Do I file Form 8858 for my sole trade business abroad?
Very likely, yes. A business a US person carries on abroad outside any company is a foreign branch for these purposes, and branch operations are what the form reports. The local description does not decide it: a registered sole trader, a licensed professional practice and an unincorporated consultancy can all be branches. What matters is that a US person is carrying on business outside the United States and not through a separate entity that is treated as a corporation. The obligation is decided by those facts rather than by whether the business produced a profit or paid any tax where it operates.
Is my foreign single-owner company a disregarded entity?
It depends on how the entity is classified for US purposes, which is not the same question as what it is called where it is registered. Some foreign forms are treated as corporations by default and some are not, and an election may have been made at some point that changed the answer. This is worth settling early, because the classification decides which form is due, who the filer is, and whether the entity's results belong on the owner's own return. Treating a company as disregarded because it has one owner is the assumption that most often turns out to be wrong.
Do I file if the foreign business made no money?
Yes. The obligation is decided by ownership and activity rather than by tax owing, so a nil year or a loss year is still a reporting year. The form asks for income and expenses, and a year with neither still has to say so. In practice a quiet year takes almost as much work as a profitable one, because the underlying accounts still have to be drawn up on a US basis and the amounts still have to be translated into dollars. A nil position removes the tax, not the filing.
What exchange rate do I use for a foreign branch?
The starting point is the branch's functional currency, which is a determination about the currency in which the business actually operates rather than a choice made for convenience. Once that is settled, the translation method follows from it, and it is the method rather than any single day's rate that matters most. Whatever source is used should be applied consistently across the years, and recorded, so the figures can be explained later. This is the part of the form that no foreign accountant produces as a matter of course, and it is usually where a first filing takes the most time.
Can my foreign accountant's financial statements be used directly?
Not as they stand. Statements prepared abroad follow local accounting rules, sit in the local currency, and often cover a year end that is not the one the US return uses. The form wants income and expenses on a US basis, translated. So the work is a conversion exercise layered on top of the local accounts: adjust for the differences that matter, align the period, translate, and keep a bridge between the two sets of figures. Asking the local accountant for the form itself is rarely productive, because it is not a document their engagement covers.
Does a US citizen living abroad with a consultancy file this?
That is the commonest filer of all. A citizen who has moved abroad and works through a local unincorporated practice, or through a single-owner entity that is disregarded for US purposes, is reporting a foreign branch or a foreign disregarded entity even though nothing about the arrangement feels international. Citizenship keeps the US filing obligation alive regardless of where the person lives or where the work is done. The result of the business goes into the owner's own return, and this form is the schedule that supports it and sets out the currency the business operates in.
What is double taxation in a corporation?
That is the economic form: the company pays tax on its profit, then the shareholder pays tax again on the dividend distributed out of that same after-tax profit. Domestic systems soften it with dividend credits or reduced rates on distributions; across borders it is compounded by withholding tax in the paying country. Which relief applies turns on the entity type and the treaty article covering dividends. See repatriating profits.
What is a foreign trust for US tax purposes?
A trust that is not a domestic trust — broadly, one that fails the tests looking at whether a US court can exercise primary supervision and whether US persons control the substantial decisions. The classification decides everything downstream: whether the settlor is taxed on the income as owner, how distributions to US beneficiaries are taxed, and which annual information returns are due. Many ordinary foreign arrangements, including some pension and education savings vehicles, land inside the definition. See Form 3520-A.
