Are you thinking of doing business in the US?
For many individuals, entrepreneurs and companies it’s about achieving and living the ‘American dream’. Being successful in the US is well on the way to being successful globally. To what extent is this true, and how easy is it to ‘crack’ America?
On 9 March, Kingston Smith hosted a seminar on doing business in the US in collaboration with Marks Paneth, Select USA and AnalogFolk, where we talked about the tax and law implications, shared experiences and learnt more about the opportunities there are in the US.
First and foremost, as a UK company, you really need to think about the time and cost of opening your operations in the US, and when is the right time for this. For many companies they see that they need to be close to their customers in order to be successful in the US – the time zone isn’t the only challenge.
If you are pitching for that ‘big’ contract with global brands, and you are not in the US it will be very tough to win. The US is the biggest local market; with that comes many competitors, all vying for the same work. So it is important to know exactly what you want to achieve before you even consider setting up in the US.
A common misconception is that the UK-US business culture is similar. Aside from a small variation of the English language they are actually very different. This isn’t just true for the US as whole, as the jurisdiction in each state is very different. It is important to understand the local market you are targeting, and adjust your marketing, website, approach, price and pitch accordingly.
Okay, so let’s say you want to take the plunge and go for it, then what next? As a UK company you really need to understand the US taxation system. The US doesn’t follow one single taxation model like the UK – 20% corporation tax across the UK. Instead, each state will have their own state tax and sales and use tax as well as federal taxes, making it a very important to know where in the US you want to do business.
Having the right business structure is also vital to your success, and there are many options to consider such as LLCs, C corporations, LLPs and many more. Choosing the right structure will have many implications for the tax you pay, your shareholders and your investors – especially if you are looking to raise finance in the US.
This right structure isn’t just important for your initial entry, but also on how you plan to grow (organically, through acquisition, or a combination?) and even exit the country.
One of the things that I haven’t touched on yet is employment. The employment culture and laws are very different in the US vs. in the UK. Particular care is required if you wish to engage contractors rather than employees. There are upsides to having contractors but make sure you don’t fall into the trap…as many of the big brands have done so recently.
Getting these points right the first time will save you a lot money, time and effort in the long run. As a result, it is imperative for your legal and financial/tax advisers in the US and UK to work together – remember, you as the UK owner must remain in control.
As AnalogFolk mentioned in their presentation, it took them three years to really be operational and up and running in the States but when you get there it is worth it. They now have offices in New York, Portland, Sydney and Hong Kong – they truly are a global company and the hard work seems to have paid off. They certainly think that opening in the US was worth it.