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Considerations for UK companies looking to set up shop in the US

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As a large law firm with offices in both Minneapolis and London (as well as several other cities), we know that the logic behind opening in Minneapolis is sound. Put simply, Minneapolis is a great place to do business. 

Minnesota is second in the nation for Fortune 500 companies per capita, home to major companies in food and agriculture, retail and healthcare sectors. While the UK is already a top-ten buyer of Minnesota exports, the US/UK bond is expected to strengthen even further with this partnership. Below are the basics that every British business looking to develop a presence and operate in the US should consider before taking the plunge.

How to structure your business 

The way you structure your business in the US effectively determines how you will be taxed, so the decision can have a big impact on profitability. On its face, the easiest option for UK companies starting in the US is to use a representative office or a branch, as these do not require the incorporation of a separate legal entity. However, it is often more advantageous for businesses to establish an independent subsidiary, the most common of which is a corporation (but other options include a limited liability company (LLC) or a partnership). Operating through a subsidiary provides a separate financial entity by which to trade and thereby protects the UK parent company from liabilities which may be incurred through its US activities. 

In which state should you register your company? 

In the US, companies are organised at the state level rather than at the federal level. This means that each company must select a state of incorporation. Despite having business activities elsewhere, companies often choose to incorporate in states with favourable corporate tax rates and those that offer the most protection for shareholders and directors. The most famously low-burden state for these purposes is Delaware.

That being said, a company’s business should be the deciding factor for where it locates. If there is one state in which you intend to carry out the majority of your business, it is generally advisable to incorporate there. You may also wish to investigate the possible availability of regional grants which may offer tax and other incentives to new businesses in their area.

Entry requirements 

UK business owners wanting to run a company in the US must obtain the necessary visas for themselves and their employees. The US Visa Waiver programme (VWP/ESTA) allows, with some limited exceptions, citizens of VWP-eligible countries, such as the United Kingdom, to seek entry into the US for the purposes of tourism or business visits for up to 90 days but does not permit the person to work. If you are intending to work in the US, a work visa will be needed. This can be expensive and time-consuming to obtain, so business owners should budget accordingly. 

Tax

It is advisable for UK companies to obtain tailored tax advice from a certified accountant or tax lawyer, including in relation to the structure of their US operations, before starting businesses in the US There is no Value Added Tax (VAT) in the U.S. Each state determines and collects sales taxes on an individual basis. Taxes can be imposed by the U.S. federal government and individual states, counties and cities. 

Protecting your intellectual property (IP)

IP rights are generally granted on a national basis. Although you may have protected your company’s intellectual property in the UK, it does not mean it is protected in the US. You should look to register any patents, trademarks or copyrights in the US directly, preferably before your company begins to do business there. It is also important to check that there are no third parties in the U.S. that already own the trademarks, brands, logos, tradenames or symbols that your company intends to use. You may unknowingly infringe someone else’s rights which could have serious consequences. 

Legal considerations 

It is not just a stereotype that the US market can be quick to engage in legal proceedings; litigation is common. You should obtain qualified legal advice before entering into any agreements in the US, ideally from lawyers who understand both US and UK law. 

Insurance 

UK companies should also secure appropriate insurance prior to establishing their businesses in the US, including insurance for product liability, professional liability and personal insurance workers’ compensation. Due to the complexity of US liability law, it would be beneficial to ask an insurance professional to review the policy on your behalf to ensure your needs are fully covered. 

Practical considerations

There are also a number of practical considerations for U.K. businesses when setting up in the US. In particular, the significant time difference between the US and the UK (the US is between five and eight hours behind the UK), and the vast regional and cultural differences between the 50 states/markets in the US. These factors are likely to throw up new challenges for any UK businesses looking to expand across the pond.

Alex Denny is employment partner and leader of Faegre Baker Daniels’ London Office and Andrew Humphrey is managing partner and chair of the management board of Faegre Baker Daniels.

Image: Shutterstock

India and China may be the flavours of the month but the US is still, by far, the biggest single market for British-made goods. Real Business reports on how to make a dent Stateside.

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