It is often the first question a European business owner asks when entering the United States, and one of the most poorly answered. A structure chosen in a hurry can create double taxation, block a raise from US investors or be expensive to unwind. Here are the criteria that actually matter.

The three real options

  • Sell from Europe with no US entity. Fine for testing the market. Be careful: a regular physical presence (an employee or agent signing contracts in the US) can create a permanent establishment and therefore US taxation, even without a company.
  • Form an LLC (Limited Liability Company): flexible, light on formalities, tax-transparent by default in the US.
  • Form a C-Corp, most often in Delaware, owned by the European company: the “classic” subsidiary.

The C-Corp: the default choice for a subsidiary

A C-Corp is taxed at its own level: a 21% federal corporate income tax since 2018, plus tax in the state where it operates. For a French parent company it has two decisive advantages:

  • It is understood on both sides of the Atlantic and allows the French parent-subsidiary regime on dividends paid up (at least 5% held for 2 years, 95% exemption), according to the analysis by Hayot Expertise.
  • It is the structure US venture capital funds expect: an LLC will almost always have to be converted before a raise.

The LLC: flexible, but a trap for Europeans

In the US, a single-member LLC is “disregarded” by default (its results flow to its owner), a multi-member LLC is treated as a partnership, and it can elect to be taxed as a corporation (IRS Form 8832).

The problem lies on the other side of the Atlantic: French case law is divided on how to classify LLCs, with some decisions treating them as companies subject to corporate tax and others as partnerships (Option Finance, June 2025). This mismatch can produce double taxation, and the parent-subsidiary regime does not apply to a disregarded single-member LLC.

Another point often missed: a foreign-owned single-member LLC must file IRS Form 5472 every year (reporting transactions with its owner). Failing to file is heavily penalized.

Delaware, Florida, Texas: which state?

Delaware is popular for its stable corporate law and specialized courts. But it saves no tax if your actual business is elsewhere: the company must also register (“foreign qualification”) in the state where it has offices, employees or inventory, and pay that state’s taxes and annual fees.

Rule of thumb: Delaware if a US fundraise is on the table; otherwise, seriously compare the state where operations will actually be.

Questions to settle before signing

  1. Is a raise from US investors planned within 3 years?
  2. Who will run the subsidiary, and will they need a visa (E-2 or L-1)?
  3. Will there be employees, inventory or an office in the US, and in which state?
  4. What flows between parent and subsidiary (sales, royalties, recharges)? They must follow transfer pricing rules.
  5. What annual compliance budget (accounting, federal and state filings, registered agent)? Hayot Expertise puts it at roughly €4–12k a year depending on complexity.
Key takeaway

For a European SME subsidiary, the C-Corp is the safest choice in most cases. The LLC is not forbidden, but it must be validated by tax advisers in both countries before formation, not after.

Frequently asked questions

Can a French company form an LLC in the United States?

Yes, but the French tax treatment of an LLC is uncertain and can create double taxation. Have it validated upfront by a French tax adviser and a US CPA.

Do I have to incorporate in Delaware?

No. Delaware is mainly useful for raising money from US investors. The company will in any case have to register in the state where it actually operates.

What tax does a C-Corp pay?

A 21% federal tax on profits, plus tax in each state where it has taxable activity.

Sources

External links checked on October 24, 2026.

This guide is not tax or legal advice. The choice of structure should be validated by a tax adviser in your country and by a US CPA or attorney.

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