With Brexit on the horizon, some businesses are beginning to question whether it’s worth expanding into Europe. Why venture across the English Channel amid the uncertainty, when businesses could head across the pond instead, targeting America for business growth and expansion?
Well, if that’s something you’ve been thinking, you’ll know there’s a lot you need to read up on first. Where do you start? Here are five essential things you must know right away if you’re considering setting up in the US.
- Setting up a subsidiary company in the US could cost thousands
As a business based in Europe, setting up a subsidiary in the US could cost you tens of thousands of pounds. The process is time-consuming and you’ll need to decide whether or not you’re going to be an ‘S’ corporation or a ‘C’ corporation (which basically refers to the legal structure of your business). You’ll need good legal advice to decide your approach, which is partly why setting up in the US can be so expensive. But, you can circumvent some of this cost by enlisting the services of companies who act on your behalf instead, such as Foothold America.
- You’ll need a Federal Tax ID number
A Federal Tax ID number is a nine-digit number that’s assigned by the Internal Revenue Service (IRS) to business entities that operate in the USA. It allows you to be identified and enables you to carry out business activities. It’s sometimes called an Employer ID Number (EIN), and you’ll use it when you’re filing taxes, as well as when you’re opening a bank account, applying for credit or asking for a business permit.
- You’ll need to pay tax in the US, and it can vary from state to state
Businesses in the US are taxed at three levels (at federal level, at state level, and at a local level). Some states charge more tax than others, so you’ll need to carefully research what your tax obligations would be in any given state before you make a move across the pond.
- You’ll need to know what a 401(K) is
If you do start operating in America with American employees, you’ll need to be familiar with the term 401(K). Think of it as the equivalent of a pension. It’s how many US employees save for retirement, and is something you’ll need to do extra research into (by looking here, for instance).
- Time zone differences will need factoring in
Finally, it isn’t just the time zone from the UK to an office in New York (for example) that you need to consider. The US itself is so vast that there are multiple time zones across the country, so you’ll need to have the resources in place to talk to customers, colleagues and employees if you plan to expand into multiple states.