Considering expanding into the USA? Here are some things to consider

Mike Whitacre

Mike Whitacre

Tax Partner, Frazier & Deeter

As the largest economy in the world, the USA is a key market when companies consider expanding overseas, but it's crucial that business operations are set up properly to avoid unexpected delays, taxes or fines. This is the very focus of our upcoming event, "Doing Business in the USA", later this month. To give you an idea of what to expect, Mike Whitacre Tax Partner at Frazier & Deeter, shares his top tips.

Expanding into the USA

With a large marketplace, strong economic growth, a significantly reduced corporate tax rate and indexes indicating record business optimism, there are many reasons to consider the entering the USA market. And for UK-based businesses, the uncertainty of Brexit brings an additional reason to consider the USA.

Some things to consider before organising a USA entity:

  • Understand the market for your product or service in the USA including any regulatory requirements

  • Consider trademark and intellectual property protection

  • Understand any visa/immigration requirements

  • Make sure you have tax and legal representation in the USA that has experience with business expansion from outside the USA. Yes, that is a self-serving comment (!) but because the USA is such a large market, there are many accountants and lawyers who are very good at what they do, but don’t work much or at all on cross-border clients.

  • Consult with an insurance broker experienced with cross-border businesses. Proper business insurance is critical to management of business and legal risk.

  • The USA is a geographically large and diverse area depending upon the location. You need to recognise and understand this from a customer and a business location perspective.  San Francisco is very different from Dallas!

Some things to consider after organising a USA entity:

  • Management of legal risk including use of properly structured business agreements

  • Understand your federal and state income tax reporting requirements

  • Address any employment law requirements  properly

  • Assess if your business activities will be subjected to sales and use tax [the USA version of VAT]

  • Consider what types of compensation and benefits you will need to offer your employees in order to be competitive

The USA market has many very positive aspects but also some potential issues to be managed. With proper advance planning, these issues are very manageable. Without proper planning, many companies expanding into the USA end up having to extricate themselves from legal and tax issues. But once the proper planning is done, there is a very large market that can drive long term growth.

Some common mistakes that we see from companies opening new businesses in the USA:

Not filing the proper tax elections and reporting forms resulting in undesirable tax structure or penalties

Utilising “home country”  business agreement in the USA without adapting USA business and legal practices

Improper insurance coverage leaving “gaps” in global coverage

Lack of advance planning, particularly with respect to visa/immigration issues which should be started 3-4 months in advance

Lack of understanding of the pros and cons of different geographic locations in the USA in order to select the best fit for the business

Want to find out more?

Mike Whitacre is a Tax Partner at Frazier & Deeter. Mike will be speaking at our event "Doing Business in the USA" on Tuesday 30 October. To find out more and to book your please visit our event page now.