Corporate Attorney in Los Angeles: What International Businesses Get Wrong When Expanding to the U.S.
- dimartinolaw
- 0 Comments
- 16 views
- July 18, 2026
Corporate Attorney in Los Angeles: What International Businesses Get Wrong When Expanding to the U.S.
Expanding to the United States is one of the most consequential decisions an international business will make. The opportunity is real, the U.S. remains the world’s largest consumer market, and California alone would rank as the fourth-largest economy in the world if measured independently. But the legal complexity of U.S. market entry is consistently underestimated by foreign companies, particularly those from civil law jurisdictions like Italy and most of Europe.
The mistakes international businesses make when entering the U.S. market are not usually strategic. They are structural, decisions made early in the process, often without adequate legal counsel, that create compliance exposure, tax inefficiency, or operational constraints that are expensive to correct after the fact. This guide covers the five most significant legal mistakes international companies make when expanding to the U.S., and why a corporate attorney in Los Angeles specifically, not just any U.S. lawyer, changes the outcome for companies entering California.
Mistake 1: Choosing the Wrong Entity Structure
The first legal decision any international business makes when entering the U.S. market is which type of entity to form. The three primary options are the Limited Liability Company (LLC), the C-Corporation (C-Corp), and the S-Corporation (S-Corp). Each provides limited liability protection, but they differ significantly in how they are taxed, how they interact with international tax treaties, and how they are perceived by U.S. investors and financial institutions.
The LLC trap for foreign-owned companies
The LLC is the most popular choice for U.S. domestic businesses because of its flexibility and pass-through taxation. For foreign-owned companies, it creates complications that a domestic business does not face. A single-member LLC owned by a foreign entity is treated as a disregarded entity by the IRS, meaning its income is attributed directly to the foreign owner, potentially triggering U.S. tax filing obligations for the parent company and complicating the application of the applicable U.S. tax treaty. Even with no income, a foreign-owned single-member LLC must file IRS Form 5472 with a pro-forma Form 1120 or face a minimum penalty of $25,000 per form.
The S-Corporation is only a valid option for US citizens or foreign shareholders who are lawful US residents.
When C-Corp is the right choice
For most international companies establishing a meaningful U.S. presence, the C-Corporation is the more straightforward structure. It is a fully separate legal entity taxed at the U.S. federal corporate rate of 21%. It aligns more cleanly with how U.S.-foreign tax treaties are designed to operate, is the expected structure for U.S. institutional investors and venture capital, and allows the issuance of multiple classes of stock. A foreign-owned company that forms an LLC and later needs to convert to a C-Corp to raise investment typically depends on the size of the company and how complex that is.
When LLC works
For Italian or European investors who will be relocating to the U.S. and establishing tax residency, including under an E-2 investor visa, the LLC often makes more sense, because once the individual is a U.S. tax resident, the pass-through treatment becomes advantageous rather than a complication.
The entity decision must account for the business model, investor profile, home-country tax treatment, and long-term objectives. It must be made before formation, because correcting it after the fact is always more expensive than getting it right from the start.
Mistake 2: Ignoring California-Specific Employment and Compliance Laws
California has some of the most complex and frequently updated employment laws in the country. For international companies establishing operations in California, the assumption that U.S. federal law is all that applies is one of the most common and expensive errors.
Worker Classification, AB5 and the ABC Test
California’s Assembly Bill 5 (AB5), in effect since January 1, 2020 and updated most recently by AB1514 in 2026, applies to any company engaging workers in California, regardless of where the hiring company is headquartered. Whether the company is based in Milan, Rome, or London makes no difference. If a worker performs services in California, AB5 governs their classification.
Under the ABC test established by AB5, a worker is presumed to be an employee unless the hiring company can demonstrate all three of the following: the worker is free from the company’s control in performing the work; the work performed is outside the usual course of the company’s business; and the worker is customarily engaged in an independently established trade or occupation. Misclassifying a worker as an independent contractor when they should be an employee exposes a company to fines of $5,000 to $15,000 per violation, and up to $25,000 per violation for willful misclassification, in addition to back wages, unpaid taxes, and workers’ compensation liability.
Minimum wage and pay reporting
California’s minimum wage in 2026 is $16.90 per hour for general workers, with higher rates for specific industries and cities. The exempt employee salary threshold is $70,304 per year as of January 1, 2026. Los Angeles, San Francisco, and other cities impose their own, higher minimum wages, requiring international employers to track local ordinance requirements, not just state law.
2026-specific compliance requirements
New in 2026: employers must provide a standalone written Workplace Know Your Rights Notice to all employees by February 1, 2026 and annually thereafter, under SB 294. Employers must also allow employees to designate emergency contacts by March 30, 2026. Mandatory sexual harassment prevention training is required every two years.
For international companies without a dedicated HR or legal team in California, these requirements create real compliance risk that accumulates quickly.
Mistake 3: Using Home-Country Contracts Without U.S. Legal Adaptation
European and Italian businesses entering the U.S. market frequently use their existing commercial contracts, adapted with U.S. party names and an attempt at U.S. governing law, without a full legal review by counsel familiar with U.S. contract law.
The result is contracts that may be unenforceable in key asspects or that create unintended obligations under U.S. law.
The fundamental structural difference
U.S. contracts operate under common law, which means every significant term must be explicitly written, courts interpret contracts based on their literal language. Italian and European civil law contracts are typically shorter because domestic law fills in many obligations automatically. A European contract adapted for U.S. use often contains gaps that U.S. law does not fill in the same way Italian or French law would.
