Foreign Person

A foreign person, as defined by the Internal Revenue Code and various U.S. regulatory frameworks, is any individual who is not a U.S. citizen or U.S. resident alien, or any entity (corporation, partnership, trust, or estate) that is not organized under U.S. law or treated as a domestic entity for tax purposes. This classification triggers a cascade of reporting, withholding, and compliance obligations across multiple regulatory regimes. Under FIRPTA (Foreign Investment in Real Property Tax Act), a foreign person selling U.S. real property interests is subject to 15% withholding on the gross sales price. Under IRC Section 1441, payers of U.S.-source fixed, determinable, annual, or periodical (FDAP) income to foreign persons must withhold 30% unless reduced by an applicable tax treaty — requiring the foreign person to provide Form W-8BEN (individuals) or W-8BEN-E (entities) to claim treaty benefits. The definition of foreign person also drives reporting under CFIUS (Committee on Foreign Investment in the United States), which reviews transactions where foreign persons acquire control of U.S. businesses for national security implications. For business formation purposes, foreign persons can freely form LLCs, C-Corporations, and partnerships in any U.S. state, but face restrictions on S-Corporation eligibility (foreign persons are ineligible shareholders). Banking access, payment processor onboarding (Stripe, PayPal), and vendor credentialing all require foreign persons to navigate enhanced Know Your Customer (KYC) requirements, typically requiring passport verification, proof of foreign address, and either an ITIN or EIN. doola provides comprehensive formation and compliance services tailored specifically for foreign persons entering the U.S. business ecosystem, streamlining the EIN, ITIN, and entity setup process.