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§01IRS Exposure Analysis

Six vectors. One map.

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Read the Glossary

Most of this is knowable in advance. We go through the structure for the exposures in your current structure — Form 5472, ECI classification, permanent establishment, withholding routing, BPT, FBAR/FATCA — and rank them by remediation urgency.

Form 5472 penalty
$25,000

Minimum penalty for each year a required Form 5472 is not filed.

Withholding at source rules
30%

Withheld at source on U.S.-source FDAP paid to a foreign person, absent a documented treaty claim.

U.S. corporate tax rate
21%

Federal corporate rate once income is effectively connected with a U.S. trade or business.

FBAR penalty (non-wilful)
$10,000

Statutory maximum non-willful FBAR penalty per annual report, adjusted annually for inflation.

Figures set by U.S. tax law · Not results from any engagement

§02Exposure Vectors

Six categories. Most founders carry at least three.

EXP.01
▲ CRITICAL
Foreign-owner disclosure rules

Form 5472 Non-Compliance

Foreign-owned single-member LLCs are disregarded entities that the IRS ignores for most tax purposes, but still treats as a corporation for this one reporting rule. Most founders never learn it exists until the penalty notice arrives.
Exposure
$25,000 minimum
EXP.02
▲ CRITICAL
U.S. trade or business rules

Effectively Connected Income Trigger

Income reclassified from FDAP to ECI is taxed at corporate rates after deduction allowance, with retroactive interest accrual. The classification turns on dependent agency, fixed place of business, and continuity tests.
Exposure
Graduated corporate rates + interest
EXP.03
▲ HIGH
Tax treaty — taxable presence

Permanent Establishment Risk

A single dependent contractor, a leased fulfillment slot, an over-engaged independent agent — each can create permanent establishment sufficient to overcome treaty protection.
Exposure
Full U.S. taxation of business profits
EXP.04
▲ HIGH
Withholding at source rules

Default 30% FDAP Withholding

In the absence of a properly documented treaty claim, all U.S.-source FDAP income to foreign persons is withheld at 30% by the payor. Most founders discover this when Stripe or AdSense remits 70% of expected revenue.
Exposure
30% withheld at source
EXP.05
▲ MEDIUM
Branch profits tax

Branch Profits Tax

Foreign corporations operating via U.S. branch are subject to BPT on the dividend equivalent amount in addition to standard corporate tax. Treaty reductions apply but are jurisdiction-specific.
Exposure
30% on dividend-equivalent amount
EXP.06
▲ HIGH
Foreign account reporting

FBAR / FATCA Disclosure Failure

U.S. founders with foreign accounts, foreign-resident citizens, and dual-status filers face automatic disclosure obligations. In Bittner v. United States, 598 U.S. 85 (2023), the Supreme Court held that the non-willful FBAR penalty attaches to each annual report — not to each unreported account.
Exposure
$10,000 per annual report
§03ECI & Exposure Dossiers

Deep reads.

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ECI & Exposure

Decoding Effectively Connected Income (ECI)

How to determine if your global sales trigger U.S. corporate taxation. The U.S.-trade-or-business framework, dependent-agent rules, and the practical test the IRS actually applies.

ECI & Exposure

The 3PL and Remote Fulfillment Pivot

Does using U.S. warehousing create a domestic permanent establishment? Amazon FBA, ShipBob, Deliverr — the de minimis activity carve-outs and the IRS positions that override them.

ECI & Exposure

SaaS Platforms and Borderless Sales

Managing tax exposure for global cloud architectures. Hosted server location, customer concentration, dependent contractor risk — the four dimensions that flip SaaS into ECI.

ECI & Exposure

The E-Commerce Tax Trap

Navigating source withholding rules for cross-border digital platforms. Stripe, Shopify, Amazon, Etsy — the 1099-K cascade and how to keep your foreign source position intact.