Moving your business to the US – What to consider

Get ready to expand your business to the US and achieve business growth.

What To Consider Article Image
Alistair Shaw
Published: 22 Feb 2024 Updated: 22 Feb 2024
Business tax Tax

Entering the US market is many businesses’ crowning goal. As the world’s largest national economy and global trader, moving your business to the US can undoubtedly bring about huge successes and increased business growth. However, achieving expansion in this market is not always easy. It requires a thorough understanding of UK and US laws (both federal and state), tax systems and regulations.

You may have decided which US state you’re aiming to expand to, or perhaps you’re developing a franchise model to tackle multiple states? Whatever the goal, you’re going to need an experienced team of advisors to support you every step of the way.

How Evelyn Partners can help with overseas business growth

Evelyn Partners specialises in helping UK companies achieve business growth in expanding to the US. We are one of the founding partners of CLA Global, along with CliftonLarsonAllen LLP, in 2023 according to Accounting Today. .

Our expertise and proven experience in assisting businesses make the transition over the Atlantic, makes us your perfect partner when considering business expansion to the US. Whether you require a one-off service to set up as a business entity or need comprehensive support to relocate your business to the US, we tailor our advice and expertise around what you need.

We offer in-depth advice and assistance with everything mentioned here and much more besides. For more information on our service offering, you can view and download our in-depth guide ‘Translating UK business success to the US’

What to consider when setting up a business in the US?

Moving your business to the mass market of America can be exciting, but also daunting. There are many things to consider, and lots of documentation and approvals are needed before you can open shop. Here’s a key-points checklist on what you need to focus on to hit the ground running and achieve business growth in the US.

Setting up a business entity

In the US, there are a variety of business entities to choose from. It is essential you are aware of the distinctions between different corporations and ownership limitations when establishing your new business. The different types of business entities are:

  • S corporations - A business entity that passes finances to its shareholders. They are taxed like a partnership but have corporate incentives
  • C corporations – As with S Corporations, there are shareholders, but a C Corp must have a Board of Directors acting as the business’s decision-makers
  • Non-profit corporations
  • Sole proprietorships
  • General partnerships

Your legal entity will be set up in the state where it's established. Delaware is a popular choice because it has good corporate laws and makes it easy for business entities to set up. But you might want to consider other states too.

You'll also need to check if the name you've chosen for your legal entity is public facing, so you can make sure it doesn’t violate anyone’s rights. You'll need to file documents in the state you want to be set up in and pay the filing fee.

Branch or subsidiary?

When moving to the US, structuring your businesses means deciding whether you want to open a branch office or a subsidiary. A branch office is connected to your parent organisation and reports directly to the head office. This allows the branch office to have a common accounting system with your head office and is controlled and held accountable by your parent organisation.

A subsidiary, on the other hand, is owned by your parent company but operates as a separate entity. It reports directly to your parent organisation, has its own accounting system and its own liability. Your parent organisation still holds a majority ownership but generally will not do the same business as you do.

Accounting for your business expansion

Your company's accounting requirements will depend on a few things, such as the size and type of your business, your lender relationships, and more.

Opening a US bank account

First thing’s first, your business is of course going to need a bank account. To open a bank account in the US, your US-based entity needs a FEIN (Federal Employer Identification Number). Your business will need a physical US-based address and completed Know Your Customer (KYC) requirements.

You'll need to find someone with a valid TIN (Taxpayer Identification Number), which could be a SSN (Social Security Number) or ITIN (Individual Taxpayer Identification Number). Usually, you'll need to find a "responsible party" who controls, administers or directs your applicant entity and how it spends its money and manages any assets. This could be an officer, director, owner, general partner or trustor.

Registering your business activity

In addition to registering your entity, you may need to register in the state(s) in which you are conducting business. The qualification requirements are determined by the type of business activities you plan to conduct in certain states(s). To file documents in these states, you will need to pay the necessary filing fees. For instance, if you are a Delaware-registered corporation but intend to have your offices in New York State, you will have to register in NY State as a Foreign Corporation with the Secretary of State and pay the associated filing and annual fees.

