Taking Your Business to America
- Taking the First Steps
- Establishing a Direct Stateside Presence – Setting up an Office or Plant
- The United States: a very basic business and tax primer and sources of further information
- Initial Organisation and Legal Decisions
- From Company Formation to Start of Operations
- Our Ongoing Services
Going To America
Britons have been investing in America and setting up businesses there since colonial times. British business investment in America is staggering. Some of America’s largest enterprises and brands such as Amoco Oil and Burger King are British owned and the United Kingdom is the largest business investor in the United States in the world. Most British businesses in America are, however, on a far more modest scale. In order to enter successfully the American market one needs certain understanding assistance with regard to legal tax, corporate and commercial issues that impact on any business stateside. It is this process of establishing and of transplanting one’s business stateside that we call “Going to America.” We have been advising British businesses and entrepreneurs on “Going to America” for over 20 years.
One critical aspect of “Going to America” is being able to transfer people legally to work in the US. This aspect is covered under our American Immigration link in our menu. However, very often the first steps taken by a foreign business in establishing itself stateside does not require opening an office or plant in America. It may be useful first just to test the market and introduce the product, service or brand in the US before engaging in the larger costs and commitment of establishing an office there.
Taking the First Steps
Some businesses with a product which can be sold in the United States start by finding an agent or sales commission agent who would be able to market one’s products stateside. This will necessitate the negotiation and entering into an agency agreement. In some cases it may be appropriate to appoint a distributor (either a national or several regional distributors) with whom it will be necessary to negotiate and enter into distribution agreements. Almost invariably, the American agent or distributor will insist upon an agreement under American law. Indeed, the agreement will be made under the law of a particular state i.e., one of the 50 states of the United States or the District of Columbia. Issues that need to be addressed at this stage include:
- Choosing the right agents or distributors;
- Deciding whether to appoint national or regional agents or distributors;
- Considering provisions for product guarantee and after sales service;
- Protecting your product name: trademarks and service marks;
- Obtaining export credit insurance;
- Obtaining product liability insurance (America is a very litigious country, known for high jury verdicts);
- Setting realistic targets for one’s distributor and incorporating these in the distribution agreement; and
- Focusing on the first steps which will thereafter facilitate moving to the second stage of direct presence.
Ferman Law as business law advisors, can coordinate and assist with this endeavour as well as draft and negotiate the necessary legal agreements with agents and/or distributors.
Information and preliminary general international guidance is available from the Department of Trade and Industry. American sources include the commercial section of the US Embassy London. Additionally organisations such as British American Business Inc., of which Ferman Law has long been an active member, and Business Council for International Living can be of assistance.
Establishing a Direct Stateside Presence – Setting up an Office or Plant
To truly establish a business in the vast American marketplace, one must have a presence stateside. This is important for a host of practical reasons as well as for business credibility. Many American businesses, and consumers alike, are reluctant to enter into contracts or deal with businesses which do not a have a permanent stateside presence. Operating stateside does not simply entail differences in business culture. It also involves the understanding of, and the proficiency in, the corporate tax and legal framework in which one will be operating. Just as the rules of English football and American football differ significantly, so do the rules pertaining to the business, corporate and tax system on either side of the Atlantic.
The United States: a very basic business and tax primer and sources of further information.
Before focusing on the basic outline, it is important to keep the following in mind: The US consists of 50 states plus the District of Columbia. Key commercial states such as New York and Florida have offices in London which are there to promote investment and establishment of businesses in their respective states. Links to the British development offices of New York and Florida are set forth in our link index. Some overseas offices do not have their own website, but information can be found on the individual state’s website. These stateside offices can provide useful practical information which can assist in terms of site locations, finding appropriate office and factory premises, staffing, training programs and information with regard to certain state development and tax incentives, where applicable. See our link index for state government sites under “State Sites.”
