For the uninitiated, doing business in the United States can seem especially daunting. Each state has different laws and compliance requirements, meaning the United States is comprised of 50 different jurisdictions, plus the District of Columbia! Not only that, US territories such as Puerto Rico, the US Virgin Islands, Guam and the Northern Mariana Islands have their intricate regimes and require a specialist to navigate the waters.
Especially now in times of economic and political uncertainty, the US remains the ideal business partner for UK enterprise. Besides the common language and similar entrepreneurial culture, the United States is consistently ranked among the top countries in the world for its ease of doing business. US businesses, regardless of domestic or foreign ownership, can market freely to 300 million Americans as well as another 425 million consumers via free trade agreements. Furthermore, the US boasts a well-educated and productive workforce, an excellent university system with innovative research and development programs and a transparent legal system emphasizing intellectual property rights (not to forget its GDP of $16 trillion). In general, there are no citizenship or residency requirements for forming a company in the US. International often form LLCs to benefit from pass-through taxation, that is, the requirement to file and pay taxes only if they have US-source of income (other global income of the principals remains unaffected).
There can be advantages and disadvantages to corporations, limited liability companies, and limited partnerships, so it is important to keep the following considerations in mind when in the early stages of planning an expansion to the US. The company’s business objectives are paramount: are you testing the waters, or thinking long-term? Sometimes establishing a branch is a good solution as it involves far less on-going compliance, but a branch has no separate legal identity from the parent company and thus has much more liability. Seeking the advice of a tax professional is imperative at this stage.
The next consideration is the choice of the state. Many foreign businesses head straight to Delaware as it is internationally known for its business-friendly ethos and favorable tax rates. Still, many US jurisdictions outside of Delaware offer distinct advantages, and if a company plans to establish its headquarters or open an office in a particular state, it is often most cost-effective, to begin with that state. Many companies, especially those headquartered on the West Coast, appreciate doing business in Nevada (businesses should be aware, however, of the business license requirement that raises annual fees for Nevada registrations–all entities are required to maintain a business license, regardless of whether a company is doing business in Nevada). Other popular choices are New York and Florida because of their business-friendly environments and easy compliance requirements. Virtual offices are freely available in almost every major city, supplying services from mail and telephone forwarding to rented or shared ownership offices and conference facilities. If the company will be operating in 4 or 5 states, it makes sense to pick the most “business friendly” environment as the primary state, and then register in the other states. Income can be allocated proportionally to each of the states in which the company does business.
An international company must remember that it is imperative to maintain good standing, as well as a registered agent, in each state in which it is doing business. This will become more important as a company grows. If a company is doing business in multiple states, they must register or “qualify” in each of these states. So what is doing business? In general, if a business has an office or employees in a jurisdiction, it is considered to be doing business there. (There are also more specific circumstances that constitute doing business—for example, if a company advertises on a local billboard in addition to national media campaigns, it could be considered to be doing business in the state in which the billboard is located. Again, it is recommended to seek professional advice in each particular case). Unlike in the UK, financial statements or accounts are not required to be submitted yearly to the registrar, but each state requires companies to file annual or biannual reports. If these reports are not filed, companies lose good standing, which can make previously entered into contracts void or voidable and precludes doing business. Because penalties and interest can accrue exponentially due to late filings, we recommend that companies entrust their compliance needs to specialists; for instance, we offer an annual report monitoring service which manages registered agents and annual reports in one place. For entities already doing business, our Corporate Health Check identifies gaps in compliance and is recommended in advance of a company’s expansion to new states.
In addition to state requirements, in many states, businesses require licenses to operate. For instance, in the case of Nevada, as was previously mentioned. However, certain industries also require federal, county and municipal licenses, with provisions varying greatly from state to state. Services such as comprehensive license research and filings, as well as assessment and verification of current licenses (this includes identification of defaults and renewal dates), are helpful for international businesses in light of the complexities of licensing from state to state.
With our home office in New York, International Business Company Formation has been helping international companies expand to the USA since 1998. Our expertise and unparalleled experience ensure that you have everything you need to operate confidently in the USA, especially in today’s business climate with its growing emphasis on transparency and compliance. We are proud to announce the opening of our London office – IBCF UK Ltd. IBCF provides corporate services to legal and tax professionals throughout the world and is confident that the London office will facilitate an easy flow of corporate work between companies in the US and the UK, and beyond.
Contact us at either our New York or London offices, depending on your time zone. We are here to make doing business simple, across the globe.
- Formation of all entities including Corporations and LLCs, for all 50 states and US territories
- Registered Agent Services
- Annual Report Maintenance and Compliance Checks
- Authentication of Documents including Legalisations and Apostilles
- Business License Research and Filing
- Document Searches (such as UCC and lien)
- Registered Officers and Directors
- Nominee Shareholders (where available)
- Representation by Private/Special Agreement
- Patent and Trademark Searches
Top 10 Reasons to do Business in the USA
- Ease of incorporating in the United States: many states can get you set up within a day!
- States like Delaware and Nevada pride themselves on their business-friendly ethos
- One of the biggest and most exciting markets in the world with over 300 million potential clients
- A common language and similar culture allows you to take your business global with ease
- A skilled and well-educated workforce
- Dependable infrastructure including communications and transport
- Free trade agreements with 20 countries
- Outstanding university system
- Gateway to emerging markets in Latin America
- Ability to outsource almost any component, commodity or service your business requires
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