Moving to the United States to build a business is often seen as an exceptionalopportunity: market depth, access to capital, sometimes attractive taxation.But behind this momentum lies a less visible reality: the majority ofFrench entrepreneurs established in the United States underestimate their actual tax exposure.
This underestimation does not stem from a lack of compliance.It stems from a lack of strategic anticipation.
1. Attractive taxation does not mean simple taxation
Many arrive with a clear idea: the U.S. federal corporate tax rate is 21%. That is correct.
Official source: Internal Revenue Code – 26 U.S. Code §11https://www.law.cornell.edu/uscode/text/26/11
But this reading is incomplete.
In the United States, taxation may include:
● Federal tax
● State tax
● City tax
● Local taxes
● Sales tax
● Payroll taxes
The tax structure is therefore multi-layered. A view limited to the 21 % federal rate does notreflect the full reality.
2. U.S. residency does not eliminate Frenchexposure
A French entrepreneur established in the United States may remain exposed to French taxationif they retain:
● Assets in France
● A subsequent French tax residence
● Heirs in France
● Shareholdings in French companies
The France–U.S. tax treaty of August 31, 1994 provides for the elimination of doubletaxation, but it does not remove all reporting obligations or estate implications.
Official source: France – United States Tax Treatyhttps://www.impots.gouv.fr/les-conventions-internationales
With respect to dividends, Article 10 of the treaty governs withholding taxes andArticle 24 sets out the foreign tax credit mechanism.
3. The choice of structure is often made without along-term vision
LLC or Corporation.
The LLC is often chosen for its flexibility. However, for tax purposes, it may be consideredtransparent in the United States while being treated differently in France.The risk does not lie in the legality of the structure, but in its cross-bordercompatibility.
Legal basis LLC – federal treatment. Internal Revenue Code – 26 U.S. Code §701 (Partnership taxation) https://www.law.cornell.edu/uscode/text/26/subtitle-A/chapter-1/subchapter-K
A poor decision can have consequences in the event of:
● A dividend distribution
● A sale
● A return to France
4. U.S. estate tax risk is widelyunderestimated
The United States imposes a federal estate tax that can reach 40 %after the applicable exemption.
Legal basis: Internal Revenue Code – 26 U.S. Code §2001https://www.law.cornell.edu/uscode/text/26/2001
For non-U.S. domiciliaries, the available exemption is significantly lower than that of individualswho are U.S. tax residents.
Legal basis: 26 U.S. Code §2102https://www.law.cornell.edu/uscode/text/26/2102
A French entrepreneur holding U.S. assets (equity interests, real estate, brokerageaccounts) may therefore be exposed to U.S. Estate Tax.
Coordination with French taxation is governed by the France–U.S. estate tax treaty.
Estate Tax Treaty (1994)https://www.impots.gouv.fr/les-conventions-internationales
5. FATCA compliance does not protect against poorstructuring
FATCA imposes a 30 % withholding tax on certain payments to non-compliant foreignentities.
Legal basis FATCA: 26 U.S. Code §1471https://www.law.cornell.edu/uscode/text/26/1471
But being compliant does not mean being optimized.
Two fully compliant entrepreneurs may face radically different tax burdensdepending on the chosen structure.
The real risk: thinking in terms of annual taxation instead ofthinking in terms of life cycle
An entrepreneur’s tax exposure unfolds across:
● The development cycle
● The timing of exit
● A change of residence
● Succession
A neutral decision today may generate a major cost in ten years.
Conclusion
France–U.S. taxation is not inherently dangerous.
It becomes risky when it is not anticipated.
Underestimating tax risk is not about ignoring the rules.
It is about ignoring their long-term consequences.
For a French entrepreneur in the United States, taxation must be treated as a strategicpillar of development, just like growth or fundraising.
Olivier
Partner – USA France Financials
Future written communications may be in English only.Financial Advisors do not provide tax advice. Consult a qualified tax professional regarding your individual situation. Tax laws are subject to change. Guardian does not provide advice regarding French law.
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