Definition:
ETBUS stands for Engaged in a Trade or Business in the United States. It is an IRS-defined status that applies to non-U.S. persons (including foreign-owned LLCs or corporations) who are actively conducting business within the United States.
Examples of activities that may trigger ETBUS status include:
- Selling products or services to U.S. customers
- Having employees or agents physically present in the U.S.
- Maintaining a U.S. office or warehouse
- Signing contracts or negotiating deals within the U.S.
If a foreign-owned business is considered ETBUS, it becomes subject to U.S. federal income tax on income that is effectively connected with that trade or business (referred to as ECI).
Why it matters:
Being classified as ETBUS may create filing and tax obligations—such as filing Form 1120 and Form 5472—even if the company is not owned by U.S. persons or does not have physical operations in the U.S.
Who is it for?
Non-resident entrepreneurs and foreign companies with any form of U.S. economic presence or U.S.-source income should assess whether they are considered ETBUS by IRS standards.