For commercial purposes, with the exception of Louisiana, all the US states have adopted the Uniform Commercial Code which provides legal similarity with regard to a very broad range of commercial matters including sales, secured transactions, banking, etc. Regulation of business matters exists on both the national and state level. Laws regarding the issuance of securities, stocks and shares are federal, although some states have state securities laws. Custom matters are purely federal as is US immigration law. Also copyright, trademark and patent matters are governed by federal laws. Corporations are formed in any one of the fifty states or the District of Columbia, and corporate law of the different states varies little. Labor regulations exist both at a federal and state level (note that there is national minimum wage law, for example). Antitrust law (i.e., competition law) is primarily federal.
Certain businesses e.g., banking, insurance and financial services are subject to strict regulation on federal and state levels. Broadcasting and telecommunication businesses are subject to federal regulation through the Federal Communication Commission. The Department of Transport, a federal agency, regulates the transportation industry whilst the Federal Drug Administration regulates the introduction of ethical drugs. On the other hand, licensing of professions and occupations is generally done on a state, and sometimes even on a county or city level. Occupations such as realtors (estate agents), which are not subject to licensing in England, are subject to compulsory registration in many US states.
Taxation of businesses and individuals is imposed both at the federal and at the state level. Also some cities, such as New York City, impose an income tax. The primary tax (unlike the situation in Canada) is the federal tax. Each state, unlike an English county, has its own taxing authority. All states impose taxes on businesses and virtually all impose a personal income tax. There is no value added tax in the United States. In certain states the state tax regime subjects financial companies and public utilities to taxes other than the general corporate income tax. Insurance companies may be subject to special provisions. Virtually all states have incorporated the Internal Revenue Code (the federal tax law statute) by reference and use federal taxable income as the starting point for calculating state tax. All of the states as well as many cities and counties impose a sales tax which is a tax on the ultimate sale i.e., the retail sale. Additionally, there are federal and state taxes imposed on gasoline (petrol). For information on this topic see our link index for the links to the US Embassy, US Department of Commerce, Internal Revenue Service and British American Business Inc. With regard to individual states, the contact in the first instance, where appropriate, would be that state’s economic development organisation in the UK or Europe. Links to the websites of all the US states can be found under “State Sites”.
Initial Organisation and Legal Decisions
There is a wide array of different legal entities under which you can legally conduct business in the United States. They include corporations (similar to limited companies in the UK), limited liability companies, limited liability partnerships, limited partnerships, general partnerships and sole proprietorships. Corporations, limited liability companies and limited liability partnerships can be formed in each of the fifty states.
Practice Tip: These American business entities can easily and quickly be formed on your behalf by Ferman Law from the UK. There is no need to actually go to the United States to form a business entity there.
An alternative to forming an American legal entity is to operate the branch of an English company in the US. However, doing so will still require registration with the appropriate Secretary of State’s Office.
Practise Tip: Each state has its own Secretary of State which deals with corporate and commercial matters. They should not be confused with the US Secretary of State, Condoleezza Rice.
Ferman Law offers advice on organizational matters, legal and tax issues, including the following:
- Forming the right legal entity for doing business in the US e.g. corporation, limited liability company, partnership, proprietorship etc.
- Deciding whether the US business should incorporate in the US or operate as a US branch of an overseas corporate body;
- Choosing the state of formation (addressing, for example, questions as to what is the advantage of a Delaware company)
Practice Tip: Approximately half the Fortune 1000 companies in the US are formed in Delaware, whereas very few are actually headquartered in this small state. This does not mean that Delaware is particularly attractive for an overseas company setting up stateside, which is not planning to do business in Delaware.
- Using multiple stateside corporations, and analyzing the resulting advantages, disadvantages and tax consequences. Liaising with the client’s US and UK accountants and tax advisors.
- Explaining to the client the concept of “doing business” in the States and the corporate requirements for businesses doing business in a state which is not their state of formation.
- Analyzing federal and state tax consequences stemming from the organisational choices.
- Using the initial organisation enterprise for a successful US immigration strategy.
- Using separate legal entities for specific functions.
- Creating and protecting corporate names and identities.
- Providing capitalisation of stateside entities, and obtaining the right debt/equity ratio. Reviewing tax considerations and, where applicable, immigration issues.
- Assigning and reviewing roles and functions of the directors and corporate officers.
- Consulting on indemnification of corporate officers and directors.
- Advising on patent, trademark, settlements and copyright matters, and registration of these intellectual property rights.