Furthermore, you must plan for the necessary licenses and permits, which may vary from state to state. If your business involves import and export activities, you must ensure you are compliant with US import and export regulations and, where applicable, safety compliance laws.

 

Familiarising yourself with US tax compliance

If you're aiming for business expansion to the US, you'll need to make sure you're following all the necessary rules and regulations when it comes to tax compliance. These can be complicated, especially if you're dealing with state or local taxes. International tax treaties usually don't cover or pre-empt these types of taxes.

When it comes to tax planning, it’s best to thoroughly research and prepare for income tax, including multi-state taxes, sales tax on goods or services sold in certain states, employment and payroll taxes, property taxes, import and export taxes, excise taxes, franchise or gross receipts taxes in certain states, taxes and withholding requirements on dividend and distributions to foreign parent companies, and anticipated intercompany transactions to figure out withholding and transfer pricing.

Serving your employees

Employment laws in the US are likely to be very different to what you’re used to in the UK. US Employment laws are made up of federal, state, and local laws, and they're highly complex. They cover everything from recruiting, interviewing, and hiring, to background checks, pay, benefits, anti-discrimination, and termination of employment. Make sure you have the right policies and procedures in place to follow US employment laws.

When hiring individuals in the US, consider the following:

  • Produce appropriate offer letters and onboarding procedures and documents
  • Where required, implement non-disclosure and/or non-compete and intellectual property assignment agreements at the outset of employment
  • Draft personal employment agreements for key executives
  • Create an employee handbook which includes employment policies
  • Review the income, franchise, sales and use, payroll and other tax implications of having employees work within a particular US jurisdiction
  • Establish which employees do and do not qualify for overtime and minimum wage requirements
  • If hiring independent contractors, put independent contractor agreements in place rather than deem them as employees

Taking care of agreements, regulations and requirements

As with any move overseas, there seems to be a never-ending stream of agreements, regulations, and requirements to adhere to.

One of the things that often catches new US businesses out is the requirement to have separate US terms and conditions of sales, as well as conditions of purchase for US transactions. It is recommended to consult with your legal counsel to modify the template foreign parent company agreement for the purpose of engaging in commercial activities in the US.

Data privacy and security

Data security and privacy must be considered. With GDPR rules becoming a mainstay within EU countries and the UK, many US states have increased their scrutiny and attention when it comes to consumer data rights and regulating how companies treat information.

Privacy laws in the US cover all aspects of personal data, from how it's collected, used, and shared to how it's stored and destroyed. A lot of federal privacy laws are specific to certain industries, but the rules can change depending on what kind of data you have, even within the same industry. Generally, US data management is less restrictive when compared to other nations, yet the increase in focus and requirements are beginning to shift rapidly across states.

Furthermore, all US States and most US territories have data breach notification laws with a broad range of reporting requirements. Many state laws also contain minimum data security requirements to protect personal data. Therefore, it is important to take information security and data exposure incidents seriously.

Review your insurance policies

The US legal system can result in considerable liability exposure. While insurance can be used to protect against many risks, a policy designed to cover matters in another country may not be suitable for an American entity.

In the US there is a range of available cover, such as workers' compensation insurance, comprehensive generic liability insurance, employers' liability insurance, cyber/data protection insurance, and (if appropriate) professional liability insurance. It is important to consult with your insurance provider and other professionals to determine the most suitable and affordable insurance options for your American entity.

Speak to us about expanding your business into the US

For further information on how we can help you take your UK success across the Atlantic, book a complimentary workshop with one of our experts.

Tax legislation

Tax legislation is that prevailing at the time, is subject to change without notice and depends on individual circumstances. You should always seek appropriate tax advice before making decisions. HMRC Tax Year 2023/24.

Evelyn Partners does not offer specific US business tax advice however, as part of our membership of CLA global, we are able to coordinate cross-border projects and deliver international projects by utilising CLA’s US advisors.

By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication.