Frequently Asked Questions About Wealth and Tax Planning for International Entrepreneurs

The choice between a C corporation, S corporation, LLC, or partnership can have significant tax and planning consequences. The right structure depends on factors such as:

• where the founders and investors are located,
• where income will be taxed, and
• whether the company expects to raise US capital.

For founders moving an existing foreign business into a US structure, a common approach is a Delaware flip, where the founders exchange their shares in the foreign company for shares of a new US corporation. However, those new shares generally do not qualify as qualified small business stock (QSBS)—which would come with significant tax benefits—because Section 1202 of the Internal Revenue Code typically requires shares to be issued for cash, qualifying property, or services—not in exchange for other stock. In some cases, issuing founder shares directly from a US C corporation can potentially qualify for QSBS, although the broader corporate and tax structure also needs to be considered.

QSBS can allow founders and other shareholders of a qualifying US C corporation to exclude a significant amount of gain from federal income tax when they eventually sell their shares. Stock acquired on or before July 4, 2025, generally requires a five-year holding period. Under the One Big Beautiful Bill Act, for qualifying stock acquired after that date, the exclusion is 50% after three years, 75% after four years, and 100% after five years. Because it can be difficult to create QSBS eligibility later, it is worth considering when planning the structure of the company.

Founder equity planning also includes 83(b) elections. When founders receive restricted stock that vests over time, an 83(b) election can allow them to recognize any taxable income when the shares are initially received, when their value may still be low, rather than as they vest. The election generally must be filed within 30 days of receiving the shares, so it needs to be considered early.

US tax residency can be more flexible and controllable than many people realize, making the timing of a move an important planning opportunity. There are a number of decision points which are best mapped out before the move.

Under the green card test, residency generally begins on the first day an individual is present in the United States as a lawful permanent resident. The substantial presence test is more nuanced, generally requiring at least 31 days of US presence in the current year and a weighted three-year total of 183 days. Even someone who meets that test may remain a nonresident under the closer connection exception if its requirements are satisfied, while a resident of a treaty country may be able to rely on a treaty tiebreaker.

A founder married to a US citizen or resident may also be able to elect full-year US residency for income-tax purposes. US residents generally become subject to US tax on worldwide income.

A move to the United States creates important opportunities around the timing of income, gains, losses, and deductions. Someone moving from a lower-tax jurisdiction may benefit from realizing certain income or gains before US residency begins, while someone leaving a higher-tax jurisdiction may face the opposite incentives. Capital gains deserve particular attention because the United States generally does not provide a basis step-up simply because someone becomes a US resident. Foreign assets are measured for US tax purposes in US dollars, so changes in exchange rates can create a US taxable gain even where there has been little or no gain measured in an asset’s local currency.

Founders who own foreign companies may have additional pre-immigration planning opportunities. For example, an eligible foreign entity may be able to make a check-the-box election before its owner becomes a US resident. The election can create a deemed liquidation for US tax purposes and, in the right circumstances, establish a more favorable basis in the company’s underlying assets before they enter the US tax system. The results depend heavily on the entity, ownership structure, and applicable foreign and US tax rules. Planning generally needs to be completed before US residency begins.

Foreign bank and financial accounts above certain thresholds must be disclosed annually under Report of Foreign Bank and Financial Accounts (FBAR) and Foreign Account Tax Compliance Act (FATCA) rules, and foreign business interests (including ownership stakes in foreign companies) carry their own layered reporting requirements. Understanding this burden before a move, and structuring foreign holdings with it in mind, is far easier than untangling penalties and late filings after the fact.

In addition, state tax residency is entirely separate from these federal rules. Entrepreneurs overwhelmingly gravitate toward California for its talent pool and venture ecosystem, but California also carries the highest state income tax rate in the country, applied to worldwide income once residency is established. Texas and Florida, both with no state income tax, have become increasingly popular landing spots for founders who do not need to be near a specific tech hub. State residency deserves the same deliberate analysis as federal residency, made before a major liquidity event rather than after one.

Once a founder has liquidity, whether from a partial sale, an IPO, or years of accumulated wealth, the next challenge is building a portfolio that is tax efficient and appropriately diversified away from a single concentrated position. Long-short separately managed accounts can be a powerful tool here: These strategies attempt to outperform their respective target benchmarks or indexes while also seeking to improve tax efficiency by generating realized losses and deferring capital gains. A founder can use those harvested losses to offset gains recognized elsewhere, including a large gain from the sale of a business.

A global lifestyle may call for a globally diversified investment strategy. Rather than concentrating wealth in one country, currency, or market, founders should consider a portfolio of public and private investments across the US and international markets.

That can include US and international fixed income, providing exposure beyond US dollar–denominated debt, as well as equity investments in both large and small companies located in the US and abroad. Private equity, private credit, real estate, and other alternative investments can provide additional sources of diversification where appropriate.

The objective is not simply to own more foreign investments, but to build a coordinated worldwide portfolio that reflects where a founder lives, spends, invests, and expects to use capital over time.

For US residents, the structure of international investments also matters because certain foreign funds and investment vehicles can create unfavorable US tax consequences. A globally coordinated investment and tax strategy can help achieve diversification while avoiding unnecessary cross-border complexity.

Estate planning can change significantly when a founder moves to the United States. Non-US citizens who are not domiciled in the US are generally subject to US estate tax only on certain US-situated assets, while US citizens and domiciliaries are generally subject to estate and gift tax on worldwide transfers. This makes planning before US domicile important, particularly if you’re considering gifting non-US assets before establishing US domicile (either directly to family members or through an appropriately structured trust).

Special planning is also important when a spouse is not a US citizen. The unlimited marital deduction generally available between US-citizen spouses does not apply in the same way to a noncitizen spouse. Lifetime gifts can qualify for a special annual exclusion, while a qualified domestic trust can potentially defer US estate tax following the death of the first spouse.

For international families with US children or grandchildren, foreign grantor trusts can also provide a way to transfer and manage family wealth across generations. Properly structured distributions during the foreign grantor’s lifetime may generally be treated as gifts rather than taxable trust income to US beneficiaries, although significant US reporting requirements apply.

Domestic trusts can also play an important role. Jurisdictions such as South Dakota are frequently considered for long-term and directed trusts because they offer flexible trust laws, including the ability to separate investment management from trust administration. For globally mobile families, the appropriate jurisdiction should be selected as part of the broader tax, estate, investment, and family-governance strategy—rather than based on any single state’s tax rules.

Not every founder’s US chapter is permanent, and planning for an eventual departure can be just as important as planning the arrival. US citizens who renounce citizenship and long-term green card holders who give up US residency may be subject to the expatriation tax rules. For green card holders, these rules generally become relevant after holding permanent resident status in at least eight of the prior 15 tax years.

An individual can become a “covered expatriate” by meeting any of three tests:

• having a net worth of $2 million or more,
• exceeding an inflation-adjusted five-year average income tax liability threshold, or
• failing to certify compliance with US federal tax obligations for the prior five years.

Covered expatriates are generally subject to a mark-to-market exit tax under Section 877A, which treats most worldwide assets as if they were sold at fair market value immediately before expatriation. An inflation-adjusted amount of gain is excluded, while certain retirement accounts, deferred compensation, and trusts are subject to separate rules.

State residency also requires careful planning. Founders leaving high-tax states should establish and document a clear change of domicile and residency, particularly when a business sale or other significant liquidity event is expected. For internationally mobile founders, the timing of both entry into and exit from the US tax system should therefore be considered well in advance.