	LTD (Limited Company)	LLP (Limited Liability Partnership)
Structure type	Separate legal entity	Partnership structure
Taxation	Pays corporate tax in the United Kingdom at the company level	Usually does not pay corporate tax at the entity level
Profit distribution	Profits can be retained and reinvested or distributed to shareholders	Profits are usually distributed directly to partners
Common use cases	IT, SaaS, e-commerce, service companies, agencies, consulting	Partnerships, professional firms, consulting partnerships
Banking & payment providers	Usually easier for banking, compliance, and payment onboarding	May require additional explanations during compliance checks
Scaling & investment	Better suited for scaling, attracting investors, and share transfers	Less flexible for scaling and investor entry
Best suited when	Business operates as an independent commercial entity	Business is focused on direct profit distribution between partners

LTD vs LLP in one minute

The key difference between an LTD and an LLP is how taxation and profit distribution work.

– A UK Limited Company is a separate legal entity. It signs contracts, receives revenue, records expenses, and pays UK corporate tax on its profit. After that, owners decide how to withdraw money, usually through dividends or salary. Tax is calculated at the company level first.

– An LLP, or limited liability partnership, usually does not pay corporate tax itself. Instead, profit is allocated to the partners, and each partner declares income in their country of tax residence. The tax obligation sits with the individuals.

For non-residents establishing a business in the United Kingdom, an LTD is generally considered the most practical and versatile structure for international operations, as it offers a clearer tax model, smoother onboarding with banks and payment systems and better integration with international payment platforms such as Stripe, Payoneer account and Wise.

Structurally, a UK limited company has shareholders and directors. Ownership is divided into shares, making it easier to scale, raise capital, or transfer part of the business.

An LLP has partners who divide profit under a partnership agreement and must file annual accounts with Companies House. The structure is simpler for direct profit distribution, but it is usually less flexible for scaling and attracting investors.

When to choose a UK LTD as a non-resident

In practice, an LTD is often the standard choice for operational businesses, particularly for IT services, consulting, marketing, software development, and other service-oriented businesses working with international clients.

The company signs contracts in its own name, invoices clients, receives revenue, and manages profit before distribution.

This structure is familiar to corporate customers and is usually easier to explain during due diligence (a comprehensive independent review of a company or asset before a transaction, investment, merger, or partnership) and compliance checks. A UK LTD is also the stronger option when growth is part of the plan. If you expect to reinvest profits, hire a team, expand into new markets, or attract investors, a share-based structure offers greater flexibility. Ownership can be adjusted more easily, which makes the company better suited for scaling.

For most non-residents, a UK LTD is the better option when the business is intended to operate as an independent commercial entity rather than simply distribute income between partners.

For example, two founders launching a software agency with plans to expand into the EU market may choose an LTD because profits can remain inside the company for growth, and shares can later be allocated to an investor.

When to choose a UK LLP as a non-resident

A UK LLP can make sense when the business is genuinely partnership-driven, and the main goal is to distribute profits directly between partners rather than retain earnings within the entity.

If several professionals work together and want income to pass directly to them, a partnership structure may match that model. A UK LLP must be registered with Companies House, and profits are allocated between members under the partnership arrangement.

However, one of the most common misconceptions is that an LLP for non-residents is “tax-free.” In practice, this is not the case. The tax obligation usually shifts to the partners, and each person must declare income under the tax rules of their country of residence. This can make an LLP more complex when partners live in different jurisdictions. What looks simple at the registration stage may require more coordination later at the tax reporting stage.

Perceptions of banking and payment providers can also differ. Some financial institutions review partnership structures more carefully, especially when all partners are non-residents, and the business has no physical presence in the UK. This may lead to additional questions during compliance checks and onboarding.

An LLP is usually suitable only when the business is built around a real partnership model, and profit is intended to pass directly to the partners. It is more suitable for professional partnerships and direct profit distribution, but it is usually less practical when long-term scaling, reinvestment, or investor entry is part of the plan.

Taxes and compliance for non-residents

When comparing UK LTD vs LLP, tax should be assessed based on how the structure works in practice, not on simplified headlines.

With a UK Limited Company, profit is taxed at the company level under UK corporate tax rules. For a more detailed overview, read our article on taxes for companies in the UK.

The company must file annual accounts and submit a company tax return. This makes the tax position more structured at the entity level, though owners must still consider how funds will be withdrawn and taxed personally later.

With a UK Limited Liability Partnership, the partnership files annual accounts, but profits are usually taxed at the partner level rather than at the entity level. Each partner must understand how this income must be reported in their country of tax residence.

What may look simpler during company registration can become more complex at the reporting and compliance stage.

For non-residents, the key issue is not whether one structure appears more tax-efficient at first glance, but whether it aligns with the business's real tax and operating model.

