Many businesses based in Europe are interested in making an expansion into the US as they begin to realise the major limitations of their own continent’s economy and the way in which the US’s contrasts this. By and large, the primary reason for the shift is the drastic discrepancy in the willingness to take risks between these two giant economies; angel investing in the US is over double that in Europe.

It has been indicated that it is far more difficult for businesses to raise venture capital in the EU than the US as a consequence of the latter’s reluctance to invest, which has induced an exodus of businesses from the EU towards the US in the hope of increased business growth from investment. This article further explores the question of why businesses are expanding to the US as well as how to do it.

Why expand to the US?

The US economy is the largest in the world, meaning those willing enough to take the leap and expand into it could benefit from a huge pool of new customers, a great supply of resources to leverage, and, following the two prior rewards, vastly increased profits.

Moreover, British companies in particular are attracted to the US due to the political and economic climate that has been built over the past few hundred years. Currently, the US is the UK’s biggest customer of its imports globally, composing nearly 15 per cent of all the UK’s exports.

Furthermore, due to hubs such as Silicon Valley across the US, which attract some of the brightest, most innovative minds in the world - the country has acquired some of the most incredible minds and business spaces in the world. Additionally, UK businesses seek to capitalise on the pioneering ethos of many members of the US workers; their go-getter attitude and commitment to their work is extremely attractive.

Also, the US operates at the forefront of technological advancement, including advancements in aerospace, military equipment, pharmaceuticals and biotechnology, and IT operations. But most enticing of all is the fact that there is a great deal of risk capital in the US – making it a good place to raise money for a rapidly growing business.

Photo: Incorporation Guru

How to expand to the US

Choose a State

Each state has their own regulations controlling how a business owner will need to organise and run their company. When deciding which state to incorporate your company into, it’s worth considering that state’s: access to your target market, workforce talent, resources and suppliers, and legal environment.

Several states in the US are infamous, especially amongst foreign businesses, due to their extremely tax-friendly regulations; this includes Delaware, Nevada and Wyoming. This might be a priority for some businesses, but incorporating in states purely for the sake of lowering tax liability isn’t always the right decision, especially where this might result in doing business in a different state to the one you are incorporated in.

Doing so could result in your business becoming liable for the second state's taxes on top of annual payments in addition to the first.

Choose a business structure

For companies who have settled on incorporating, there are three business structures to choose from: C corporations, S corporations and LLCs. Whilst the first two options have their benefits, LLCs are in most cases the optimal scenario for those looking to expand a business to the US.

In particular, there’s no requirement to be a US citizen (or even a permanent resident) in order to become the owners of a US business; such owners benefit from limited liability protection for their personal assets and the tax benefits.

Paperwork to complete

The required paperwork varies on a state-by-state basis, however you can expect to have to complete four types of documents, those relating to: formation, governance and ownership, tax and due diligence. In order to form a business, you will be required to fill out an Article of Organisation.

Furthermore, details of shareholder agreements plus member details for each shareholder must be prepared for governance and ownership. An EIN must also be obtained for tax purposes and due diligence checks must be submitted to verify the foreign nationals owning assets are allowed to possess US assets.

Final note

It is no easy feat to try and expand a business from the UK to US, and a number of hoops to jump through are what UK companies attempting to register in America will be faced with. The amount of red tape alone to manage is abysmal, let alone attempting to understand a plethora of foreign and alien laws to make sure you are not breaking any.

Add to this the challenge of finding capable professionals to undertake these tasks and European business owners looking to form a US LLC can be left with a real headache.

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.