How do you set up as a US contractor for a foreign company?

The setup in seven steps

1. Pick an entity. Sole proprietor, single-member LLC, or S-corp — see llc vs s-corp for remote americans. Most first-time contractors start as an LLC for the liability shield.
2. Get an EIN. Free from the IRS online. Required for an LLC or S-corp; useful for a sole prop so you don't give out your Social Security Number.
3. Open a business bank account. Any US bank works. Wise or Mercury if you want cheap international transfers. Keep all business income and expenses in this account — this is the single biggest thing that simplifies bookkeeping.
4. Sign the contractor agreement. The foreign company will usually supply a template. Read carefully; foreign employment contracts often include terms Americans don't see (post-contract non-competes, governing-law clauses in the employer's country, mandatory arbitration abroad).
5. Provide tax forms to the foreign company. There is usually no US form required — foreign payers do not issue 1099s. If the foreign company asks for a W-9, fill it out. A W-8BEN is for foreign persons receiving US-source income, so it does not apply to you.
6. Set up bookkeeping. QuickBooks, Xero, Wave, or a clean spreadsheet. Separate revenue, expenses, and owner draws. Reconcile monthly.
7. Pay quarterly estimated taxes. Form 1040-ES for federal; your state's equivalent for state. Due April 15, June 15, September 15, and January 15.

That's the backbone. The rest is ongoing discipline.

The invoice

A typical invoice to a foreign company includes:

• Your legal business name and EIN (or SSN if sole prop).
• The client's legal name and address.
• Invoice number and date.
• Description of services performed during the period.
• Amount in USD (strongly preferred) or the foreign currency with the agreed exchange rate.
• Payment terms (net 30 is common; insist on net 15 if cash flow matters).
• Wire or Wise transfer instructions.

Some foreign companies will try to pay net 45 or net 60. Push back — these are aggressive in the consulting world.

Getting paid across borders

Three practical options:

• Wire transfer. Traditional, reliable, fees of $15–$40 on your end and a few-day delay. Wire to your US bank.
• Wise (formerly TransferWise). Near mid-market exchange rates. Business account supports USD and multi-currency balances. Best for foreign-currency invoices.
• Payment platforms (Deel, Remote, Oyster, Papaya Global). If the foreign company uses one, you'll get paid through their app. Fees come out of the employer's budget, not yours — usually.

Whatever channel you use, record the USD value on the date payment hits your account — this is the amount reported to the IRS. Don't report the gross foreign-currency amount.

Taxes — the annual cycle

Year-round:

• Keep receipts for business expenses (home office, software, travel, equipment).
• Track mileage if you drive for business.
• Pay quarterly estimates.

Year-end (January–April):

• Reconcile books.
• Prepare Schedule C (sole prop / SMLLC) or Form 1120-S (S-corp).
• Calculate self-employment tax on Schedule SE.
• File your 1040 and state return.

If foreign tax was withheld:

• File Form 1116 for the Foreign Tax Credit.
• Keep the foreign tax document (equivalent of a 1099-equivalent statement from the foreign government or employer).

If a foreign bank held your money:

• File FBAR (FinCEN 114) if total foreign balances exceeded $10,000 at any point in the year.
• File Form 8938 (FATCA) if higher thresholds met.

Deductions that actually apply

• Home office. Simplified method: $5 per square foot up to 300 sq ft ($1,500 max). Regular method: percentage of actual home expenses.
• Internet and phone. Business-use percentage.
• Software subscriptions. 100% if business-only (QuickBooks, Adobe, Slack, etc.).
• Professional services. Accountant, lawyer, business bank fees.
• Equipment. Laptop, monitor, desk. Section 179 or bonus depreciation to expense in year 1.
• Travel for business. Only if the foreign client requires you to travel to them — keep records.
• Health insurance (self-employed health insurance deduction, above the line, if you don't qualify for a spouse's plan).
• Retirement. Solo 401(k) or SEP IRA — huge deductible contribution room for high earners.

Meals are 50% deductible. Entertainment is not.

Things that trip people up

• Forgetting the self-employment tax. Federal income tax is only part of the bill. SE tax adds 15.3% on the first ~$168,600. Budget for it.
• Missing quarterly estimates. The IRS charges an underpayment penalty. Set calendar reminders.
• Exchange-rate ambiguity. Use the payment-date rate, not the invoice-date rate, for reporting.
• Thinking you don't need to report because no 1099 was issued. You do. US self-reporting obligation is not contingent on the payer filing anything.
• Co-mingling funds. Running business revenue through a personal account. Don't.
• Ignoring state tax. Your state wants its cut. Every state except the no-income-tax ones.

When to get help

• First year: hire an accountant experienced with self-employment and foreign-source income. Expect $500–$1,500 for first-year setup and return.
• Ongoing: once the structure runs, an accountant can file annually for $400–$800 (sole prop) or $1,500–$3,000 (S-corp with payroll).
• International tax questions: if the foreign country also claims taxing rights, talk to someone who specializes in international tax — a generalist CPA may miss details.

The bottom line

Set up as a single-member LLC, get an EIN, open a business bank account, invoice in USD, pay quarterly estimated taxes, track every deductible expense. Work with an accountant the first year. After that the structure runs on autopilot and the only thing left to do is the work itself.