Recommended article

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Before choosing between an LTD or LLP, non-residents should clarify three points:

– where they are tax resident,

– whether profits will be retained in the business or distributed to owners,

– and whether future investors, banking checks, or cross-border compliance scrutiny are likely.

The right structure should reduce administrative and tax complexity, not create additional reporting problems later.

Not sure which structure is right for your business?

The WoBorders team can help you assess LTD and LLP structures based on your business model, the owners’ tax residency, scaling plans, and financial infrastructure

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Banking and payment providers: what non-residents should consider

Company registration is only part of the process. For many non-residents, financial onboarding becomes the real test after incorporation.

– A UK Limited Company is widely understood by banks and payment providers.Its corporate structure, share ownership model, and reporting framework are familiar to compliance teams. In practice, this often reduces the number of questions during onboarding, although approval still depends on business activity, geography, and supporting documentation.

– A UK Limited Liability Partnership may require more explanation, especially when all partners are non-residents and management is based outside the UK. Financial institutions may ask how decisions are made, who controls the business, and how profits are allocated between partners.

For e-commerce, digital services, and cross-border business, clarity in structure matters when applying for merchant accounts, payment processing, or other financial services.

Тому під час вибору між LTD та LLP варто оцінювати не лише податкову модель, а й те, як обрана структура виглядатиме для банків, платіжних провайдерів і комплаєнс-відділів.

For many operational businesses, an LTD is often easier to present to banks and payment providers than an LLP, especially when the company is intended to scale and work with international clients.

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When to choose an LTD, and when is a better LLP

The choice becomes clearer when it is based on how the business will actually operate.

Choose a UK limited company if the business is intended to grow as an independent asset, retain earnings, sign international contracts, work with payment providers, or attract investors. This structure is generally more suitable for reinvestment, operational activity, and long-term scaling.

Consider an LLP if the business primarily exists to distribute income among partners who understand their personal tax obligations and do not plan to retain profits within the entity. This model may work for genuine partnerships, but it is usually less practical for scaling, investor entry, or more complex financial onboarding.

The right structure should reflect how the business is expected to operate over the next few years, not just how quickly it can be registered.

Choosing between UK LTD or LLP structures becomes easier when the decision is based on how the business will actually operate in practice. Registration is only the first step. The real value lies in aligning the structure with your tax position, growth plans, and banking strategy from the start.

FAQs about UK LTD and LLP for non-residents

What is the main difference between an LTD and an LLP for a non-resident?

An LTD is a separate legal entity and pays corporation tax at the company level. An LLP operates as a partnership structure, where profits are generally distributed among the partners and tax obligations arise at the partner level. Therefore, the choice depends on the business model, the tax residency of the participants, and the business’s development plans.

Which is better for non-residents: UK LTD or LLP?

For most non-residents, an LTD is the more practical choice because it offers clearer taxation, better banking compatibility, and supports long-term business growth.

Is a UK LLP really tax-free for non-residents?

No. An LLP is not tax-free. The partnership itself usually does not pay corporate tax, but each partner must declare and pay tax on their share of profit in their country of tax residence.

Which is easier for banking: LTD or LLP?

In most cases, an LTD is easier to use with banks and payment providers. The corporate structure is more familiar, which often simplifies compliance checks and financial onboarding.

What structure is better for IT services and online business?

For most non-residents working in IT, consulting, SaaS, or e-commerce, an due diligence LTD is the preferred structure because it supports contracts, reinvestment, and scaling.

What are the annual reporting requirements for LTD vs LLP?

Both LTDs and LLPs in the United Kingdom must file annual accounts with Companies House. An LTD must also submit corporate tax returns, while LLP profits are reported and taxed at the partner level.

Choose between an LTD and an LLP based on how the business will operate: where the owners or partners are located, how profits will be distributed, whether the business plans to scale, and which financial tools it will need.

If you have already chosen the structure and are planning to launch your business, see the terms, stages, and cost of support on our UK company registration page.

We are available Monday to Friday from 9:00 to 19:00. You can submit an inquiry through the website form or contact us via one of the available messengers.

Ця публікація UK LTD vs LLP for Non-Residents: Which structure to choose? вперше з’явилася на сайті WoBorders.

Tax regime of IP Box in Poland, Cyprus, Luxembourg

WoBorders — Tue, 12 May 2026 06:54:14 +0000

IP Box is a corporate tax incentive that can reduce tax on qualifying IP income (often software and patents) when the profit is tied to documented R&D under the OECD Nexus approach.

Innovation is more than a competitive advantage. Across Europe, governments are updating intellectual property tax rules to encourage companies to create, protect, and commercialize new ideas locally.

One of the key tools supporting this shift is the IP Box tax regime.

