Attorney Jin Ji Kim

Foreign-founded companies that have flipped into a U.S. parent or formed a U.S. subsidiary have committed to the United States market for capital, talent, and exits. For Boston-area ventures, that usually means adopting a Delaware–Massachusetts corporate setup and entering an ecosystem rich in venture capital, life sciences, AI, and university-driven innovation. What comes next is execution: a few practical workstreams can turn onshoring into a market advantage.

Promote Entity Hygiene

Most foreign-owned growth companies adopt a Delaware corporation as the U.S. holding company and then register it to do business in Massachusetts. Under Massachusetts corporate law, a corporation formed outside the Commonwealth is considered a “foreign corporation” and must qualify with the Secretary of the Commonwealth if it transacts business, maintains a usual place of business, or has employees in the state. That means filing a certificate of registration, appointing a registered agent, and keeping the registration current through annual reports. Counsel should flag the consequence of skipping this step: an unqualified corporation may be barred from maintaining an action in Massachusetts courts until it registers and pays any overdue fees.

Conventional entity hygiene facilitates transactions. Buyers and lead investors expect clean formation records, current foreign-qualification status, and U.S.-style charter, bylaws, stock ledgers, option records, and board minutes. That discipline remains relevant to beneficial-ownership information (BOI) reporting under the Corporate Transparency Act, although the CTA now cuts differently for most flipped Delaware holding companies. FinCEN’s March 26, 2025 interim final rule exempted domestic reporting companies, including U.S. holding companies, leaving the narrowed regime principally applicable to foreign reporting companies. The takeaway is to keep state records and cap tables clean for diligence rather than assume the Delaware corporation has a FinCEN filing obligation.

Anticipate Banking Realities

Banking is often where foreign ownership first creates friction. Even with a Delaware entity and an EIN, banks may require a Social Security number or Individual Taxpayer Identification Number (ITIN) for at least one authorized signer, plus a U.S. address, to open accounts.

That friction usually does not come from corporate law, which ordinarily permits foreign nationals to serve as stockholders, directors, and officers. It comes from bank customer identification and AML/KYC requirements: banks must verify who is opening the account, who controls the entity, and whether the relationship presents sanctions or money-laundering risk. Onboarding can stall over missing U.S. identifiers, unclear ownership structures, foreign-parent payment flows, inconsistent documents, or a company profile that looks more like a shell than an operating business.

Counsel can treat bank onboarding as a parallel workstream to formation: identify a U.S.-based officer who can furnish an SSN/ITIN, ensure proper qualification appears in the Secretary’s database, and benchmark institutions that serve foreign-owned startups.

Establish Export and Sanctions Compliance

Once operations run through a U.S. entity, export controls and sanctions become part of compliance, even for companies that are not defense contractors. The practical questions are what technology, software, equipment, data, or materials the company controls; where they are going; who gets access; and why. A Boston venture need not build an elaborate program, but it should know whether core assets—source code, technical designs, lab materials, robotics components, or AI-related software—are subject to the Export Administration Regulations (EAR) and, if so, whether they have an Export Control Classification Number (ECCN) on the Commerce Control List (CCL) or are “EAR99” items.

For foreign-owned ventures with offshore development teams, the recurring pitfall is the “deemed export” rule (15 C.F.R. § 734.13). Releasing controlled technology or source code to a foreign person can be treated as an export to that person’s home country. That issue can arise when offshore developers access a GitHub repository, a foreign parent reviews design files, or non-U.S. employees access controlled technology in the cloud. A license is not always required, but the company should have a documented basis for its conclusion.

Sanctions screening is separate. Even an EAR99 product can create risk if the company deals with a sanctioned person, restricted entity, embargoed destination, or prohibited payment flow. A right-sized program should classify core technology, map foreign access, and screen major customers, distributors, and investors, against OFAC’s Specially Designated Nationals list and other restricted-party lists. The goal is enough discipline to avoid diligence questions about historical transfers, sanctioned counterparties, or undocumented access.

Address CFIUS Issues Beforehand

Foreign-owned ventures should build a concise compliance and governance narrative before a financing or sale begins. In addition to aligning cap tables with U.S. expectations, counsel should identify national-security review issues early enough that they do not influence buyer sentiment or timing.

The Committee on Foreign Investment in the United States (CFIUS) can review certain foreign investments in U.S. businesses to assess national-security risk. For Boston companies, the issue is not limited to defense contractors. CFIUS can become relevant where a company has controlled technology, sensitive personal data, government customers, or foreign-government-linked investors. AI, robotics, semiconductors, cybersecurity, synthetic biology, and data-heavy health-tech businesses can raise CFIUS questions even when products are commercial.

Counsel should distinguish general export-control sensitivity from CFIUS “critical technologies.” Not every technology subject to the EAR, or even controlled under an ECCN, triggers a mandatory filing. But mandatory declarations may be required for certain foreign investments in U.S. businesses that produce, design, test, manufacture, or develop critical technologies, depending on the technology, investor, and rights acquired. A robotics company with controlled sensors, a synthetic biology platform working with regulated organisms or toxins, or an AI cybersecurity business developing encryption may require closer CFIUS analysis than a general EAR99 software company. The objective is to know early whether CFIUS could affect future deal processes. A company that can explain its structure, ownership, technology classification, sanctions posture, and CFIUS analysis preserves optionality.

The regulatory landscape discussed in this article continues to evolve through rulemaking, enforcement guidance, and litigation. This article reflects developments as of its publication date and is intended as general information, not legal advice.

Jin Ji Kim is a corporate attorney at Sheehan Phinney, where he focuses on mergers and acquisitions, private equity, and venture capital investments, and other corporate governance matters.