- Registration of domain names and “d/b/a” names.
From Company Formation to Start of Operations
Now that we have an appropriate legal entity to use stateside, we need to make it operational. Some of the matters that need to be addressed to ensure that business commences successfully are the following:
- Opening up a stateside bank account and transferring funds into the account of the business entity stateside.
- Practice Tip: In order to open up a bank account the entity will need a US tax Identification Number. Such number is available upon application to the Internal Revenue Service. Ferman Law routinely prepares the appropriate application for clients.
- Locating and obtaining the appropriate office premises or plant from which the business will be operated. Customarily this will involve the negotiation and conclusion of a lease for premises which may require, in certain instances, guarantees by the parent company of the stateside operating entity.
- Preparing and filing the appropriate petitions with the Immigration and Naturalization Service (“USCIS”) or, for example with the US Embassy London in the case of treaty trader (E-1) and treaty investor (E-2) visas and B-1 in lieu of H-1B and B-1 in lieu of H-3 visas, with the US Embassy London.
- Practice Tip: At Ferman Law, American immigration is considered an integral part of the “Going to America” process. It is important to coordinate the actions taken for business, commercial and tax reasons with the immigration requirements of obtaining work visas for non US staff to be employed stateside. Sometimes compromises are needed to satisfy these immigration requirements. For example, obtaining an E-2 treaty investor visa may not be so desirable from a corporate tax standpoint.
- Obtaining trademark and service mark protection stateside.
- Practice Tip: There is no such thing as a global trademark or service mark. Obtaining trademark protection is done through an appropriate filing with the US Patent and Trademark Office. This is a service which Ferman Law provides to its clients
- Reviewing, where applicable, other intellectual property needs and applying, if necessary, for US patent and US copyright protection.
- Providing tax advice to ensure federal and state tax compliance. Where the client has not already appointed local accountants stateside, Ferman Law undertakes to provide initial advice and assistance with regard to federal and state compliance matters such as registration for sales tax purposes.
- Helping companies with corporate law compliance and corporate housekeeping. This includes assistance with initial filings with the relevant Secretary of State’s office, preparation of corporate minutes, shareholders’ resolutions and issuance of stock certificates.
- Americanising the terms and conditions of business of the client’s business so as to conform to those used in the US.
- Drafting of employment agreements for staff to be employed in the US.
- Advising on American employment law, and on immigration and tax responsibilities of all stateside employers.
- Practice Tip: Upon the hiring of an employee, the US employer must complete the USCIS Form I-9, Employment Eligibility Verification, and the Internal Revenue Service Form W-4, Employee’s Withholding Allowance Certificate, to operate federal income tax withholding.
- Drafting and negotiating various commercial agreements such as purchase and acquisition agreements, shareholders’ agreements, distribution agreements, agency agreements, joint venture agreements etc.
- Identifying what licenses or permits may be necessary for the legal operation of one’s business in the locality where it is being established. For example establishing a food manufacturing plant in New York City will require an appropriate licence as would the opening of a restaurant or café. In some localities all businesses require a licence from the local authority, usually known as a general business licence.
- Discussing insurance coverage – general liability coverage and, where appropriate, product liability coverage. Additionally, registering for workman’s compensation purposes.
- Liaising with the client’s other professional advisors e.g. accountants and tax advisors and client’s management in order to smoothly and effectively establish and implement a time table for the start of operations.
Our Ongoing Services
Once your business is up and running in the US, our role does not cease: it has merely just begun. Ferman Law provides the following continuing services for clients with stateside operations.
- Ongoing corporate compliance and corporate housekeeping matters.
- Liaising with accountants and staff in the US with regard to legal and tax compliance matters and operational matters including the provision of ongoing corporate and commercial law advice.
- Preparing the appropriate legal documentation necessary with regard to the expansion and development of your business.
- Immigration and visa law advice, including obtaining extensions and renewals of existing visas and obtaining immigrant (“green card”) visas for stateside staff, providing general immigration law advice, and preparing immigration petitions and visa applications on behalf of new staff.
As business lawyers, we at Ferman Law regard it as our business to remain apprised of your business stateside. It is only by so doing that we are best able to help.