This framework allows companies to pay a reduced corporate rate on income generated from qualified intellectual property, such as software, patents, and other R&D-related assets. The regime is designed to reward businesses that actively create and develop their own intellectual property rather than merely holding it.

As a result, this incentive has become a practical tax incentive for innovation, particularly for technology-driven companies operating within a structured R&D tax regime.

In the following sections, we explain what IP Box is in practice, how the mechanism works, and compare IP Box in Poland, Cyprus, and Luxembourg within the broader context of IP Box Europe.

Key takeaways:

– IP Box reduces corporate tax on qualifying IP income.

– Most EU regimes follow the Nexus approach: benefits link to real R&D costs.

– Poland: widely marketed as 5% on qualifying IP income (with strong documentation).

– Cyprus & Luxembourg: substance-first; effective benefits depend on nexus ratio and structure.

– Best fit: companies with recurring IP income + documented R&D.

This guide compares IP Box tax rate outcomes for Poland, Cyprus, and Luxembourg, explains the OECD Nexus approach, and highlights when the IP Box for software companies is most effective.

What is an IP Box?

IP Box regimes apply a preferential corporate tax rate (or exemption) to net income attributable to qualifying IP, but the benefit is usually limited by the OECD Nexus approach.

In practice, this means you receive relief only for the portion of IP profit supported by your qualifying R&D costs and traceable documentation.

How the IP Box tax regime works

In Europe, IP Box regimes are built to support businesses that create and commercialize intellectual property by applying preferential taxation to profits linked to qualifying IP. In practice, this can mean a lower effective tax burden on income from assets such as software and patents compared with the standard corporate rate.

Across many EU-style implementations, the scope is typically limited to technical IP (e.g., patents and copyrighted software), while marketing intangibles such as trademarks are often excluded from coverage.

A central design feature is the Nexus approach, which links the tax benefit to actual development activity. In simple terms, the relief is proportional: the more qualifying R&D a company performs (and can evidence), the larger the share of IP profits that may qualify for preferential treatment.

To apply the mechanism in practice, companies typically need to track:

– qualifying in-house R&D costs

– qualifying outsourced development costs under the company’s control

– IP-level income and a defensible allocation of profit to the relevant IP rights

This structure makes the benefit harder to apply “on paper only” and easier to defend when documentation, cost allocation, and governance are consistent.

What income qualifies under an IP Box

In most regimes, the benefit targets income streams that are clearly linked to a specific IP right and supported by traceable accounting.

Common categories include:

– Royalties/licensing fees

– Embedded IP income (subscriptions, product margin attributable to software/IP)

– Capital gains on sale/transfer of qualifying IP (jurisdiction-dependent)

Not usually: trademark or brand income (marketing intangibles).

The practical rule of thumb: if you cannot separately identify and evidence

– the qualifying IP

– the related costs

– and the income attributable to it

it becomes hard to apply the relief confidently.

Quick comparison: IP Box in Poland, Cyprus, and Luxembourg

The table below summarizes indicative outcomes; the final effective rate depends on the Nexus and local cost allocation rules.

Comparison of IP Box regimes in European countries
Country	Approximate effective taxation of qualified IP income*	Key Requirement	Best Suited For
Poland	5% (qualified IP income; nexus approach + documentation)	Documented R&D activity + IP-level accounting	Product and IT companies with strong R&D documentation
Cyprus	from approximately 3% (15% CIT × 20% taxable base; before applying the nexus fraction)	Business substance + nexus fraction + expense allocation	Teams licensing or delivering digital products
Luxembourg	approximately 5% (80% exemption; around 4.8% for Luxembourg City in 2026; before applying nexus)	Nexus fraction + development control / substance requirements	Corporate groups requiring stability and scalable IP structures

*Indicative outcomes only. Rates shown reflect 2026 headline CIT where relevant. Final results depend on the nexus calculation and cost allocation.

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IP Box in Poland

The IP Box in Poland is widely regarded as one of the most competitive innovation-focused tax solutions in Europe. Eligible companies can apply a 5% corporate income tax rate to profits from qualifying intellectual assets, instead of the standard corporate tax rate.

Qualifying assets typically include IP rights, such as patents and copyrighted software, provided the income is directly linked to documented R&D activity.

Under the Polish framework, preferential taxation applies only to income derived from intellectual property created, developed, or improved through documented research and development activities. This makes IP Box Poland particularly attractive for technology companies operating within a structured R&D tax regime.

A major advantage of the IP Box tax in Poland is its clear treatment of software. IP Box Poland software provisions may allow income from copyrighted computer programs to qualify, provided the software is developed as part of an R&D activity and supported by proper documentation.

For IT and SaaS companies, this mechanism results in a reduced rate for software and improved long-term tax efficiency.

To access the Polish regime, businesses must meet defined IP Box Poland requirements.

