You're moving to the US and you own a company back home

A profitable company abroad is usually the largest item on a new resident's balance sheet, and it is the item most likely to produce an unexpected US tax bill in the first year.

Once you are a US person and you own or control enough of a foreign corporation, it is a controlled foreign corporation and you file for it annually, with financial statements translated into US accounting terms, whether or not you took a distribution.

The GILTI regime taxes an individual US shareholder on the company's active earnings above a routine return on its tangible assets, in the year they arise, at ordinary rates, with no foreign tax credit available to an individual shareholder by default.

For a service company with few fixed assets, a consultancy, an agency, a software business, nearly all profit can fall into the inclusion. The company can be reinvesting everything and the shareholder still owes US tax on it personally.

An individual can elect to be taxed on the inclusion as if they were a corporation: at the corporate rate, with credit for foreign corporate tax paid. It frequently reduces the immediate liability substantially, at the cost of a second layer of tax when the earnings are eventually distributed. It is an annual decision, not a permanent structure.

Electing to treat the company as transparent for US purposes can align US and local taxation and avoid the GILTI machinery entirely. Made before residency, it is a paperwork exercise. Made afterwards, it is a deemed liquidation with real tax consequences.

• Distribute or restructure accumulated earnings before the start date, where local law allows.
• Decide the entity classification before arrival, not in the first filing season.
• Fix the accounting basis and functional currency before the first US filing depends on them.
• Model the first three years, because the first year is rarely the worst one.