Entering the USA Market
Foreign companies who wish to expand into the USA will be met with an attractive business hub that includes a highly educated workforce, attractive tax rates and incentives, as well as low labor and administration costs. However, setting up shop in an unfamiliar place comes with its own challenges. Foreign businesses must comply with employment, tax, payroll, and corporate legislation whilst ensuring that their employees are working productively and efficiently.
Work alongside our Professional Employer Organization (PEO) recruitment specialists, then our Employer of Record (EOR) in-country experts to handle every aspect of compliance. Employers can depend on our in-depth knowledge of the US, its work culture and business practices. Here we have written out some basic summaries of what you need to make the transition into America’s market, no matter the industry you are in.
Starting a Business in the US
The usual choice for companies establishing a subsidiary in the US is to establish a limited liability company. This is a separate legal entity to the parent company by having its own capital and administration. Another advantage is that the parent company generally has no responsibility for the liabilities or debts of the subsidiary.
Set procedures include the following steps:
Decide on the company type that suits the nature of your business, your business goals and matches your own capabilities to meet establishment requirements.
- Select a state to locate the new company, which can be different to where the subsidiary is incorporated
- Select a unique name for the company, confirm the business address
- File the new business with the Secretary of State’s office, download and complete authorized templates for Articles of Association and pay fees due
- Capitalize the subsidiary by transferring funds from the parent company, although there is no legal requirement to initially deposit share capital
- Compile an agreement indemnifying management from company liabilities. Specify how the parent company can appoint or change directors of the subsidiary, prohibiting changes without the parent company’s permission
- Draw up the Operating Agreement and install the manager or directors who will manage the subsidiary as an independent entity
Once the company has been cleared to operate, in order to employ and payroll staff other procedures must be followed, including:
- Ensuring employees have correct documentation, including Form I-9, allowing them to work in the US
- Completing Form W-4 for remitting employees’ tax payments to the authorities
- Registering the employee with the relevant state’s Labor Agency
- Putting worker’s compensation insurance in place, requirements can vary between states
Expanding Business into the US
As the strongest economy in the world, the United States of America is a major target for companies planning international expansion. The US market is innovative and inventive with 50 states each offering opportunities in manufacturing, industry, services, and hi-tech sectors. Main industrial areas feature petroleum, natural gas, automotive, aerospace, telecoms, electronics, food processing, pharmaceutics, consumer goods, mining, defense manufacturing, healthcare, information technology, construction, retail, real estate, and financial services.
Generally, companies expanding into the US take the route of opening a subsidiary as either an LLC (Limited Liability Company) or a C-Corporation, but both represent a complicated journey which involves complying with federal and state laws as they apply to hiring and recruitment, payroll, paying taxes, compensation, and benefits plus every other aspect of employment. The simple alternative? By considering their plans in partnership with a Professional Employer Organization (PEO) and Employer of Record (EOR) such as Bradford Jacobs, companies can plot a time-efficient and cost-effective path to locating and employing staff in the US.
US Business Facts
- Capital City – Washington DC
- Population – 333 million approximately
- Regions – 50 states plus Washington DC. Economic regions include New England, the Mideast, Southeast, the Great Lakes, the Plains, Southwest, the Rocky Mountains, and the Far West
- Official Language – many States have declared English as their official language, although there is no official language at federal level
- Economy – US$ 22 trillion, the world’s largest economy
- Leading Sectors – petroleum, automotive, aerospace, telecommunications, lumber, mining, construction, and financial services
- Main exports – include refined petroleum, aircraft, helicopter and spacecraft, cars, crude petroleum, integrated circuits
- Main imports – include cars, crude petroleum, broadcasting and electrical equipment, computers, pharmaceuticals
- Main trading partners – Mexico, China, Canada, Japan, UK, and Germany
- Government – a federation of states, a federal republic, democracy, and presidential system
- Currency – US$
- Advantages and Challenges of the US Market
Advantages of expanding into the US market include:
- Logistics: The US is equipped to supply markets nationally and globally through air, sea, rail and road networks and features half of the world’s top 10 airports for moving cargo
- Market: The US is the world’s largest economy, with the greatest private sector and consumer numbers
- Legal: Low regulatory barriers to setting up a business; US Patent Office strictly enforces Intellectual Property rights
- Staffing: The US’s 5,000-plus universities and colleges are a production line for well-educated and skilled workers to enter the employment market
- Business: All US-based businesses are treated equally, whether foreign-owned or not, plus all 50 states are committed to attracting investment
- Locations: Expanding companies have seemingly unlimited choices and can benefit from a variety of geographical and climate characteristics that can best suit their line of business
- Attitudes: Innovation and new ideas are encouraged, and lines of personal communication are open and direct
- Benefits: Foreign companies can attract incentives, such as tax credits, and lower commercial real estate prices
Challenges of entering the US market include:
- Workforce: The multi-ethnicity of the workforce can create challenges for incoming companies as the cultural diversity is very different from the largely culturally homogenous European employment market
- Taxation: The Internal Revenue Service strictly applies federal taxes, plus there are also tax collection authorities at state and local level
- Recruitment: The multinational corporations tend to choose the best of the best of the employment market, making it very competitive to find the right fit for you
- Bureaucracy: The steps needed to obtain property in the States involves multiple documentation procedures. For example, electricity connections can take up to two months to sort out.
Limited Company / Subsidiary or Branch in the US?
International companies targeting the US for expansion will generally choose a limited liability company (LLC) subsidiary, as they have independent legal status from the parent company, which is generally free from responsibility for any debts or liabilities of the subsidiaries. Subsidiaries can have a totally different name from the parent company, pursue different business activities and form their own contracts. Branches, in comparison, are an extension of the parent company and are not generally a popular choice for expanding into the US.