– These include conducting qualifying R&D

– owning or co-owning the intellectual property

– and maintaining detailed accounting records that link costs and revenue to specific IP rights

Eligible income is calculated using the Nexus approach, ensuring that tax relief reflects genuine development work carried out in Poland.

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IP Box in Cyprus

The IP Box in Cyprus is often considered by companies that generate income from intellectual assets and want a European structure that balances tax efficiency with operational substance. The Cypriot framework is designed to support innovation that is genuinely developed and managed within the country.

In 2026, with Cyprus corporate profits taxed at 15%, the IP Box can reduce the effective tax on qualifying net IP profit to as low as ~3% (15% × 20%) before the nexus adjustment, depending on the nexus fraction and cost allocation.

In practice, this regime applies the Nexus approach, meaning tax relief is directly linked to the company's research and development activities. This principle is critical for business owners, as preferential treatment is not automatic. Companies must demonstrate that activities such as software development, maintenance, or product improvement are clearly connected to the income being taxed.

For example

A company that develops software internally and licenses it to customers abroad may be subject to software-related IP tax rules in Cyprus. When development work, strategic decision-making, and documentation are properly aligned, part of the income from that software may qualify for intellectual property tax relief under the Cyprus model. This outcome often results in a lower tax rate on software than under standard corporate taxation.

Cyprus is frequently chosen by founders and CFOs seeking IP Box Europe options that combine predictable tax treatment with relatively straightforward administration. While it is not suitable for businesses without R&D activity, this solution can be effective for companies actively developing digital products that require a compliant solution with clear substance and documentation requirements.

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IP Box in Luxembourg

The IP Box in Luxembourg is typically considered by companies that manage valuable intellectual assets across multiple markets and prioritize legal certainty over aggressive taxation optimization. The local framework focuses on stability, predictability, and long-term planning, making it attractive for groups with complex ownership or licensing structures.

The rules are set out under the Luxembourg IP Box regime, which allows qualifying income from intellectual property to benefit from preferential taxation. Typically, this includes patents and copyrighted software, while marketing intangibles (e.g., trademarks) are generally outside the scope.

From a practical standpoint, this structure can significantly lower the effective burden of intellectual property tax when income is generated from licensing, embedded IP in products, or cross-border commercialization.

In practical terms, Luxembourg’s IP Box is often described as an effective tax burden of approximately 5% on qualifying net IP income (e.g., approximately 4.8% in Luxembourg City as of tax year 2026), after the 80% exemption and the nexus ratio are applied.

A key condition is the application of the Nexus approach. This requirement links tax benefits to the proportion of research and development activity the company actually carries out.

Simply holding IP is not enough.

Substance, strategic control, and documented development work are essential for accessing relief.

In real-world scenarios, groups typically centralize ownership of their intellectual assets in Luxembourg while coordinating R&D across several jurisdictions.

When correctly aligned, income from qualifying development activity may benefit from the Luxembourg IP Box tax rate, providing reliable corporate tax benefits for IP within IP Box Europe.

For example, a group may hold software licensing rights in Luxembourg while documenting the portion of qualifying R&D costs that supports the licensing income under the nexus calculation.

Luxembourg is rarely the lowest-cost option. However, it is frequently chosen by companies that value regulatory clarity, investor confidence, and scalability over short-term tax savings.

Benefits of the IP Box in Europe

Across Europe, preferential tax treatment for innovation enables companies to turn research and development into measurable financial value. Instead of applying standard corporate rates, many jurisdictions reduce intellectual property tax when income is linked to genuine development activity. This approach is central to IP taxation in Europe and supports long-term innovation rather than short-term tax planning.

One of the clearest advantages is cost efficiency for technology-driven businesses. Income from software and other R&D-based assets may qualify for software-related IP tax relief, reducing the software tax rate relative to ordinary corporate taxation. This frees up capital for product development, hiring, and market expansion.

Another important benefit is regulatory alignment. Through the Nexus approach, IP Box tax incentives are tied directly to real research and development work. This makes innovation tax relief easier to defend during audits and due diligence (a comprehensive independent review of a company or asset before a transaction, investment, merger, or partnership), while still delivering meaningful corporate tax benefits for IP.

From a strategic perspective, these regimes serve as long-term tax incentives for innovation. By lowering effective tax rates on qualifying income, European countries encourage companies to keep development teams local and scale their R&D pipelines. When combined with an existing R&D tax regime, this creates a sustainable framework for innovation-led growth.

For founders and CFOs, the key value lies in predictability. When structured correctly, these incentives become part of a stable financial model rather than a one-off tax benefit.

When the IP Box typically makes sense

– You have recurring income from software, patents, or other qualifying IP.

– You can document R&D work and cost allocation (nexus).

