This Land Is Your Land: Expanding Your Business into U.S. Market

Congratulations! If you’re reading this, you’re likely running a successful business and interested in expanding into the most open and robust marketplace in the world, the United States. If your products and services translate into other markets, you should be thinking about that! We understand this may seem daunting, but U.S. expansion is a lot easier and more accessible than you might imagine! In this article, we break down some basic requirements you’ll need to be aware of and try to outline what you should be thinking about.

Market Entry

A. Method – the “how”

There are many ways to enter the U.S. market. The five most common methods of entry are:

1. Simply exporting your products or services into the U.S. from your home market;
2. Creating, without more, a U.S. sales force (independent contractors or employees);
3. Establishing a U.S. Branch;
4. Creating a U.S. subsidiary (e.g., Limited liability company (LLC), C Corporation, or partnership); or
5. Moving and reincorporating your company in the U.S. (an “Inversion”).

B. Location

Location, location, location – not just a good thought for buying real estate. No matter how you decide to get started in the U.S., you need to think about what is the best location for your company’s entry into the U.S. First, this has nothing to do with where you “registered” your business, it has to do with: You need to consider:

• where is it most convenient to operate and get to, proximity and ease of travel to and from your home office (is there a direct affordable flight);
• where you have overlapping working hours;
• where your customers are or are likely to be;
• where your employees are or are likely to be;
• where you have an available “ecosystem;”
• where you have support from local officials and other providers;
• marketplace resources to assist with U.S. expansion (e.g., state, federal and local funding and incentives);
• trusted marketplace allies (e.g., advisors, suppliers, investors, and clients)
• tax implications;
• ease of doing business;
• where you would simply like to be doing business (sunny Florida or winter wonderland Colorado); and
• amenities (schools, restaurants, urban interest, country side and rural beauty).

While everyone wants to make it in New York, it is typically a difficult location to launch your business. New York is expensive, highly regulated, difficult to navigate and downright contentious. New Yorkers really do live up to their reputation for being prone to litigation.

This decision should not be rushed, doesn’t need to be rushed, and it requires a thorough analysis. We at Cove are happy to help with this discussion.

C. Other Important Considerations

There are a variety of other considerations accompanying U.S. expansion with relevancy depending on the desired method of market entry and business model. Such considerations include, for example:

• Visa and immigration requirements and concerns;
• Contract and local employment laws;
• Intellectual property protection; and
• Market intelligence unique to your channel of trade

Formation & Administrative Requirements

If you decide to enter the U.S. market “formally,” with either a U.S. entity or a physical presence, you should either form or consider forming a U.S. entity, we typically recommend a limited liability company (“LLC”), but a corporation will work just as well. U.S. entities are formed at the state level and we typically recommend the state of Delaware. You’ll need to file the relevant documents, either a Certificate of Formation for an LLC or a Certificate of Incorporation for a corporation with the appropriate state filing office. You’ll have additional administrative requirements, such as designation of a Registered Agent in that state (registered agent services are inexpensive and readily available). Notably, each type of entity (e.g., LLC or corporation) has its own filing requirements and tax implications (for example, a foreign wholly owned subsidiary, even if an LLC, will almost always want to be taxed as a corporation to avoid the foreign parent being perceived to be doing business in the U.S. as an owner). Formation is actually the most straightforward component of expansion and can normally be accomplished within 24 hours.

Following formation, the new entity will need to obtain an Employer Identification Number[1](“EIN”) so you can open a business bank account and receive U.S. revenue. U.S. buyers and customers prefer to work with businesses registered with the Internal Revenue Service (the “IRS”) because it simplifies their accounting concerns. An EIN can be applied for online through the IRS website, although this process while incredibly easy, is bureaucratically time consuming. This process is easier if a principal of the foreign parent already has a U.S. social security number or International Taxpayer Identification Number. Importantly, the EIN application does require that your business have a U.S. address, but such an address can be virtual and is again easy and readily available. Once in possession of an EIN you will then be able to open a business bank account, which, notably, is required by the IRS for most types of businesses.

Making the Leap

As you embark on this exciting endeavor remember to remain confident. Your existing success in Europe, or your home country, will likely translate to success in the U.S.. While the U.S. marketplace may seem daunting, overwhelming and complicated, it’s not, and it is likely much less complicated than the regulatory market of your home country. The U.S. is a robust and exciting market and opportunity is abundant. The U.S. marketplace launch consultants, like Cove, can help you navigate expansion and streamline the process.

Do not give up easily and be prepared to “ramp-up” for U.S. expansion. With proper vision and planning, and the guidance of competent professionals like Cove, breaking into the U.S. market has never been easier.

[1] A Social Security number (“SSN”) for individuals.