California-specific contract requirements
California imposes specific mandatory requirements on commercial contracts that differ from both federal law and the laws of most other U.S. states. Non-compete clauses, for example, are largely unenforceable in California regardless of what the contract says, a significant consideration for companies trying to protect client relationships or proprietary information when hiring California-based employees. As of January 1, 2026, California has also introduced new restrictions on repayment clauses in employment contracts, provisions requiring employees to repay relocation expenses, sign-on bonuses, or training costs are void unless they meet specific statutory requirements.
Intellectual property assignment
Employment agreements in California must include specific IP assignment language to ensure that work created by employees belongs to the company. Without properly drafted IP assignment clauses, employees may retain ownership of work they create, even when hired explicitly for that purpose.
Mistake 4: Overlooking Intellectual Property Registration in the U.S.
Many international companies enter the U.S. market with the assumption that their existing intellectual property, trademarks registered in Italy or the EU, patents filed in Europe, or copyrights established under their home country’s law, protects them in the United States. It does not.
Trademark protection is territorial
A trademark registered with the European Union Intellectual Property Office (EUIPO) or the Italian Patent and Trademark Office provides no protection in the United States. U.S. trademark rights are established through either federal registration with the United States Patent and Trademark Office (USPTO) or through actual use in U.S. commerce. A foreign company that operates in the U.S. under an unregistered name risks having that name registered by a third party, including a competitor, who can then assert rights that force the foreign company to rebrand.
Since 2019, all trademark filings with the USPTO by foreign-domiciled applicants must be handled by a U.S.-licensed trademark attorney. This is not optional, the USPTO will reject filings that do not comply with this requirement.
Patent protection requires U.S. filing
European patents and PCT applications provide a pathway to U.S. patent protection, but the U.S. filing must be completed within specific time limits, generally 30 months from the priority date under the Patent Cooperation Treaty. International companies that miss these deadlines lose the ability to obtain U.S. patent protection based on their foreign priority filing.
Trade secrets and confidential information
The U.S. approach to trade secret protection, governed by the federal Defend Trade Secrets Act and California’s Uniform Trade Secrets Act, requires companies to take affirmative steps to maintain secrecy. Contracts with employees, contractors, and business partners must include properly drafted non-disclosure and confidentiality provisions. Without these, a company’s trade secrets may not qualify for legal protection even if the information is genuinely confidential.
Mistake 5: Misunderstanding U.S. Tax Obligations for Foreign-Owned Entities
The U.S. tax system is one of the most complex in the world for foreign-owned businesses. International companies entering the market frequently underestimate the scope of their U.S. tax obligations, not just on income earned in the U.S., but on the structure of the entity itself.
Federal corporate income tax
A U.S. C-Corporation pays federal corporate income tax at a flat rate of 21% on its net income. California imposes an additional state corporate income tax of 8.84%, subject to an $800 minimum annual franchise tax. If the company’s calculated state tax liability is below $800, it pays the $800 minimum instead; if the calculated liability exceeds $800, it pays that higher amount rather than both. This minimum tax applies even in years the company generates no income. For companies operating in Los Angeles or other California cities, local business taxes may also apply.
Foreign-owned LLC reporting
As noted above, a foreign-owned single-member LLC must file IRS Form 5472 with a pro-forma Form 1120 even if it has no income. The $25,000 penalty for failure to file applies per form, per year. Multi-member LLCs with foreign owners face similar reporting obligations.
Withholding on payments to foreign parties
When a U.S. entity makes payments to a foreign parent, dividends, royalties, service fees, or interest, U.S. withholding tax applies at a rate of 30% unless reduced by a tax treaty. The U.S.-Italy tax treaty reduces withholding rates on dividends to 5% or 15% depending on the ownership percentage, and on royalties to 0% or 8% depending on the type. These treaty benefits require proper documentation and structuring to apply, they are not automatic.
State and local tax nexus
A foreign company can trigger California tax obligations, “nexus”, by having employees working in California, storing inventory in California, or making sales to California customers above certain thresholds, even without a formal California office. International companies entering the market often discover their California tax obligations only after they have already accumulated significant exposure.
Why a Corporate Attorney in Los Angeles Specifically
Each of the five mistakes above is correctable, but correction after the fact is consistently more expensive than prevention. The question is not whether to involve legal counsel, but when and what kind.
A corporate attorney in Los Angeles who works with international businesses brings a specific combination of expertise that general U.S. counsel or home-country attorneys cannot replicate: knowledge of California-specific employment, contract, and corporate law; experience with the entity structures and tax implications that affect foreign-owned businesses specifically; and, for firms with U.S.-Italy cross-border practices, the dual-jurisdiction understanding that allows the U.S. and home-country sides of a transaction to be evaluated in a single engagement.
California is not simply a U.S. state with local color. It is a distinct legal jurisdiction with its own employment standards, contract rules, and regulatory framework that regularly diverges from federal law and from the laws of other U.S. states. An international business law attorney who focuses on California-based international business understands this distinction and advises accordingly.
For Italian and European companies specifically, the value of an Italian corporate lawyer with California experience goes further, the ability to understand how Italian corporate structures, contractual frameworks, and business practices interact with U.S. legal requirements avoids the gap that neither a U.S.-only nor an Italy-only attorney can bridge.
Getting It Right
The five mistakes in this guide share a common thread: they are all decisions made early, often quickly, without the right legal input, and they all become significantly more expensive to correct than they would have been to prevent.
For international businesses entering the U.S. market, particularly through California, the right time to engage a corporate contract attorney in Los Angeles is before the first entity is formed, before the first employee is hired, and before the first contract is signed, not after a compliance issue has surfaced or a legal dispute has begun.