– You control development decisions and bear the risks, even with contractors.

When it typically does not make sense

– No real R&D activity or no IP-driven revenue.

– IP is fully purchased/held passively without substance.

– Documentation and tracking are not feasible.

If you would like to assess whether the IP Box regime is suitable for your company, feel free to contact the WoBorders team. We can help analyze your business model, IP assets, R&D processes, income structure, and documentation requirements to determine whether IP Box may be an effective solution for your tax structure.

FAQ: About IP Box taxation in Europe

Is this tax regime suitable for early-stage companies?

It can be, but timing matters. These incentives work best once a company generates income from software or other innovation-driven assets. If there is no revenue yet, structuring early may still help, but the benefit only appears once profits exist.

What level of documentation is usually required?

Documentation is critical. Companies must clearly link income to research and development activity. This typically includes development records, cost allocation, and proof of intellectual property ownership. Weak documentation is the most common reason tax relief is denied.

Does outsourcing development disqualify a company?

Not necessarily. Outsourced work can still qualify if the company retains control over development decisions and bears the related risks. Purely passive ownership without substance usually fails under modern IP taxation European standards.

Can software developed outside the country still qualify?

In some cases, yes. What matters most is where strategic decisions, coordination, and ownership sit. Authorities focus on substance rather than geography alone, especially when assessing software-related IP tax eligibility.

What are the most common mistakes businesses make?

The biggest risks include:

– poor recordkeeping,

– choosing the wrong jurisdiction,

– and applying too late.

Many companies also underestimate how closely tax authorities examine R&D processes under an R&D tax regime.

Can these incentives be combined with other R&D relief?

Often, yes. Innovation-related tax relief is frequently used alongside R&D deductions or credits. When aligned correctly, this creates a layered approach to reducing both development costs and effective taxation.

When does this structure clearly not make sense?

It is usually ineffective for companies:

– without real development activity,

– those relying entirely on third-party IP,

– or businesses whose income is unrelated to innovation.

In such cases, standard corporate taxation may be more appropriate.

Ця публікація Tax regime of IP Box in Poland, Cyprus, Luxembourg вперше з’явилася на сайті WoBorders.

Business taxes in the U.S. in 2026

WoBorders — Thu, 09 Apr 2026 12:07:06 +0000

The tax system of the United States is one of the most complex and at the same time one of the most structured in the world. It combines federal, state, and local levies, which may differ significantly depending on the jurisdiction, business structure, and type of taxpayer. For companies, this means that planning must account for not only federal rules, but also the specific features of a particular state, including rates, the procedure for calculating the base, benefits, and filing requirements. Taxes in the USA for companies depend on the business structure, the state of registration, and the type of activity. In this article, we will consider what a company pays in the USA, how business taxation works, and what residents and non-residents should take into account.

The first important point that distinguishes the USA from many other countries is the multi-level structure of the fiscal system. In the USA, obligations may arise at three levels: federal, state, and local — that is, at the level of a city or county.

At these levels, a business may face Corporate Income Tax, Individual Income Tax, and in the case of the sale of goods or certain services, also Sales Tax, Use Tax, and, in certain cases, excise duties. In addition to income or profit levies, many states have mandatory annual fees, which are often combined under the general name Franchise Tax. Their logic, name, and calculation procedure differ depending on the state, but the general principle is the same: this is a payment for the right of a company to exist or conduct activities in the relevant jurisdiction.

Next, we will consider the main types separately and explain in which cases and for which types of companies the relevant obligations may arise.

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Corporate Income Tax in the U.S.

Corporate Income Tax in the USA has a two-level structure: a company's profit may be subject to both federal and state-level charges. For this reason, the actual burden on a business depends not only on the company's legal form, but also on the state in which it is registered or conducts activities. Corporate income tax is one of the key elements shaping the overall fiscal obligations of a company in the USA. It is generally paid by companies with a corporate model — in particular C-Corporations, as well as LLCs that have elected to be treated as a corporation.

The federal Corporate Income Tax rate is 21%. Taxable income is subject to this charge — profit determined as the company's revenue minus allowable expenses, taking into account the general rules of adjustments. In order to be deductible, business expenses must be ordinary and necessary, meaning typical for the relevant activity and reasonably required for conducting business.

Most states also establish their own Corporate Income Tax.The rules for determining taxable profit, the existence of rates, their size, and structure may differ significantly depending on the jurisdiction. Therefore, when choosing a state for registration or conducting activities, it is important to assess not only the formal rate but also the overall fiscal model in that state.

Corporate Income Tax Rates in US States (2026)

Below are the indicative Corporate Income Tax rates in US states as of 2026.

