In 2013, the US Bureau of Labor Statistics released a report that stated that a slower GDP is expected to become the ‘new normal’ by 2022. Despite this, the US Bureau of Economic Analysis announced that the fourth quarter of 2021 yielded an increase in GDP for 47 states, and an annual increase in real GDP of 6.9 per cent. This growth comes as a result of a tapering pandemic, and despite a global climate of economic uncertainty. Many European countries, despite their own economic hurdles, have developed a key interest in expanding business to the US. This expansion often leads to fruitfulness, as the US offers a unique market and set of opportunities.
When considering moving business to the US, or simply expanding an original business within a global setting, businesses need to be aware of a number of factors. Reflecting on and analyzing the market are vital to tapping into the US.
What to consider when expanding to the US
Know the timing
Many businesses make the idea of expanding to the US an integral part of their business operations. These businesses plan out products and services for the US market from the initial stages of their business formation. By starting early, there will be a significant amount of time allowed for actively planning and strategizing for the big move. Similarly, there will be time for funding to be accrued and invested. This is helpful, as an international expansion can be expensive. It is also important to allocate a great deal of time to researching and understanding the American market. This will allow the business to better grapple with the US consumers.
On the other hand, many other businesses choose to first establish themselves within the European market. This allows these businesses to build a consumer base, as well as a brand name and identity. Similarly, it allows them to develop revenue before thoughts of expansion arise. This option can be beneficial, as it does not necessitate external funding. However, planning for the expansion will take time, and will have to be done whilst running an existing business.
Choose the location
A vital aspect of expansion and tapping into the US market is considering the location, or state, in which the business will operate in. This is contingent on whether the European business decides to set up an owned subsidiary. This is recommended, as it smoothes out the process of hiring employees, and eases tax concerns.
When considering where to locate the business, companies need to analyze their potential consumer base and market. This means that consumer proximity, as well as employee proximity, are taken into account. In addition to this, businesses need to assess the tax laws surrounding their chosen location, as well as the general cost to the company, as a result of that space.
Understand LLC law
When setting up a business in the US, European companies need to assess and analyze the LLC laws and regulations of the US market, as well as the specific tax laws of each state. Understanding LLC regulations, in addition to the tax laws per state, will allow the business to understand the viability of the expansion. Similarly, it will help them choose the most appropriate and beneficial destination. Many businesses choose to use the external help of LLC services in the US. These services aid businesses in better understanding LLCs in the US, and provide a helping hand in LLC formation.
Best LLC Services has an extensive list of resources that can help European businesses better understand LLC regulations and laws within the US. This guide ranks and rates the top LLC services in the US.
Photo: BestLLCServicesKnow the cost
Possibly the most important factor to consider when expanding to the US market, is the cost. This will make or break the expansion, and will affect the outcome of tapping into the consumer pool in the US.
Businesses need to be aware that employees and talent in the US come at a great cost. This is in addition to all the tax that any business will have to cover. Certain locations in the US, like California or New York, have very high employee salaries. In a similar way, certain locations will charge a much higher rate for property, land and space.
Final thoughts
Tapping into the US market can take time and large sums of money. It is important to spend a length of time analyzing and researching both the market, and all the factors that are at play when expanding to the US. These factors include, overall cost, location, time, and LLC laws. Expanding to an international market is a big economic move for any business, and recognising the most appropriate way to do it is vital. Businesses can learn more about LLC laws and regulations through the help of LLC services and agents.
Disclaimer: The information provided in this article is being provided solely for informational and promotional purposes and should not be construed as investment, tax or legal advice.