Corporate income tax (CIT) rates by U.S. state
State	CIT Rate	State	CIT Rate
Alabama	6.5%	Montana	6.75%
Alaska	2%–9.4%	Nebraska	4.55%
Arizona	4.9%	Nevada	None
Arkansas	1%–4.3%	New Hampshire	7.5%
California	8.84%	New Jersey	6.5%–11.5%
Colorado	4.4%	New Mexico	5.9%
Connecticut	7.5%–8.25%	New York	6.5%–7.25%
Delaware	8.7%	North Carolina	2%
District of Columbia	8.25%	North Dakota	1.41%–4.31%
Florida	5.5%	Ohio	None
Georgia	5.19%	Oklahoma	4%
Hawaii	4.4%–6.4%	Oregon	6.6%–7.6%
Idaho	5.3%	Pennsylvania	7.49%
Illinois	9.5%	Rhode Island	7%
Indiana	4.9%	South Carolina	5%
Iowa	5.5%–7.1%	South Dakota	None
Kansas	4%–7%	Tennessee	6.5%
Kentucky	5%	Texas	None
Louisiana	5.5%	Utah	4.5%
Maine	3.5%–8.93%	Vermont	6%–8.5%
Maryland	8.25%	Virginia	6%
Massachusetts	8%	Washington	None
Michigan	6%	West Virginia	6.5%
Minnesota	9.8%	Wisconsin	7.9%
Mississippi	4%–5%	Wyoming	None
Missouri	4%

Notes:

– In Colorado, the 4.4% rate may be reduced mid-year depending on the state's budget performance.
– In Connecticut, an additional 10% surtax applies to companies with gross revenue of USD 100 million or more. This mechanism has currently been extended until January 1, 2029.
– Nevada, Ohio, Texas, and Washington do not levy Corporate Income Tax, but they apply other charges, including gross receipts levies, which are not a direct equivalent of an income-based charge.
– Delaware, Oregon, Tennessee, Pennsylvania, Virginia, and West Virginia impose gross receipts fees or similar charges in addition to corporate income tax.
– In Illinois, the effective rate consists of two separate charges: 7% base corporate income tax and 2.5% personal property replacement tax.

As a result, a standard C-Corporation pays 21% federal corporate income tax plus state-level charges. Upon distribution of dividends to the business owner, withholding applies, typically 30% for non-residents, which may be reduced under a double taxation treaty.

Individual Income Tax in the U.S.

Individual Income Tax in the USA applies to the income of individuals and, as with corporate obligations, may be levied at two levels: federal and state. At the federal level, the United States applies a progressive rate scale: the higher the income, the higher the rate.

Below is the indicative federal Individual Income Tax scale as of 2026.

Federal income tax rates in the United States for individuals
Tax Rate	Income Level
10%	from $0 to $12,400
12%	from $12,401 to $50,400
22%	from $50,401 to $105,700
24%	from $105,701 to $201,775
32%	from $201,776 to $256,225
35%	from $256,226 to $640,600
37%	more than $640,601

Individual Income Tax in the USA may also be levied at the state level. In its logic, it is similar to the federal personal income tax; however, the revenue from it is allocated to the budget of the respective state rather than to the federal budget. The approach to such taxation varies among states: progressive or flat rates may be applied, and in certain jurisdictions this tax is not imposed at all.

Below are the indicative rates as of 2026.

Personal income tax rates by U.S. state
State	Tax Rate	State	Tax Rate
Alabama	2%–5%	Montana	4.7%–5.9%
Alaska	No tax	Nebraska	2.46%–5.2%
Arizona	2.5%	Nevada	No tax
Arkansas	2%–3.9%	New Hampshire	No tax
California	1%–13.3%	New Jersey	1.4%–10.75%
Colorado	4.4%	New Mexico	1.5%–5.9%
Connecticut	2%–6.99%	New York	4%–10.9%
Delaware	2.2%–6.6%	North Carolina	4.25%
District of Columbia	4%–10.75%	North Dakota	1.95%–2.5%
Florida	No tax	Ohio	2.75%–3.5%
Georgia	5.39%	Oklahoma	0.25%–4.75%
Hawaii	1.4%–11%	Oregon	4.75%–9.9%
Idaho	5.695%	Pennsylvania	3.07%
Illinois	4.95%	Rhode Island	3.75%–5.99%
Indiana	3%	South Carolina	0%–6.2%
Iowa	3.8%	South Dakota	No tax
Kansas	5.2%–5.58%	Tennessee	No tax
Kentucky	4%	Texas	No tax
Louisiana	3%	Utah	4.55%
Maine	5.8%–7.15%	Vermont	3.35%–8.75%
Maryland	2%–5.75%	Virginia	2%–5.75%
Massachusetts	5%–9%	Washington	No tax*
Michigan	4.25%	West Virginia	2.22%–4.82%
Minnesota	5.35%–9.85%	Wisconsin	3.5%–7.65%
Mississippi	4.4%	Wyoming	No tax
Missouri	2%–4.7%

Note:

* Washington does not impose personal income tax, but an additional 2.9% charge applies to capital gains exceeding the established threshold.

The most common company form in the United States among non-residents is a Single-Member LLC. By default, this structure does not pay at the company level — this occurs at the owner level. The LLC's profit is treated as the individual income of the owner and is calculated taking into account business expenses. Federal Individual Income Tax obligations may arise from this income and, under certain conditions, similar state-level obligations may also apply.

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LLC, C-Corp, or Partnership in the USA?

For non-residents, the key factor is the presence of Effectively Connected Income (ECI), which determines whether a U.S. liability arises. ECI generally arises where there is an actual presence or business activity in the United States — including an office, warehouse, employees, or other active operations. Income directly connected with activities conducted within the United States may also qualify as ECI. If ECI is absent, federal obligations may not arise. State-level obligations may still apply in certain cases, depending on the type of income, the jurisdiction, and the presence of activity in a particular state. In practice, the treatment of an LLC for non-residents always depends on the existence of ECI, the source of income, and the state of operation.

It is important to note that this material addresses company obligations specifically in the United States.

Owners of U.S. businesses who are fiscal residents of other countries may have additional obligations in their country of residence. For a comprehensive understanding of the overall burden, it is advisable to consider both jurisdictions.

For U.S. residents who own a Single-Member LLC and receive income from active business activities, Self-Employment Tax (15.3%) may additionally apply.

Interesting fact:

Almost half of private companies in the United States are classified as pass-through entities, including LLCs and S-Corporations. In these structures, the income tax is typically not paid by the company itself, but by its owner as an individual.

Franchise Tax in the U.S.

Franchise Tax in the U.S. is a distinct mandatory fee imposed on legal entities, including LLCs and corporations, for the right to exist and conduct business in a given jurisdiction. Unlike income-based charges, Franchise Tax often does not depend on the company's actual revenue, although the calculation method varies by state. Therefore, when analyzing what a company pays in the U.S., it is important to consider not only income-based charges but also mandatory annual fees. Typically, this fee is paid annually, often concurrently with the annual report.

The calculation method can differ significantly not only between states but also depending on the type of company within the same jurisdiction. For example, in Delaware, the amount for corporations can be determined using either the authorized shares method or the assumed par value capital methodThus, for companies, especially corporations, both the fact of registration and the capital structure and chosen calculation method are important.

In some states, the Franchise Tax or equivalent annual fee is relatively modest. For instance, in Wyoming, the annual report license fee starts at $60 for many companies, which is one reason for the jurisdiction's popularity among businesses entering the U.S. market.

It is important to note that even an LLC with no turnover may be required to pay such fees if mandated by the state of registration. If a company is registered in one state but operates in another, it may need to register there as a foreign LLC or foreign corporation and pay annual fees in both jurisdictions.

Sales Tax and Use Tax in the United States

Sales Tax and Use Tax are two related but distinct levies imposed at the state and local levels on the sale of goods and certain services. For LLCs and corporations, these are practically important because they affect not only the final price for the customer but also the business's compliance obligations.

– Sales Tax is effectively paid by the buyer when purchasing a product or service, while the seller acts as a collection agent: calculating, collecting, and remitting the amount to the government. Each state independently sets its base Sales Tax rate. Rates can range from 0% in certain jurisdictions — such as Oregon or Delaware — to 7.25% and higher, as in California. Additionally, most states also impose a Local Sales Tax, set at the county or city level.

– Use Tax to the use, storage, or consumption of goods and services purchased without Sales Tax. Its purpose is to ensure an equivalent burden regardless of where the product or service was purchased, within the state or from an out-of-state supplier.

Sales Tax and Use Tax are not income-based charges. The business's responsibility is to correctly determine liability, register on time, and accurately calculate, collect, and remit the required amount according to the rules of the specific state. A key concept here is nexus — the company's connection to a state that gives the state the right to require compliance. Nexus may arise through physical presence (an office, warehouse, employees, or store), or by meeting established thresholds for transactions or sales volume, known as economic nexus. If a company has a nexus in a state, it is generally required to collect Sales Tax and remit it to that state's treasury.

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Payroll Taxes in the U.S.

Payroll taxes in the U.S. are assessed on employee wages and fall into two main categories: Social Security and Medicare, along with additional contributions such as unemployment insurance. Unlike income-based charges, these are withheld from employees' wages and remitted by the employer to the relevant authorities.

Employers are separately responsible for unemployment insurance contributions , Federal Unemployment Tax (FUTA) and State Unemployment Tax (SUTA), with rates varying depending on the jurisdiction and the nature of the business.

Main structure of U.S. Payroll Taxes

Rates are current for 2026 year

Payroll taxes and mandatory employer contributions in the United States
Tax	Who Pays	Rate (2026)
Social Security Tax	Employer + Employee	6.2% each (12.4% total)
Medicare Tax	Employer + Employee	1.45% each (2.9% total)
Additional Medicare Tax	Employee	0.9% for income above $200,000
Federal Unemployment Tax (FUTA)	Employer	6% on the first $7,000 of wages
State Unemployment Tax (SUTA)	Employer	0.5%–6% depending on the state

Tax benefits and structuring in the USA

We have reviewed the main charges that businesses face in the United States. However, the actual burden is often determined not so much by rates as by the business structure and the use of available planning tools. Evaluating a company's obligations in the U.S. should therefore consider not only base rates but also available planning mechanisms. The U.S. has a developed system of exemptions, deductions, and tax credits that can reduce taxable income or the total liability. These mechanisms apply both to individuals (Individual Income Tax) and to businesses (LLCs, corporations).

For example:

Amazon has at various times demonstrated an effective burden of approximately 12–20% due to significant operating expenses, investments, and depreciation.

Apple has long optimized its obligations through structuring income from intellectual property, including utilizing jurisdictions with lower rates.

Companies such as Netflix and Meta invest substantial funds in development, research, and AI, which allows them to benefit from available credits. Importantly, these approaches are legal and grounded in legislation.

For small and medium-sized businesses, proper structuring of operations and collaboration with accountants and advisors is crucial. This enables companies to leverage available optimization tools and reduce the overall burden on both the business and its owners..

Frequently asked questions about U.S. Taxes

Are taxes in the USA really high?

Not necessarily. The US tax system is progressive and depends on the type of income, the state, and the business structure. The federal corporate rate is 21%, often lower than in many European countries. In some cases, effective rates can be further reduced through expenses, deductions, and proper business structuring.

Can we say that rates are low in the U.S.?

Not exactly. Levels vary depending on the specific situation. For example, non-resident LLC owners may not owe U.S. obligations if they have no Effectively Connected Income (ECI), but they are still required to report income in their country of fiscal residence.

What taxes for business apply in the U.S.?

Depending on its structure and operations, a U.S. company may be subject to multiple charges: federal and state Corporate Income Tax, Franchise Tax, Sales Tax and Use Tax, as well as payroll obligations if it has employees. The exact mix depends on the state, type of activity, and business structure.

Does an LLC pay taxes in the U.S.?

By default, an LLC is a pass-through entity, meaning obligations are met at the owner level through Individual Income Tax rather than at the company level. For non-residents, the presence of ECI determines whether U.S. obligations arise.

Do non-residents have obligations in the U.S.?

It depends on the source of income and business activity. If income qualifies as ECI, the non-resident must meet U.S. obligations. If ECI is absent, federal charges may not apply, but reporting obligations remain in the country of residence.

Is business reporting complicated in the U.S.?

For basic cases, no. Standard structures have formalized, predictable requirements. Complexity increases with multiple income sources, employees, or more complex structures. Non-residents are generally advised to work with a Certified Public Accountant (CPA) to minimize risks.

Do you have to pay if the company has no profit?

Yes. Even without profit, companies may have mandatory payments such as Franchise Tax or other annual fees. In most cases, reporting obligations remain.

Can personal expenses be deducted as business expenses?

No. Only expenses directly related to business operations and properly documented can be deducted. Personal expenses do not reduce taxable income. Expenses incurred by the owner may be considered if they have a direct connection to the business activity.

Taxes in the USA for companies depend not only on rates but also on business structure, sources of income, the presence of activity in a specific state, and compliance rules. Evaluating a company's obligations always requires a comprehensive approach: considering federal and state-level charges, the company's structure, and the owner's status. For C-Corporations, key considerations include federal Corporate Income Tax, state charges, and possible withholding on dividend payments. For LLCs, pass-through treatment, Individual Income Tax, and an assessment of Effectively Connected Income (ECI) for non-residents are critical.

Additionally, businesses in the U.S. may encounter Franchise Tax, Sales Tax, Use Tax, and payroll obligations even if the company has minimal profits. Therefore, properly structuring a U.S. business requires careful attention not only to reducing rates but also to specific state rules, reporting requirements, available benefits, and risks of double taxation.

To build an effective structure for your U.S. business and minimize potential risks, consult an expert at WoBorders.

We will help you navigate the specifics of the US tax system, assess available structuring options, and support you at every stage, from business setup in the U.S. and provide accounting and declaration for companies.

Our office hours are Monday through Friday, 9:00 a.m. to 6:00 p.m.

Ця публікація Business taxes in the U.S. in 2026 вперше з’явилася на сайті WoBorders.